Expense management software 101: A guide for businesses


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  1. Introduction
  2. What is expense management software?
  3. Key components of expense management software
  4. How does expense management software work?
  5. Types of expense management software
  6. Benefits of using expense management software
  7. Challenges associated with using expense management software
  8. How to choose the right expense management software solution
  9. Best practices for implementation and expense management

The software-as-a-service (SaaS) industry has produced software solutions that help businesses streamline internal operations, including accounting and expense management. The market for this type of software is projected to grow by more than $4.7 billion by 2027, with 40% of that growth concentrated in North America.

As your business grows and faces increasingly complex expenses, effective expense management software becomes even more important. Below, we’ll explain what businesses should know about selecting and working with expense management software, including how it works, its key components, and the benefits and drawbacks of using it. We’ll also share best practices around expense management.

What’s in this article?

  • What is expense management software?
  • Key components of expense management software
  • How does expense management software work?
  • Types of expense management software
  • Benefits of using expense management software
  • Challenges associated with using expense management software
  • How to choose the right expense management software solution
  • Best practices for implementation and expense management

What is expense management software?

Expense management software helps businesses and individuals track, record, and process expenses. For businesses, this software is especially useful for managing operational expenses and travel costs.

Key components of expense management software

Expense management software consists of several components, including:

  • Receipt tracking
    This feature allows users to track receipts digitally. Instead of keeping paper receipts, employees can take pictures of receipts and upload them or send email receipts directly to the software. Receipt tracking makes it easier for employees to organize and store receipts, while eliminating paperwork and reducing the risk of losing important documents.

  • Expense entry and categorization
    Users can enter expenses manually or import them from bank or credit card statements. The software allows users to categorize each expense under specific headings such as travel, office supplies, or client meetings, which helps with budget management.

  • Approval workflow
    This component expedites the process of expense approval. Once an employee submits an expense report, the software routes it to the appropriate person for approval, based on predefined rules.

  • Policy compliance
    Businesses can configure the software to adhere to company policies regarding spending limits and permissible expenses. The software can automatically flag or reject submissions that don’t comply with these policies.

  • Reporting and analytics
    This feature provides detailed reports and analyses of expenses and can generate breakdowns by category, department, project, or individual. Businesses can use these reports to make informed decisions about budgeting and cost-saving opportunities.

  • Integration capabilities
    Expense management software can integrate with other business systems such as accounting software, HR systems, and enterprise resource planning (ERP) systems, allowing data to move easily between systems and improving overall operations.

  • Mobile access and usability
    Many expense management tools have mobile applications, allowing users to report expenses from their smartphones. This is particularly useful for employees who travel frequently.

  • Security and data protection
    Expense management systems often come with strong security features, such as data encryption, access controls, and regular security audits, which protect businesses from unauthorized access and data breaches.

  • Customization and scalability
    Often, businesses can customize the software to fit specific needs. Expense management software can also scale up as a business grows, accommodating more users and larger volumes of data.

  • User support and training
    Good software provides support and training resources—such as online tutorials, customer support services, and user manuals—to make sure users can use the system effectively.

These components work together to create a comprehensive system that simplifies the process of managing and analyzing expenses for businesses.

How does expense management software work?

Expense management software reduces the administrative burden for businesses, improves accuracy, and provides insight into company spending. Here’s how it works:

  • Expense recording
    The software allows users to input their own expenses. They can do this manually, by entering the details of each expense, such as the amount, date, and category. The software can also automatically pull in transaction data from connected bank accounts or credit cards, reducing the need for manual entry.

  • Receipt management
    For each expense, users can attach digital copies of receipts. They can do this by taking photos of paper receipts with a smartphone and uploading them to the software, or by attaching digital receipts, such as PDFs or email confirmations.

  • Expense categorization and organization
    Once an employee enters an expense, the software categorizes it. The employee can also do this manually. Common categories include travel, meals, office supplies, and client entertainment. This categorization helps in tracking and analyzing spending patterns.

  • Approval process
    In most businesses, an employee’s expenses need approval from a supervisor or the finance department. The software typically includes a workflow that routes expenses to the appropriate person for review and approval. Businesses can set up rules to automate this process.

  • Policy compliance checks
    Businesses can set up the software to check each expense against the company’s spending policies. If an expense violates a policy (for example, if it exceeds a spending limit), the software can flag it for review or reject it automatically, helping to enforce financial controls.

  • Reimbursement processing
    The software can facilitate reimbursing employees for expenses. Once an expense is approved, the software can route it to payment processing, which might be linked to the company’s payroll system for reimbursement.

  • Reporting and analytics
    A key function of expense management software is the ability to generate reports and analytics. These reports can provide insights into spending patterns, track expenses against budgets, and inform financial decision-making. Businesses can customize and break down reports by metrics such as time period, department, or expense type.

  • Integration with other systems
    The software often integrates with other business systems, such as accounting software or ERP systems. This integration facilitates the easy transfer of expense data, contributing to overall financial management.

  • User access and security
    Businesses can set different levels of access for different users, ensuring that employees see only what they need to see. Security features such as encryption and access controls protect sensitive financial data.

  • Mobile accessibility
    Many expense management tools have mobile apps that allow users to submit and approve expenses from their smartphones. This is particularly useful for employees who travel or work remotely.

Types of expense management software

There are many types of expense management software on the market. These include:

  • Cloud-based expense management software
    This type is hosted on the cloud, so it’s accessible via the internet, without needing to install software on individual computers. Cloud-based expense management software is flexible and accessible, and allows users to submit and manage expenses from anywhere. Typically, updates and new features are rolled out automatically by the provider, ensuring the software remains up-to-date.

  • On-premises expense management software
    In contrast to cloud-based solutions, on-premises software is installed and runs on a company’s own servers. This type might be a good choice for businesses that require greater control over their data and systems. However, it often involves more up-front costs and in-house IT staff for maintenance and updates.

  • Integrated expense management solutions
    Some expense management systems are part of a larger suite of business management applications. These integrated systems combine expense management with other functions such as accounting, invoicing, or payroll. This integration can deliver a more comprehensive solution but might include features that some businesses do not need.

  • Standalone expense management software
    These are specialized tools for expense management. They’re often more straightforward to use than integrated systems. Standalone software is ideal for businesses that want to simplify and improve their expense management processes but do not need additional business management tools.

  • Mobile-first expense management applications
    Some expense management tools are designed for use on smartphones and tablets. These apps allow users to capture receipts and file expense reports on the go, which makes them a good fit for businesses with employees who travel frequently or work remotely.

  • Customizable expense management systems
    Some software offers a high level of customization. This can include custom approval workflows, specific expense categories, and unique report formats. While this type of software provides businesses with flexibility, it might require more time and resources to set up.

  • Enterprise-level expense management software
    Designed for large organizations, these systems include a range of features that handle complex expense management needs at scale. They often include advanced reporting capabilities, integration options with different enterprise systems, and thorough compliance and security measures.

Benefits of using expense management software

Here’s a closer look at some of the advantages of using expense management software versus traditional methods of expense management:

  • Time and labor savings
    One of the most immediate benefits is less time and effort spent managing expenses. By implementing automated data entry and simplifying reporting and approval processes, expense management software helps you spend fewer hours on manual tasks.

  • Improved accuracy and fewer errors
    Expense management software minimizes errors by automating data entry and calculations. This accuracy is important for maintaining reliable financial records and compliance with internal policies and external regulations.

  • Improved visibility and control over expenses
    These systems provide real-time visibility into spending patterns and trends. Management can use these detailed reporting tools and dashboards to monitor expenses, identify areas of overspending, and make informed decisions to control costs.

  • Streamlined reimbursement processes
    The software accelerates the reimbursement process for employees. Once expenses are approved, they can be processed for payment faster, reducing administrative delays and improving employee satisfaction.

  • Better policy compliance and fraud prevention
    With the software’s ability to set and enforce expense policies, businesses can maintain better compliance. The system can automatically flag expenses that don't adhere to set policies, preventing fraud and policy violations.

  • Integration with other business systems
    Integrating expense management software with other systems such as accounting software or ERP systems facilitates financial management across the organization.

  • Mobile accessibility for on-the-go management
    Mobile applications allow employees to submit expenses from their smartphones, which is particularly useful for remote workers and frequent travelers.

  • Scalability to suit business growth
    As a business grows, its expense management needs become more complex. Expense management software can scale to accommodate larger volumes of transactions and the needs of a growing business.

  • Increased data security
    Expense management systems usually have strong security features to protect against unauthorized access and data breaches.

  • Environmental benefits
    By digitizing the expense management process, businesses reduce their reliance on paper.

Challenges associated with using expense management software

While expense management software can improve the speed and accuracy of a company’s expense management practices, it does come with certain challenges. These include:

  • Complex integration processes
    Integrating expense management software with existing systems can be complicated. It could require technical expertise and additional costs.

  • User training and adaptation
    It takes time for employees to learn to use the new software. Adequate training sessions and support materials can ease this transition.

  • Data security concerns
    Handling sensitive financial data calls for stringent security measures. The software must comply with data protection regulations and have strong encryption protocols. Regular security audits can prevent data breaches.

  • Cost implications
    While expense management software can save time and resources long term, businesses must weigh potential benefits and savings against initial setup costs and ongoing subscription fees.

  • Customization limitations
    Off-the-shelf software might not be sufficient for every business. The ability to customize features and reports will vary depending on the software.

  • Regular updates and maintenance
    Keeping the software updated is necessary for optimal performance and security. This might require regular check-ins and coordination with the software provider, which can be time-consuming.

  • Data accuracy and reliability
    Automated systems rely on the data that feeds them. Inaccurate data entry can lead to errors in expense tracking and reporting. Regular audits and checks help maintain the reliability of the data.

  • Compliance with regulations
    The software must stay updated with the latest tax laws and financial regulations. Noncompliance can lead to legal issues and financial penalties.

How to choose the right expense management software solution

The “right” expense management software is the one that best fits the needs of your business. Here’s how to find the best software solution for your business:

  • Detailed needs analysis
    Conduct an in-depth analysis of your company's expense management processes. Map out the full workflow of expense submissions, approvals, reimbursements, and reporting. Identify specific bottlenecks, compliance issues, and areas where errors frequently occur. Decide what granularity of data you need from reports and how that ties into broader financial planning.

  • Comprehensive budget assessment
    Analyze the long-term ROI of different software options. This includes the up-front cost or subscription fees as well as the cost of integration, training, and potential downtime during implementation. Consider the financial impact of increased efficiency and policy compliance that different software solutions might deliver.

  • Advanced software capabilities evaluation
    Examine the features potential software solutions offer. Look for advanced capabilities such as multicurrency support, real-time policy compliance checks, AI-based fraud detection, and automated cost allocation. Explore how these features could address the pain points you identified in your needs analysis.

  • Integration complexity and flexibility
    Evaluate the integration capabilities of the software with your existing systems (such as ERP, HRMS, and CRM). Assess the ease of integration and the flexibility to adapt to future system changes or upgrades. Consider the software’s API capabilities and whether it allows for custom integrations.

  • User experience and adoption
    Evaluate the software from an end-user perspective. Advanced software that is not user-friendly can lead to low adoption rates. Use a focus group of employees in a trial run of the software to gather feedback on its usability.

  • Customization and policy enforcement
    Research how you can customize the software to fit your business’s rules and expense policies. Look for features like dynamic policy setting, in which rules can be adjusted based on different criteria such as employee role, location, or type of expense.

  • Data security and compliance
    Investigate the software’s security in detail. This includes data encryption standards, compliance with global data protection regulations (such as the European Union’s General Data Protection Regulation), and audit trails for expense transactions.

  • Vendor expertise and support
    Assess the vendor's expertise in your specific industry. Look at their track record, customer base, and case studies. Get to know what level of support they provide, including the availability of dedicated account management and technical support resources.

  • Scalability and future proofing
    Make sure the software can scale with your business growth by examining how well the software can handle increasing transaction volumes, additional users, and expanding global operations. Consider the vendor’s roadmap for future features and updates.

  • Data-driven decision-making
    Evaluate the software’s reporting and analytics capabilities. Advanced software should provide comprehensive dashboards, customizable reports, and the ability to perform deep data analysis.

Best practices for implementation and expense management

  • Strategic planning and stakeholder engagement
    Begin with a comprehensive plan that involves key stakeholders from different departments such as finance, IT, and human resources. Learn their needs and concerns to ensure the system addresses the organization’s broader objectives.

  • Phased roll-out and pilot testing
    Implement the software in phases. Begin with a pilot program involving a small, representative group of users. This method will help you identify potential issues while allowing for adjustments before a full-scale roll-out.

  • Integration with existing systems
    Ensure the expense management system integrates easily with your existing financial systems, such as accounting software, ERP, and payroll systems. This integration is key to automating workflows and ensuring data consistency.

  • Comprehensive user training and support
    Develop a comprehensive training program for all users, tailored to different roles within the organization. Include resources such as manuals, online tutorials, and FAQs. Establish a support system for addressing user queries and technical issues promptly.

  • Customization for business needs
    Customize the system to pair with your company's specific expense policies and workflows. This includes setting up custom approval hierarchies, expense categories, and reimbursement rules.

  • Regular system audits and updates
    Conduct regular audits to check that the system functions as intended. Stay updated with the latest software upgrades and features that could improve system performance and user experience.

  • Data security and compliance monitoring
    Implement strong data security measures. Regularly monitor compliance with internal policies and external regulations, adjusting the system as needed to remain compliant with evolving standards such as GDPR.

  • Encouraging user adoption and feedback loop
    Encourage use of the expense management system. Gather user feedback regularly to monitor challenges and find areas for improvement. This feedback loop is important for ongoing refinement of the system.

  • Using analytics for strategic insights
    Use the system’s analytics capabilities to gain insight into spending patterns, policy violations, and potential savings to inform strategic decisions and policy adjustments.

  • Continuous process improvement
    Treat expense management as an ongoing process. Regularly review and refine policies, workflows, and system settings in response to changing business needs, user feedback, and technological advancements.

  • Vendor relationship management
    Maintain a strong relationship with the software vendor. This includes regular communication regarding updates, support issues, and discussions about future needs and upgrades.

  • Cultivating a compliance culture
    Build and support a company culture that emphasizes compliance and ethical spending. You can achieve this through regular communication and training, and by setting an example at the leadership level.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular situation.

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