6 Expense Management Best Practices: The Complete Guide for CFOs and Experts

Setting limits and budgets is essential to control your company’s financials fully. This helps your company stay within its budget and avoid mishaps with company spending. With quick end-to-end reimbursements, employees no longer have to wait till payroll to get reimbursed. If you’re purchasing an expense management solution, make sure it fills your company’s unique needs, offers the right level of functionality, and comes with a dedicated account manager. If you’ve reached this far, you might already know the advantages of automated expense management.

Using the appropriate expense management software can help organizations have a holistic view of their expenses. With NetSuite, you go live in a predictable timeframe — smart, stepped implementations begin with sales and span the entire customer lifecycle, so there’s continuity from sales to services to support. An automated expense management tool can help you save time and resources through real-time expense tracking, customized expense reporting, and automated faster approval processes. Most expense management software offer easy business receipt tracking options to reduce the time and effort employees invest in expense reporting.

Simplified Accounting and Bookkeeping

If you are trying to simplify your expense reporting process for travel expenses, then you need a way to work on those expenses on the go. Pluto’s mobile app would allow your employees to report their expenses right expense management definition away from any location, while also giving them the ability to submit receipts digitally. Our expense management software can also give you a lot of control and flexibility over the spending limits that you set.

One of the ways you can do this is by tracking all deductible expenses for tax reduction purposes. Expense reports are a crucial aspect of the financial bookkeeping of any business organization. The purpose of an expense report is to track the expenditures of a business and expense forms should include all purchases necessary to operate a business, such as food, gas, or parking. Integrating your accounting platform with your expense management software reduces the time spent on bookkeeping. With Pluto, all expense records are in one place, meaning expense reports are automated; this helps accounting departments save hundreds of hours on manual work. Pluto helps you manage expenses incurred by digitizing the reimbursement process.

Deduction of business expenses under the United States tax code

Delays, errors, frauds, and painful audits are characteristic of traditional expense management. This is businesses, small and large, turn to more effective methods of managing expenses. Expense Management is critical because it can help organizations identify areas of operations that gulp the most revenue. It also provides a  clear picture of the organization’s finances for effective decision-making and better control over expenses and increases employee productivity to reduce costs.

• Expense reports are necessary for small businesses whose employees often pay out-of-pocket for business expenses.
• It’s best to create a business culture where, if employees are unsure of whether an expense will reimbursed, they check with you in advance.
• Under the matching principle, expenses are typically recognized in the same period in which related revenues are recognized.
• For example, you might set up an expense category for airfare, and then further customize it to require the employee to enter a ticket number, ticket status, subledger, and so on.
• If you have daily allowances, weekly budgets, or travel expenses, you can get better control over your employee spending by setting custom limits on their corporate credit cards.
• They also offer features like role-based access, IP based access, and auditor-access to ensure different stakeholders with different roles only have access to data you decide to let them see.

You can also look for ways to minimize the expenses that need to be reimbursed. For instance, by using Pluto corporate cards, you could help eliminate, or at least reduce, the need to reimburse food expenses while giving you better control over them. If you don’t have clear policies and infrastructure in place, reporting and reconciling expenses can be a tedious task for both you and your employees. But your policies and structure can only go so far when you are limited by outdated technologies and manual input. That’s why it’s so important that your organization develops and maintains effective T&E management policies, and uses the tools available to simplify T&E management.

Simplified Reimbursements

Pluto can be integrated with your accounting software so that it can automatically populate expense reports and simplify your reimbursement through the use of your organization’s accounting data. Routine audits can also help you improve management and tracking of your business expenses by letting you know how to refine your reporting process. Ensure that you also incorporate a routine audit process into your business expense report policies. Your expense report should be audited quarterly, biannually, or annually, depending on the number of expenditures your employees incur.

For more advanced expense management tools, such as integration with payment platforms, make payments to employees or vendors alike. An expenditure is a payment or the incurrence of a liability, whereas an expense represents the consumption of an asset. Thus, a company could make a $10,000 expenditure of cash for a fixed asset, but the $10,000 asset would only be charged to expense over the term of its useful life. Thus, an expenditure generally occurs up front, while the recognition of an expense might be spread over an extended period of time.

Types of expense management

After the approval and audit processes are completed, the system produces accounts payable vouchers or time card records that you use to process the payment. Multiple cards can be issued from one bank account, meaning employees or subcontractors can use a card – reducing the sign-off process and speeding things up. Cashplus cards can also be pre-loaded with an expense budget so that you never overspend. Once you’ve created your policy, you should make it easily visible to your employees. This will help cut down on invalid expense applications, which will reduce your admin and free up more of your important time. Additionally, expense management promotes transparency, enabling property owners and stakeholders to make informed financial decisions.

• Unless special tools are adopted to automate the process, creating and tracking costs and reports can be time-consuming.
• Reviews from customers who use a software provide insight into their experiences post-implementation.
• Many ‘traditional’ best practices might not fit companies with remote-first work policies, engage in cutting-edge industries, or have an unorthodox structure.
• Consequently, these expenses will be considered business expenses and are tax-deductible.
• This is so because reimbursement of an expense claim is dependent on the provision of an expense claim or report.

For owners or management, it is about growth, productivity, risk management, cost-saving, and employee satisfaction. While most costs of doing business can be expensed or written off against business income the year they are incurred, capital expenses must be capitalized or written off slowly over time. Operating expense is deducted from revenue to arrive at operating income; the amount of profit a company earns from its direct business activities. Having dedicated time to review your expenses within the year is critical to having a flawless expense management process. Include a guide that would state expenses covered by your expense management policy. Formplus also features a robust collection of free expense management templates.