Whether you are an individual or a company, expenses are a part of life that you cannot avoid. While expenses are inevitable, there are chances that the repercussions of not managing expenses well could be more profound and long-lasting on businesses because of the sheer volume and the impact it creates. What you require is a smart business expense management software.
Let’s start by looking at the definition of some terms, define why we need to manage expenses, and how expense management solutions help. Then as a next step, we will look closer at the reasons that small and medium-sized enterprises should consider investing in expense management solutions.
What is the meaning of expenses?
An expense has been defined as a cost incurred. Expenses come in different forms. They can be a one-time expense or recurring. Expenses can range from manufacturing, operating, financial, prepaid, and extraordinary, to accrued expenses. You also have emergency expenses that you cannot anticipate but make a provision based on past data.
In accounting terms, expenses have been divided into four categories—fixed, recurring, non-recurring, and emergency.
What does expense management mean?
According to Wikipedia, expense management is the method by which a business processes, pays, and audits all expenses. This could include employee-related expenses, travel & entertainment, and other expenses. Expense management also involves planning for expenses, ensuring that the right checks are in place to ensure they are legitimate, approving processes, and making the payment or reimbursing the expense to the one who made the payment.
What is an expense management system?
On a small scale, expense management can be managed (barely) with the help of a few basic tools like a spreadsheet, calculator, ledger, vouchers, and even handwritten notes. However, expense management automation becomes crucial when it comes to managing the expenses of a business. Managing expenses is vital not only for the business to run but also to ensure that it meets audit and compliance requirements.
An expense management system is software that enables you to record, track and make expense payments with ease. Not only that, paperless expense management or expense management automation, ensures that the process is automated and requires minimal manual intervention. No matter the size of your business, you need expense management software to ensure smooth operations. Today we even have expense management software for small business that is effective and affordable.
5 benefits of expense management software
Many small and medium-sized businesses often feel that investing in expense management software is a good-to-have factor but not a must-have. And it is also true that SMBs are the ones that are most affected by the lack of expense management. Businesses see a serious blip in their operations when faced with random expenses for which they have to locate sources of finance.
Helps bring down the cost of finance
Cost of financing sudden expenses can seem trivial to begin with but over time the cost of finance can add up substantially. Not only that but also the cost of finance would also include late payment penalties that you would incur due to late payments.
It would also include the loss of bargaining power due to delayed payments. Often suppliers and vendors give preferential treatment to those customers who pay on time for both rates as well as the quality of supplies or services.
Ensures better cash flow management
Cash flow management or managing working capital to run the business is a task that finance managers both fear and are loathe to ignore. When expense management takes a hit, it is most likely that cash flow takes a hit too.
Any unplanned expenses or rogue spending is likely to put your budget off balance and this, in turn, can cause your working capital to be affected. With expense management automation, you can look at empirical evidence to plan funds for those times when your expenses are at a peak.
Raises an alert where expenses are out of control
Expense management software ensures that not only are you avoiding repetitive manual processes but also getting an overview of the expense management trends within your company. Keeping tabs on expenses will ensure that they do not get out of control. In fact, you will even discover that some expenses can be avoided like a service that you only use yearly but are paying a monthly subscription. Often something as simple as changing the subscription plan can make a huge difference.
Reduces manual efforts of all concerned
Automation of finance functions like expense management will reduce your paperwork and the manual efforts that your teams put into it. Imagine, if your solution offered the means to scan or take a picture of a bill and automatically upload it onto the system.
The whole process of checking, approving, and reimbursing the business expense would involve a few clicks instead of the lengthy manual process. Typically, a manual process would involve waiting for the receipts to be sent to you, fetching them, checking them, making entries, sending them for approval, filing the paperwork, and making the payment. And any deviations would add additional steps to the process and further increase the manual efforts involved.
Better auditory and compliance management
Monthly, quarterly, and yearly closing of books are something that is essential for the finance department. Doing this not only ensures that they are keeping track of various financial aspects but also helps with audits and compliance. Preparing for audits can take a lot of time and effort due to the sheer volume of records and supporting documents that have to be produced.
However, with the automation of expense management, the records are digitized which automatically cuts down the efforts. But that’s not all, you also have hierarchies, approvals, and records of all exceptions that took place in expense management. A trail of all the approvals and justifications needs to be produced during the auditing process. With automation, all these records are available at the click of a button. The same goes for compliance; records are created automatically in real-time and any exceptions are recorded which makes the entire process easier.
Why is Expense Management Automation critical for SMBs?
Even as we acknowledge that automating functions like expense management is essential, it is also important to see why it is even more so in the case of SMBs.
Limited resources: Whether it is in terms of money, people hours or time, resources are a constant issue with SMBs and investing in affordable expense management is the best way forward. Expense management automation ensures that there are savings on the number of hours spent, easier closing of accounts, and better fund management.
One person with multiple roles: In smaller companies, there’s a chance that a single person is carrying out multiple roles and while this is a good thing, it can result in missing details. An end-to-end spend management platform will ensure that the burden of managing multiple responsibilities becomes easier.
Need for better insights: Planning, forecasting, and budgeting are key to consistent financial success of any business. And when we consider smaller businesses who have access to limited customers, this could make the difference between continued operations and closure. An expense management software will not only automate many of the mundane tasks, but also ensure you have the insights to plan better. Insights into expenses also enable you to put controls in place to make sure there is no rogue spending.
Documentation for finance: Getting a line of credit or other finance facilities for SMBs is not easy. It becomes even more difficult if the company in question does not document their finances well. An expense management will ensure that records are created in real-time with minimal errors, if any. This can not only ease the audit and month closing but also ensure that you get the funding you require.
Conclusion and the way forward
Expense management software in today’s world is no longer optional but a factor that can decide the success or failure of your business. At EnKash, our team talks to numerous first-generation entrepreneurs and our endeavor is always to offer solutions that suit their needs and their budgets.
Our exceptional portfolio of spend management and cards platform covers the whole range of support that a SMB or startup may require. And our corporate credit cards not only offer a line of credit but come with the means to issue child cards to your employees or teams to ease the spending process.
Our DIY dashboard ensures that you have complete control of the cards in terms of how much is spent, what it is spent on, and the amounts spent. It also ensures accountability and security with the feature that enables you to disable or cancel a card in case of theft or employee separation. With the option to create hierarchies and approval workflows as per your requirement, our solutions cover all your needs.
To know more, visit: www.enkash.com. You can also click below on Signup Now and we will reach out to you soon.