Expense management is an important function for any company with more than a handful of employees. Whether they’re making expenditures while traveling, working remotely or doing their jobs onsite, most staffers have at least a few receipts to submit for reimbursement in any given month. Historically, managing that process required a lot of receipts, paper shuffling and approval handoffs across managers and senior executives.

Today, more companies are using software to automate these steps and simplify the process for everyone while also making it faster and more accurate.

What is an Expense Management Workflow?

An expense management workflow clearly outlines the route that a receipt takes from the time it’s inputted into the company’s expense management system until the employee is reimbursed or the charge is paid by the business.

It’s a step-by-step process that applies to all expenses and defines how they will be received, approved and settled.

Why is it Important to Establish an Expense Management Workflow?

Without a defined expense management workflow, companies will be limited when it comes to receiving, accounting for, approving and reimbursing employee expenses.

An unstructured approach to expense management may suffice for a firm that has just a handful of employees submitting their expenses. But as a company grows, it needs an automated way to manage this aspect of its business.

By establishing a predictable workflow for all expenses, companies can save time, reduce errors, more readily head off potential fraud and save money.

Why is an Expense Management System Important?

To stay in operation, all organizations must pay their bills on time. For any company that has employees who conduct business outside of its own “four walls,” there will always be a need for good expense management. Even the cost of an activity as common as a company-paid lunch with a client must be documented, approved and reimbursed to the person who paid the tab.

With effective expense management processes in place, companies can issue those reimbursements quickly and accurately. There’s nothing worse than having to wait months after an outlay to get reimbursed, particularly for an employee who paid out-of-pocket for a product or service.

Expense Management Workflow Example

  1. Gather the records. The employee who is submitting an expense report for reimbursement collects the receipts, credit card statements, bills or other documentation proving that the purchase was made.

    The accounting team, supervisor and/or manager will use this documentation to substantiate the expense and ensure that it’s legitimate and reimbursable.

  2. Employee creates report. The employee should refer to the company’s expense management policy when developing his or her report, which will reflect one or more expenses to be scheduled for reimbursement.

    The report serves as the primary documentation that a worker will use to submit his or her claim for expenses and is generally filled out and submitted on a monthly basis.

  3. Report submitted for final approval. Once submitted, the report will be reviewed by a direct supervisor and the accounting team to validate the claims.

    At this point, the report achieves the “final approval” stage and moves onto the next step.

  4. Approvers receive notification for review. The report is then distributed to the appropriate approvers, whether managers or senior executives, for review.

    These individuals review the report, ensure that all entries on it are legitimate and reimbursable and then sign off.

  5. Expense report approved. The reviewers put their stamps of approval on the report. Any reports that aren’t approved are sent back to the accounting team—and subsequently, the employee—for review and revision.

    For any expenses that weren’t approved, the process starts anew at “gather the records,” with the onus on the employee to either retract the claim or substantiate it.

  6. Report sent to accounts payable contact. At this point in the accounting system workflow, the expense report goes to the accounts payable coordinator to be posted.

    Once the report is posted, the expenses can be set for payment. The accounts payable contact is responsible for ensuring that the employee is paid on time.

  7. Receipts are verified. Any receipts that the employee submitted are verified as legitimate and entered into the file for tax and accounting purposes.

    If receipts are missing or otherwise unusable, there are ways to recreate them for tax-deduction purposes. And, the IRS considers digitized receipts legitimate proof of an expense.

  8. General ledger codes (or tax codes) entered into report. The accounting team enters the right codes into the expense report for each line item.

    These codes vary according to the expense itself, with travel, accommodations, meals and entertainment being among the most popular categories for offsite employees

  9. Expense report posted. Expense items are added to the ERP or accounting system as journal entries, reviewed and approved, and then posted to the GL so the employee is paid—the expense typically must be in the system for accounts payable to issue a check—as well as for auditing and accounting purposes.

    In case of a future financial dispute or IRS audit, these reports will serve as proof of the employee’s total business expenses over a certain period of time.

  10. Reimbursement payment is authorized. During this step, the reimbursement payment is authorized and set for payment based on the schedule set forth in the company’s expense management policy.

    The reimbursement authorization is the last step that the accounting team will take in the expense management workflow process.

  11. Employee is reimbursed. The employee receives his or her reimbursement for the expense via direct deposit, check or cash. If the employee uses a corporate credit card, payments would be made to the credit card company.

    Once the employee is reimbursed, it’s time to start gathering receipts and pulling the information together for his or her next expense report.

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Benefits of Expense Management Automation for Expense Approvals

When the expense management process is automated, employees can submit expenses from anywhere via a web browser or mobile device. Companies can customize workflows and approval processes to meet their unique business, project accounting and expense management needs. In return, organizations get lower report processing costs, improved reporting accuracy and fewer hours spent sifting through spreadsheets and paper. Finally, an automated expense management system improves collaboration among accounting team members, employees and approvers—all without the need to pick up the phone or send an email.