An expense management program is a system that simplifies the way businesses handle their spending. It helps employees submit expenses for reimbursement quickly, which managers can easily approve. This system also tracks expenses for compliance with company spending rules, noting any unusual spending that might indicate mistakes or fraud.

Demand for this type of automated tool is increasing: the global expense management market is projected to increase from over $7 billion in 2023 to $16 billion by 2032. Below, we’ll explain what expense management programs do for businesses, which business types might need them, and how to build and launch this kind of program successfully.

What’s in this article?

• What do expense management programs do for businesses?
  
• Which businesses need expense management programs?
  
• Components and features of expense management programs
  
• How to launch an expense management program
  
• Challenges of launching a new expense program
  

What do expense management programs do for businesses?

Expense management programs handle the following tasks:

• Tracking and categorizing expenses: Expense management software tracks and categorizes expenses and ensures that all spending aligns with company policies and budgets.

• Simplifying approvals: Expense management software can reduce the time and effort required to review and approve expenses.

• Integrating with accounting systems: Expense management software integrates with existing accounting and finance systems for synchronized, accurate data that makes financial reporting more consistent and compliant.

• Providing real-time insight: Expense management software provides real-time analytics and insight into spending trends. This helps businesses make informed decisions about budget adjustments and future spending.

• Improving policy compliance: Expense management software sets rules and parameters that align with company policies to keep transactions compliant with internal guidelines and external regulatory requirements.

• Facilitating reimbursements: Expense management software expedites the reimbursement process for employee-incurred expenses. This can increase employee satisfaction and help maintain trust within the organization.

• Reducing fraud and misuse: Some expense management software provides advanced monitoring tools that can detect and prevent fraudulent activities or misuse of company funds.

Which businesses need expense management programs?

Most businesses need some kind of expense management program. While small businesses might be able to handle these processes manually or with the help of an accountant, even they can benefit from automated systems. Here are some signs that a business would benefit from an expense management program:

• The business experiences regular issues with expense reports such as late submissions, missing receipts, and policy violations.

• As it expands, the company struggles with a growing team and an increasing expense volume.

• Employees travel frequently or make out-of-pocket purchases for which they submit receipts and reimbursement requests.

• The company struggles to gain visibility into its spending.

• The business is concerned about expense-related fraud or misuse of company funds.

Components of expense management programs

Expense management programs can include different components depending on specific business needs, but most include the following:

• Expense tracking: This allows employees to capture and submit expenses, often through a mobile app for on-the-go convenience.

• Receipt management: This enables businesses to capture and store digital copies of receipts, decreasing paper clutter and waste and making it easier to match receipts and expenses.

• Workflow and approvals: This automates the routing of expense reports for approval so that the right people review and sign off on expenses before reimbursement.

• Policy enforcement: This flags or automatically rejects expenses that don’t comply with company policies.

• Accounting system integration: This eliminates the need for manual data entry and ensures that expense data flows easily into your financial records.

• Reporting and analytics: This lets users generate custom reports and displays dashboards with insight into spending patterns and potential cost savings.

• Mobile accessibility: This allows employees to submit expenses and track their status when they’re on the go.

• Corporate card integration: This links company credit cards to the system for automatic transaction capture and reconciliation.

How to launch an expense management program

Once you’ve determined that your business needs an expense management program, the next step is to devise a clear strategy for building a program that works for you. Here’s a step-by-step guide.

Conduct an expense audit

• Analyze historical expense data. Examine past expense reports to identify spending patterns, recurring issues, and potential areas for cost savings.

• Talk to finance teams, department heads, and employees who travel frequently to understand their challenges and gather insight on how to improve the expense management process.

• Research how other companies in your industry handle expense management to identify best practices and potential areas for improvement.

Map out your ideal expense workflow

• Create a flowchart or diagram to illustrate the desired steps from expense incurrence to reimbursement. This can help identify potential bottlenecks and areas for automation.

• Define roles and responsibilities for each step of the process, from submitting expenses to approving them and processing reimbursements.

• Set explicit timelines for expense approvals and reimbursements to ensure timely processing.

Customize your expense policy

• Craft a policy that reflects your company culture, industry norms, and specific needs.

• Clarify what is and isn’t reimbursable, including daily rates, mileage allowances, and any restrictions on specific expense categories.

• If your company operates in multiple countries, consider local customs and regulations related to expense reimbursement.

Pilot the program with a select group

• Select a small, diverse group of employees to test the new system and provide feedback before a full rollout.

• Collect feedback on the software, policies, and overall process, and make adjustments as needed before launching company-wide.

• Encourage early adopters to become advocates for the new program and help drive adoption.

Gamify the adoption process

• Create incentives for employees who consistently submit expenses on time and adhere to policies.

• Implement leaderboards or contests to encourage participation.

• Share success stories and positive feedback from early adopters to build excitement and momentum for the program.

Monitor and refine

• Track key performance indicators (KPIs) such as average reimbursement time, policy compliance rates, and cost savings to measure the program’s success.

• Conduct regular audits of expense reports to identify any anomalies or potential areas for improvement.

• Solicit ongoing feedback from employees on how to further improve the expense management process.

Challenges of launching a new expense program

Launching an expense program presents challenges for businesses. From difficult tech implementation to ongoing maintenance, here are some common issues to consider:

• Change management: Any new process, no matter how beneficial, might meet resistance at first. Employees might be hesitant to adopt new technologies or workflows, especially if they’ve been accustomed to manual processes for a long time.

• System setup: Establishing a new expense management program involves configuring the software, integrating it with other systems, defining policies, and training employees. This can be time-consuming and complex, particularly for larger organizations with multiple departments or locations.

• Data migration and integration: Migrating historical expense data to the new platform can be challenging. Ensure simple integration with your accounting or enterprise resource planning (ERP) system for smooth data flow and reporting.

• Policy enforcement: Establishing and enforcing clear expense policies can be difficult, especially if there are gray areas or exceptions.

• Adoption and user engagement: Convincing employees to use the new system and submit expenses on time can be arduous. A lack of adoption can lead to incomplete data, delayed reimbursements, and frustration for employees and finance teams.

• Maintenance and improvement: An expense management program requires ongoing monitoring, updates, and refinements to stay aligned with changing business needs and evolving technologies.

• Costs: New expense management programs come with up-front costs such as software licenses, training, and potential consulting fees. Factor these into your budget to accurately calculate your return on investment over time.

• Technical issues: Even the best software can experience occasional technical issues. Ensure you have access to reliable customer support and timely troubleshooting to minimize disruption and keep the program running smoothly.