5 ways to simplify expense approval system
The expense approval system of a company is a critical part of the business’s processes for managing spending.
Having a system in place for approving expenses is important for an organization to manage and control its expenses effectively and efficiently.
Businesses often work with limited resources and hence must make sure every penny is being spent appropriately, and in an authorized manner.
The expense approval process of a company ensures this by enforcing regulations that curb unauthorized spending of company money.
The concept behind an expense approval system is fairly simple — before company money can be spent on any purchase, that purchase needs to be vetted and authorized by a higher authority in the company in order to prevent fraud or misuse.
The expense approval workflow starts when an employee incurs any expense on behalf of the company.
When they do so they are required to submit expense reports to the company containing all the required information related to the purchase they made.
These reports are then vetted against company policies by superiors, managers or other individuals made responsible for the same. After the vetting process, the expense is either approved or rejected.
Once approved, the employee will get reimbursed for the expense and in case the report is rejected further inquiries will be made.
The expense approval system of a company consists of all the processes that are required to be followed for an authorized purchase to be made by an employee on behalf of the business.
The system consists of an expense report that must be submitted after making an expense.
This expense report consists of all important information related to the purchase (e.g. price, vendor, date, etc.) alongside some form of proof of purchase (e.g. receipt, invoice, etc.)
The expense report has to be submitted to an approving authority, say a manager or a supervisor, for the expense to be approved and therefore authorized.
To sum it up, the process of expense report submission, approval workflow, and end authorization all make up the expense approval system of a company.
The primary function that an expense approval system serves is to ensure that only authorized purchases are made using company money.
Such a system is put in place to make sure that the funds of a company are being used in a way that is beneficial to the fulfillment of company objectives and requirements.
The features of such a system include elements such as a process for submitting expense reports, parameters or guidelines for making expenditures, expense policies as well as enforcement or compliance guidelines.
When compared with an automated expense approval system, manual approval processes fall quite a bit short. In the traditional, manual approval process employees would have to physically fill out and hand in expense reports.
Along with these expense reports, they would also have to submit proofs of purchase such as bills, receipts, invoices, etc.
After the expense report is submitted it is then passed on to a superior (e.g. the line manager or department head) and finance department for approval.
The line manager or departmental head conducts the initial step of verification and then passes the report on to the finance department.
Once the reports are passed on to them, the finance department has to then make sure the expenses are compliant with company expense policy by meticulously going through and matching proof of purchases with expense reports.
While this might seem like a straightforward process imagine the finance team verifying and matching expense reports against proofs of purchases for the entire company. When done manually, this process can take a lot of time as well as energy.
The good news for finance departments is that this manual process is now archaic. In place of this long tedious process of expense approval, we now have software-based automated systems that can do the same job with much greater ease and efficiency.
These systems can automate pretty much every part of the process, starting from expense report submission straight up to the point where that expense gets approved.
They can also automatically match expense reports against proofs of purchase, making life much easier for finance teams.
Automation can work wonders for your company’s expense approval process. By automating your expense approval system you can easily eliminate all the manual work that goes on behind approving an expense.
Using automation employees can upload expense reports faster and more easily, approvers get notified on time and the process of expense reconciliation can be done automatically by the system itself.
With traditional, manual expense approval systems managing all the expenses made in a company can become a challenging task. Using a centralized dashboard that gets updated in real-time, however, can change the game.
With a centralized dashboard, all the expenses your employees have submitted for approval are consolidated and displayed on one uniform platform.
Any changes in the status of approvals or new requests being generated are all updated on this dashboard in real-time, as and when they happen.
Smart workflows are critical to streamlining the expense approval process. With a manual system, a lot of time and energy get lost in notifying approvers and getting the approvals done.
A smart workflow, however, automatically notifies the required levels of approvers and ensures approvals are provided on time.
The policies that govern your company’s expense approval system must be clearly defined and regularly updated.
Clear definitions ensure there is no room for confusion or doubt amongst employees regarding what is authorized and what is not.
Regular updates, on the other hand, are required to keep company practices up to date with industry standards as well as future goals.
Matching company expenses with general ledger records or expense reconciliation can be a lot of labor and a time-consuming process when done manually.
Finance teams have to physically go through piles of expense reports and proofs of purchase in order to make sure everything is in order.
With expense reconciliation automation, however, this entire process can be handled by software. All it takes is a few clicks and a couple of seconds to reconcile expenses using automation.
Suggested read: How to improve cash flow in a manufacturing business
Volopay is an expense management system that comes equipped with a highly advanced, customizable expense approval workflow. Employees can use Volopay to easily upload expense reports and attach proofs of purchase.
Using OCR (Optical Character Recognition) the system automatically extracts data from the attached proofs of purchase (e.g. receipt, bill, or invoice).
All the data related to the expense is logged in the system as soon as a purchase is made, in real-time. The system also uses notifications and reminders to ensure different levels of approvals are always obtained on time.
Additionally, the expense reconciliation process is almost automatic with Volopay. Via its integration abilities, Volopay also syncs all your transaction data with your preferred accounting software.