Expense management: How to automate the reimbursement process

When employees dip into personal funds to make job-related purchases, companies should strive to pay them back as quickly as possible. But the reimbursement process can hit snags. It’s hard to keep track of flimsy paper receipts. Approval requests idle in managers’ queue for days. And finance teams have to ensure repayment transactions balance the books. 

Luckily, expense management software makes the manually time-consuming process quicker, more accurate, and easier to align with company spend policies. Read on for a primer on what expense management is, why it’s so important, and how the right solution can turn IOUs into prompt reimbursements.

What is expense management?

Expense management refers to the systems companies use to review, reimburse, and record their employees’ job-related purchases. 

Businesses need to repay employees for professional expenses charged to personal funds or cards. They also need to set up approval processes to ensure transactions comply with employee spend policies. And they need to account for every purchase so that monthly books tie out. A good expense management program covers all these bases. 

The expense management process includes:

• Implementing expense policies: Finance leaders should ensure employees across departments know what they can and can’t expense before filing reports. 
• Submitting expenses: Employees log every purchase they’d like reimbursed and share receipts with matching amounts. 
• Approval: Designated approvers—usually managers or department heads—review employee expense reports and either authorize or block claims. 
• Repayment processing: Finance teams process reimbursements for approved expenses and pay employees back. 
• Bookkeeping: Finance teams record expenses and receipts to keep track of payments and prepare for internal reconciliation or external audits.

Why is expense management important?

Employees want swift, accurate reimbursements for business expenses they pay for upfront. And a slipshod expense management system not only dampens employee morale; it also hamstrings finance teams’ ability to gauge cash flow and keep costs down. Here are some of the biggest reasons why expense management is crucial for companies to get right. 

Control spend

Expense management keeps costs in check by encouraging responsible use of company funds. A clear reimbursement policy—tailored to different employees across roles, departments, and locations—ensures employees know what’s allowed before making noncompliant purchases. And a well-oiled approval process ensures out-of-policy transactions don’t slip through the cracks, which can mitigate fraud before finances take a hit. 

More control over company spend helps teams stay within budget and be more efficient with their capital.

Regulatory compliance

Efficient expense management also prepares companies for audits. When expense claims, receipts, and reimbursements are neatly organized and recorded in a general ledger and other accounting systems, companies have compliant documentation at-the-ready if the IRS or other regulatory agencies come knocking. 

Accurate reporting and financial planning

Expense tracking gives finance teams real-time visibility over different employees’ purchasing patterns. And when employee spend is consolidated among the rest of your company’s finances, businesses have an easier time setting budgets and forecasting a company’s future needs. 

The slog of manual expense management

While expense management is important, an end-to-end manual process makes for a huge time-suck. Employees have to keep track of paper receipts, then approvers have to pore through piles of the likely-wrinkled slips to see if they comply with spend policy, and accountants have to record every submission from every employee to make sure the books balance out. 

And even if you level up from handwritten reports and log expense management data into spreadsheets, you still have to keep track of receipts and toil through manual data entry—which risks errors. They're also not user-friendly for every employee. 

Benefits of expense management software

In lieu of a drawn-out, manual reimbursement system, you can automate the most cumbersome parts of expense management with software. Such platforms streamline every step of the process and empower compliant spending, prompt repayment, and up-to-date bookkeeping. Here are the biggest perks of expense management solutions in more detail. 

Reduce manual work

Trusty expense management automations can save time for everyone involved in the reimbursement. Via web or a mobile app, employees can electronically submit expense reports, quickly upload paper receipts, and forward emails of e-receipts to automatically match charges. And when admins review transactions, standout solutions can automatically flag duplicate transactions and receipt mismatches, which reduces accounting errors. All the time saved means employees get reimbursed quicker. 

Automatically block out-of-policy spend

Expense management providers can also automatically enforce your spending policies, even when they vary among roles and departments. Instead of spending hours manually checking policy compliance on every reimbursement request, the best platforms can catch unauthorized claims on your behalf—for instance, ensuring remote employees don’t get reimbursed for home office expenses over $500. 

Build customizable approval chains

Instead of chasing down department heads to greenlight reimbursements, you can configure expense approval workflows that ensure the right managers oversee the right transactions. 

While most systems make you manually assign approvers to every company policy, the best solutions boost functionality by letting you build specific, role-based approval chains synced to your org chart. For instance, you can set the system up to send approval requests to finance partners for big-ticket Amazon purchases, but only to direct managers for small, one-time charges. 

Build in-depth reports

The best expense management tools let teams track employee spend, compare it with budget allocations, and assess how purchasing patterns changed over time. Some solutions even let you customize access permissions; for example, while a CFO can see cash burn across the company, lower-level managers can only run reports with data from their individual departments.  

Sync expenses to your general ledger

Through integrations with accounting software, expense management software can even spare bookkeeping headaches. Some solutions let you auto-categorize expenses to your general ledger in real-time, saving bookkeepers hours of work manually logging transactions from different vendors to the right expense categories and reconciling them at the end of reporting periods. You can even access a built-in audit trail to stay on top of compliance. 

Consolidate, automate, and control all types of company spend

While most expense management tools can save companies time and simplify the employee reimbursement process, they typically work in a vacuum, untethered from the rest of your company’s finance systems. 

Then there’s Rippling, which gathers all of your company spend—expense reimbursements alongside vendor bills, payroll, and corporate cards—under the same roof, giving companies unprecedented control over every finance stream. With Rippling Spend, you can create customizable reports, approval chains, and policy enforcements—all on an intuitive platform.

And since Rippling uses employee data to connect finance with the rest of your workforce management processes, company spend policies will automatically apply to new employees as soon as they onboard and automatically adjust if they ever change roles.

What's more, if your company has an international presence or eyes global expansion, Rippling’s expense management solution lets you reimburse employees around the world in their local currency—all while reviewing transactions in your native currency.

Frequently asked questions

What is expense management?

Expense management is the process by which companies review, record, and process reimbursements for business-related purchases employees make on their dime. During the expense management process, employees typically file expense reports logging the transactions they want reimbursed and verifying amounts with receipts. Managers and other designated approvers authorize (or block) the reimbursement request, then finance teams process repayments and record the transaction for accounting purposes. 

Which is the difference between spend and expense management?

Spend management refers to how companies control different types of expenses—like procurement, credit card transactions, and payroll—altogether. Expense management, on the other hand, just focuses on a singular expense bucket: reimbursements for employees’ business-related purchases. As such, expense management is a component within spend management, which casts a wider net. 

What are common examples of Travel and Expenses (T&E)?

Companies often reimburse employees for T&E, which typically refers to travel expenses made for business purchases. This can include:

• Flights
• Hotel bookings
• Car rentals
• Meals
• Entertainment experiences for clients (like a concert)
• Parking fees

To ensure employees are only expensing necessary business travel costs, you can leverage expense management software to both create and enforce a T&E policy. 

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.