A small business guide to expense management

If managing expenses for your small business makes you feel like you’re drowning in paperwork and spreadsheets, you’re not alone. It's a difficult process for any business, but it can be especially challenging for small business owners with a small or nonexistent finance department.

There are expense management software solutions but you may think you lack the time or budget to implement one. Or if it’s really going to solve the spend control problems you face. Here's the good news: the latest expense management software for small businesses are easy to implement, intuitive to use, and helps your business save time and money.

In this guide, we'll touch on everything you need to know about small business expense management, including explainers on:

Small business accounting software

Small business expense categories

Small business expense tracking

Small business cash flow management

Small business expense reports

That said, there are some telltale signs that it's time to revisit your current expense management processes. If you encounter the following issues, it might be time to make the upgrade:

1. Your spreadsheets are impossible to maintain

Spreadsheets may make sense when you’re first starting out, but as companies scale, it quickly becomes a nearly impossible feat.

Complex data management

The most apparent strains of using spreadsheets are the time and cost of manual data entry. For every calculation, you have to build formulas that are frequently complex and built from scratch. If you aren’t familiar with formulas, you have to spend even more time researching how to write one every time you need to do a basic calculation.

The fun doesn’t stop with building formulas, though. Your data is probably scattered across multiple spreadsheets, and at some point, you'll need to resolve conflicting formatting and merge them to generate a report.

Exacting data correction

Spreadsheets are also notorious for including errors since they often involve manual entry. These miscalculations can lead to major losses, like the $6 billion J.P. Morgan loss due to Excel spreadsheet errors. Yes, that’s billion, with a B. If you’re a small business or startup, a loss of even a fraction of this could be devastating.

Businesses will often spend hours manually combing through data for errors and duplication. But even after all of those hours, there’s no guarantee that you didn’t miss something.

2. You don't know who's charging your corporate cards

It's basically a shot in the dark where the money is going when your corporate credit cards' expense information is scattered across billing statements, receipts, expense forms, and email chains. Unfortunately, this is par for the course with traditional cards, and it can leave your business feeling helpless to address a system that you know is failing you.

Traditional corporate card companies often force employees to share cards or potentially use ones they're not authorized for because they limit the number of cards issued. These factors open up a host of problems, primarily security risks, loss of data, and minimal employee accountability.

Security risks

Unauthorized employees can easily steal card information or misuse it when an authorized employee lends them their card due to the limited number available. Additionally, loose controls on traditional corporate cards leave the company open to fraud and maverick spending (because how many employees actually read or care about the 10-page small business expense policy?).

These security issues aren't limited to large corporations. According to an Association of Certified Fraud Examiners (ACFE) study, small businesses lost almost twice as much per fraud scheme than larger businesses, with a median loss of $200,000. And half of those frauds were due to weak internal controls.

Loss of data

Even if your company prohibits sharing cards, there is still the issue of tracking business-related expenses. Traditional corporate cards aren’t tied to a single expense management system, so data is scattered across multiple sources—billing statements, expense forms, and more. This system makes it easy for expenses to get lost in the shuffle because it’s time-consuming to match all of these sources to a single expense record.

Minimal employee accountability

When employees share expense cards due to the limited number, it's hard to see who is spending the money or hold them accountable for out-of-policy spending.

3. Your whole team wastes time with expense reports

Manual expense forms have been around for a long time because they serve a real purpose: tracking business expenses, ensuring they align with policy, and, ultimately, reconciling your books. However, once a company gets to the point where they are processing hundreds or even thousands of expenses a month, this process can quickly become overwhelming and inefficient.

Time-and cost-consuming

It may be obvious that manually processing expense forms is time-consuming, but it may be surprising just how bad it is. According to a study by the Global Business Travel Association, it takes 20 minutes, on average, for an employee to complete a single travel expense reimbursement report and 18 minutes for the finance team to correct it (which is significant considering 19% of expense reports have errors). In terms of dollars and cents, processing these expense forms manually costs $58, and correcting them costs $52, on average, according to the report.

Delays bookkeeping

As a business finance manager, there’s nothing worse than trying to close your books at the end of the month and waiting for missing documentation for expenses from employees (like that gas receipt that’s probably crumpled up and covered in grime). Even when you hunt down the receipt, you still have to manually enter these expenses into a report and check your company's policy to ensure all are compliant.

Inconsistent

Without concrete boundaries in place, expense policy exceptions quickly become everyday occurrences. Approved expenses then become harder to define for both you and your employees when boundaries are loose, and lines get blurred.

Strains employee relationships

A manual expense submission process can also put your finance team at odds with other employees when they have to nag them about receipts or tell them purchases are not reimbursable after the fact.

4. You're asking your employees to pay out of pocket and request reimbursements

It's easy to understand why business expense reimbursements get delayed when you have a limited number of corporate cards and a manual submission system for expenses put on personal cards. However, delayed reimbursements can put a significant financial strain on your employees and their relationship with the company. In fact, according to Forbes, 2 in 5 employees have experienced cash flow issues due to slow expense reimbursement.

When expense reimbursement policies or reimbursement processes are unclear, it’s inevitable that some expenses won’t be reimbursed, furthering the wound for employees that may already feel compromised putting company expenses on their personal card.

5. Your system is expensive and disconnected

If you’re tired of manual expense management, you may have tried hiring someone else to take care of it. But for the external bookkeeper to complete this work, you may have found that you end up doing a lot of the groundwork—wrangling expense forms and receipts, answering emails about standard operating procedures (SOPs), and more.

The reality is, outsourced bookkeeping isn’t necessarily a time-saver, and the person you hire will always be disconnected from your company. They won’t have a full view of your goals and business needs, nor will they understand your policies and procedures like someone on your team. They may help relieve your workload in some areas, but you'll still have to feed them the information that enables them to do their job at the end of the day. And, of course, their services will be another expense to add to your budget.

The solution: An expense management platform

If you identify with these five signs, a modern expense management platform is your answer. An expense management platform is a central tool that processes all of your employee expenses so you can focus on growing your company. Look for a system with the following features:

Automated expense policies

When your expense management software connects with your corporate cards, you can automate policy enforcement through custom card controls.

Eliminate expense fraud with the built-in security of pre-set spend controls like amounts, vendors, time period available, authorized employee, etc. With automated expense policies, limits are clear to everyone, and you don’t have to be the bad guy. It allows your employees to feel like they’re freely spending while controls remain top-down.

Ability to easily pre-approve spend

Expense pre-approvals ensure that there aren’t any surprises for you or your employees when it comes to expenses being covered or not. With expense management software, you can automatically route spend requests to the designated manager, where they can pre-approve or decline the request with a single click.

Streamlined receipt collection

Say goodbye to scattered receipts and expense reports and let the software gather all the information you need.  Through SMS and email prompts, the software automatically reminds employees to submit their receipts at the point of purchase and pulls the information directly into the platform (so you never have to touch Matt’s grimy receipt). The receipt scanning tool can then verify the receipt information and instantly match it to the correct transaction.

Instant employee expense reimbursement

For the few occasions where employees forgot to use a corporate card for their purchases, the employee can still upload their receipt and make reimbursement requests right in the expense management software. Here it will automatically be routed to the appropriate manager, who can reimburse the employee with a single click, directly depositing the funds into their bank account through an ACH payment.

Fast accounting reconciliation

An expense management platform instantly pulls data into the tool for you, where intuitive automation takes over the majority of the administrative tasks involved, so your books are always up to date and you can focus on other key initiatives for the company (like your next vacation).

Through integrations with accounting systems like QuickBooks and Xero, all of your corporate card expenses and reimbursements are consolidated in one platform and then automatically synced to your accounting system.

Automatic data reconciliation happens right in the tool. The tool pulls vendors, billing, and expense information directly into the platform, where expert-level accounting occurs in real-time. It then notifies you of any irregularities and syncs with your favorite accounting software.

Real-time expense tracking

When all of your expense data is in one tool that is powered by powerful AI, pulling reports,  completing audits, and meeting compliance are easy. Business expense categories, and accounting codes are defined during the initial software integration so you can easily pull custom reports.

Easily track spend over time with all of your company’s vendors, contract owners, and expenses aggregated in the expense management software. ​​​​See upcoming spend with a tool that identifies all active subscriptions, predicts upcoming payments, and even notifies you of potential savings based on your corporate card spend history. Audit trails are easy to follow because all approvals happen directly in the platform.

This close monitoring of corporate card spend will help safeguard your company’s finances. According to the same study by the ACFE, data monitoring and analysis reduced losses by 52% and increased fraud detection by 58%.

Automated alerts & insights

Get the best of both worlds with a solution that doesn’t add to your budget or workload by using a free expense management platform like Ramp. It does all the heavy lifting for you by automating every process. It even will alert you to savings and potential fraud. All you have to do is enter what policy controls you want in place and then sit back and relax.

Ramp: Built to scale with your SMB

Managing a small business as a whole is challenging, but managing expenses doesn’t have to be. Rather than trying to make an antiquated system keep up with the demands of current business models, Ramp has entirely reimagined what expense management looks like for businesses today.

Ramp simplifies expense management by automating administrative work and integrating expenses, payments, and accounting all into one platform. We believe that expense management solutions should do just that—manage expenses—and corporate cards should help you spend less, not more.

‍Sign up for free today and start saving your business time and money.