April 21, 2022
Explainer

What are expense reports? (and why you should eliminate them)

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Tracking expenses is crucial to the success of any business. Expense reports, on the other hand, aren’t as useful as you might think. They’re time-consuming, tedious, and, quite frankly, not a good use of your employees’ time or money. 

If you’re looking to implement an efficient expense reporting process for your organization, simplifying these reports—or getting rid of them altogether—may be the ideal move. The best part? It’s easy to do. 

So, let’s take a closer look at expense reports, why they’re keeping companies from reaching their full potential, and how to simplify your expense management process.

What is an expense report?

When employees pay for company expenses with their own money, they typically fill out an expense report to get those funds reimbursed. 

Say you’re attending a business conference on behalf of your organization. At the very least, you’ll need to pay for your lodging, meals, airfare, and other travel expenses. But without access to a company card, covering these expenses upfront falls on you.

Expense reports allow companies to review the expenditures employees incur on their behalf, verify that they’re accurate and in line with their expense policy, and reimburse team members for these purchases. 

The key components of an expense report

This document will differ between companies, but a typical expense report includes:

  • The name, contact information, and department of the employee submitting the report
  • The date every purchase was made
  • A brief (but informative) description of each expense to provide context for the purchase
  • The cost of each purchase
  • The client, project, or event the expense was incurred for
  • A subtotal of expenses by category (e.g. travel, parking fees, entertainment)
  • The grand total of the reimbursement amount requested
  • Receipts to verify each purchase

Why expense reports are becoming a thing of the past

Despite their widespread use, manual expense reporting ultimately holds businesses back. Here are a few reasons to kill expense reports in your business:

They’re time-consuming, inefficient, and wasteful

Because the reporting process typically requires an employee to record information on their purchases and one or more to review the document, it can take up hours of your team’s valuable time—and even more of it if any mistakes are found.

And contrary to popular belief, expense reports don't actually prevent expense reimbursement fraud. According to the Association of Certified Fraud Examiners, expense fraud costs businesses about $1,400 a month on average

They cast doubt on your business data

People aren’t perfect. With manual expense reporting, there’s always the risk of introducing inaccurate data into your organization’s financial statements.

Even the most diligent people will make (or fail to catch) mistakes on an expense report. And every time a report is handed off for review, it becomes another opportunity for error. 

Over time, the compounding of these inaccuracies can dramatically impact your company’s bottom line. And when leaders lack confidence in their financial reports, that translates into a lack of confidence when making important business decisions as well. 

They put an unnecessary financial burden on employees

Company expenses are not an employee’s responsibility. Purchases that benefit the company shouldn’t be at their expense either—even if it’s temporary. 

A 2018 Conferma survey of UK employees revealed that 37% of respondents had to wait 2 weeks or more for reimbursement of work-related expenses, and that another one-third reported personal financial issues as a result of their employer’s reimbursement policies.

And as mentioned earlier, people make mistakes. Businesses that rely on their employees to cover company expenses shouldn’t then fault them for losing a receipt or being too busy with work to request reimbursement. 

How to evolve past expense reports and streamline expense management

1. Define your travel and expense policy (if you haven’t already)

Documenting your company’s policy on employee expenses helps keep everyone on the same page, reducing the chance for costly errors or misunderstandings.

If you don’t have one yet, Ramp’s guide on creating a travel and expense management policy can walk you through the process. You’ll also find best practices, implementation tips, and an expense report template to use as the foundation for your company’s own guidelines. 

Once it’s created, communicate any changes to your employees, send them a copy of the policy, and add it to your employee handbook. 

If you need more guidance, check out our expense policy generator

2. Conduct regular policy audits

Treat your expense policy as a living document. Your company’s needs and spending habits will evolve over time, so you’ll want to regularly revisit and update these guidelines accordingly.

Reach out to your finance and non-finance employees for feedback and suggestions on improving their experience with it. Consider things like bottlenecks, recent changes within the company, and future initiatives. Review expense data for discrepancies, errors, or policy abuses that come up regularly. 

Update your policy to address these findings. Then, send out an updated version to ensure your employees understand and implement the changes.

3. Automate your expense approval process

To make it as easy as possible for your organization to adopt and follow your expense management policy, consider going digital with automated workflows. Expense automation allows companies to:

  • Set criteria for out-of-policy purchases and limits on employee spend across categories
  • Help employees submit expenses and get reimbursed in a timely manner
  • Reallocate hours that would be otherwise spent on submitting and reviewing expense reports

With expense reporting software, companies can also deploy expense policies across remote or distributed teams with ease.

4. Provide employees with corporate cards

Even with a digital expense tracking system, reimbursements take time—time your employees may not have if they have credit card payments or bills due. You can reduce this friction and avoid having employees foot the company bill with corporate cards. 

Company cards automatically manage expenses and collect receipts on behalf of their users, rendering traditional expense reports unnecessary. This solution simplifies expense management across the organization—from employees and managers, to finance teams and business leaders. 

Ramp’s corporate card program makes expense management and reporting effortless. 

Take advantage of business spending controls that can be as broad or specific as you need, plus no fees and unlimited 1.5% cashback on every purchase. And combined with our powerful expense management software, you can review your company’s spending across thousands of cards at a glance. 

Of course, in the few cases where employees do need to use their personal card, Ramp also makes expense reimbursements easier and faster. 

Don’t bog your team down with the burdensome accounting processes of yesteryear. Breathe new life into your expense reporting (and your workforce) with the Ramp corporate card

Learn how Ramp strengthens your finances

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FAQs
What is the purpose of an expense report?

Expense reports help employees get reimbursed for out-of-pocket business expenses in a timely and organized manner. Managers can use them to assess their department’s spend on a particular client or project, and adjust their budget and strategy accordingly.

From a leadership standpoint, these documents help business owners and executives track company spend, and as a result, the company’s health and profitability. Come tax time, businesses that keep a record of these expenses have an easier time claiming tax deductions and filing their tax returns with the IRS. 

How do you prepare an expense report?

If you’re an employee looking for reimbursement, start by tracking your purchases and recording any expense information required by your employer. Then fill out the form itself, itemize each expense, add up the total amount, and attach receipts if needed. 

Submit your completed report through the appropriate channels. The finance department will then review it against the company expense policy, and if it’s approved, record the expenses for auditing and accounting purposes. 

What are the downsides to expense reports?

According to a survey conducted by Hubspot in 2019, 43% of companies still manage expense reporting manually. And although this practice allows companies to better understand how their money is being spent, it comes with its share of drawbacks:

  • Puts the burden of company expenses on employees
  • Pits finance professionals and employees against each other
  • Adds more work for employees, managers, and finance teams
  • Incorporates potentially inaccurate data into financial reports

However, the hidden costs of expense management can be reduced by implementing corporate cards and automated expense workflows. 

And in a world of work that increasingly focuses on company values and mission-driven organizations, these solutions help businesses divert resources away from tedious, ineffective processes and toward the work that matters most. 

Meet our customers

How we helped Sandboxx replaced Amex, Expensify, and Bill.com with Ramp

How we helped SwagUp save over $30k in SaaS spend

How we helped Fi scale its finance function

Marqeta closes its books 88% faster with Ramp + Sage

How Long Meadow Ranch got on top of its multi-entity spend

How we helped New Way Landscape remove bottlenecks and Expensify

How we helped Walther Farms switch from Expensify to close its books 10x faster

Learn more about Ramp

Streamline approvals.
Review requests, pre-approve expenses, and issue general expense cards in a few clicks – or directly in Slack. Delegate approvals and empower your team leads to spend on the things they need and control their team’s expenses.
Learn more
Issue instant cards.
Unlimited virtual and physical cards with built-in spend limits, instantly available for everyone in your team. Define spend rules and let your smart cards enforce your policies automatically. No more surprises or under-the-radar spending.
Learn more
See spend as it happens.
Stop waiting on monthly statements or manual spreadsheets. Find, browse, and download real-time transactions from any employee, department, or merchant – on any device.
Learn more
Close your books 5x faster.
An accounting experience by finance teams, built for speed and efficiency. Automate manual processes and start enjoying instant reconciliation – Ramp does all the heavy lifting.
Learn more
Trim wasteful spend.
Ramp analyses every transaction and identifies hundreds of actionable ways your company can cut expenses and alerts your team via email, SMS, or Slack. It’s like having a second finance team, laser-focused on cutting costs.
Learn more
Consolidate reimbursements.
Ramp makes it easy to reimburse your employees for any incidental out-of-pocket expenses. Review, approve, and pay employees back for anything that didn’t make it onto a card with the rest of your Ramp transactions.
Learn more