Heavy on compliance, slow, and inconvenient – these are some of the adjectives people use to define paper-based expense report management. Honestly, manual expense report management can be frustrating, but employees are still responsible for making these expense reports. However, in this blog, we will be looking at great detail about expense reports, how the tedious management process can be eased, tips for managing business expense reports, and much more. So, are you ready to get your business’s expense report management back on track?
What Is An Expense Report?
An expense report is a form that collects essential information related to business expenses. With expense reports, the businesses can determine how much reimbursement is available for employees if they use their own money, and it helps document the expenses (even the deeper information), so filing the business’s tax returns is convenient. In case your employees are handling the business expenses, such as traveling for client meetings, conferences, using their own vehicle, it is crucial to keep track of the expenses with the help of an expense report.
The expense report demands the employees to itemize different expenses that are available on the report. In addition, it requires the attachment of receipts associated with different expenses. When you are itemizing the expenses, it’s important to break down the details as far as possible. An expense report also organizes different expenses by category, which is why it’s convenient to connect it to the bookkeeping system if you already have one.
The employees can utilize the expense report with which the employees can request the reimbursement of the expenses that the employees incur on behalf of the company. We have already mentioned the receipts which need to be attached to share proof of expenses, but they must be beyond the minimum amount. The higher business authorities analyze the submitted expense reports to check for validity and accuracy. The reimbursement are only done after the higher business authorities approval.
Once the reimbursement is complete, the businesses can record such reimbursement amounts under the category of a business expense. Also, it can influence the taxable profits and accounting profits.
The Components Of Expense Reports
One would think that this form is straightforward, but there are various components of expense reports, including;
- It must have information that identifies the person submitting the expense reports, such as position, department, SSN, and contact information.
- Dollar-based amount and date for every expense and make sure the receipts provide the proof.
- The concise description of every expense
- Which company’s account was used for billing the expenses
On the other hand, some expense reports also include the subtotals of the expenses to ease the bookkeeping experience (it will ensure automated data input into the business’s accounting system). Moreover, it could include the total reimbursement charges requested by the employees who submit the expense reports. In addition, if an expense report doesn’t have a certain category, the expense report could have an extra note section to explain such expenses.
Expense Report Uses
The businesses that are already doing bookkeeping and creating a financial statement, you must be wondering what’s the point of developing expense reports. So, if you have the same confusion, we are sharing primary purposes of using expense reports, such as;
- Proper Employee Reimbursement
If the employees are paying for something from their pocket and are asking for reimbursement, you need to have an appropriate system to identify the expenses that are being claimed. For this reason, an expense report with properly itemized information and receipts will help be accurate.
- Expense Tracking
Business charges are constantly spiking, yet it’s essential to keep tighter control over them. With expense reports, the businesses will be able to track the business spending and see if certain categories are constantly increasing the costs.
- Proper Tax Filing
Various expenses made by the employees are deductible, but deduction cannot be made unless proper records and proof of expenses are not kept. The help of an expense report allows businesses to keep track of the deductible business expenses that your credit card history and bank statements aren’t outlining. As a result, the tax filing will be convenient and accurate. For this reason, it’s essential to use IRS categories whenever you are designing the expense reports (ask your employees to fill them up as well).
Should You Go For Paperless Expense Reports?
Automated software are handling everything these days, and it would be negating to say that paper-based expense reports aren’t suitable. However, paperless expense reports have more benefits, such as reduced office supply costs, zero processing costs, no need for manual spreadsheets, saving the hassle of physical documents, and no chances of lost receipts. For this person, the businesses can opt for the automated expense report system for generating paperless reports.
With these software solutions, the employees have to log in to their respective accounts and fill in the information. Moreover, they can upload the scanned copies of receipts. Furthermore, businesses can connect the bank accounts with expense reporting software for convenient functionality.
What Is A Monthly Expense Report?
The monthly expense report shows the expenses done by the employees during the period of one month. The monthly expense report shows the purchases made by employees in a month that are important for operating the business. On the other hand, some businesses also ask for quarterly and annual expense reports. Coming back to our point, monthly expense reports can be checked to see if the business is operating within the fixed budget. In case of financial constraints, the monthly expense reports can be utilized for checking how different costs can be eliminated and cut down to increase the profits.
Automate The Expense Reporting Process
The expense automation eliminates errors in the processing and filing of the expense reports. It can easily replace the tedious Excel and paper-based reports. It can be attained with the help of the expense management apps that check all the claims and authorize them. More benefits of automated expense reporting are;
- Reduced Errors
According to research, around 20% of the expense reports have incorrect information, and they add up to the business cost. That being said, the automated tools have a step-by-step system to minimize errors. Moreover, these tools are integrated with OCR technology that helps read the receipts and check the claims.
- Faster Filing
The employees need to find out the templates, fill row-by-row, keep track of receipts, cross-check the details, and send it out to the respective person. This can be frustrating for the employees, but using the automation tool eliminates this issue.
- Quick Processing
Paperwork can be extremely challenging, and it increases the supply costs. Moreover, the employees will be drowned in piles of papers and receipts at closing, which is nothing but never-ending data entry and error fixation. However, automation tools help in eliminating the paperwork limiting the chances of duplication of work.
- Real-Time Functionality
According to research, finance leaders and CFOs constantly complain about not having access to spending. In particular, around 57% of the companies are struggling with this. This issue is caused by the nonsynchronous expense claims – the businesses often don’t know they have spent something until they receive the claim. With automation, the employees can submit the expense reports in real-time, streamlining the forecasting and budgeting process.
Creating Expense Report Without Automation
With the automation software for the expense reporting process, the following structure is generally used, such as;
- The employee will spend their personal money on a specific business expense.
- The employee records the expense into the automation software
- They can also capture a picture of the receipt, attach it to the app and after rechecking the details press submit.
- The finance manager or upper authorities receive an alert, and they can deny or approve the claim.
- Once Finance manager approves the claim, financial controller receives the claim and also approves it.
- The financial controller will check all the details for validity and accuracy and process everything
- At the end of the month, accounting tools receive the approved claims , and employees receive the reimbursement.
Honestly, these automated expense reporting software solutions are pretty straightforward since there is no manual data entry and complicated policies. Not to forget, the software ensures that every employee is spending what’s affordable while reducing the chances of errors.
Creating Expense Report without Automation Software
On the other hand, if you don’t have software, you can follow the below-mentioned steps;
- Template Selection
For making the expense report, you need to select a template. You can use Microsoft Word and Microsoft Excel to create the reports. In addition, they have various templates available to ease the experience. However, you can also download the templates from search engine platforms.
- Columns Editing
Opting for templates means having a high chance of predefined columns, so employees can only enter the data. Some of these columns include the date, vendor, client, project, account, notes, author, and amount. The columns must represent the everyday business expenses. If out-of-work client meetings are common, one should create a column of “meals and travel”. In addition, if you’ve to use a vehicle for commuting, add the “commute and car expenses” column. As far as the tax category is concerned, the expense reports can be separated so that you can get deductions from IRS.
- Adding Itemized Expenses
When you’ve edited the columns, you have to add every expense in a new line and make sure you add as much information as possible. Moreover, don’t forget to specify the client and project for whom the expenses were used to ensure seamless tracking. It is ideal to add the expenses in chronological order. Hence, the last few expenses actually end up at the end.
- Adding Subtotal & Attaching Receipts
When you’ve filled in all the subtotal of every category, make the grand total. You also need to add the underpayments and overpayments to ensure correct reimbursements. In addition to this, if you had visited the store, café, or any place that gave you a receipt, you need to attach them with the report.
- Sending The Report
Once completed, double-check the information and total amount and figures.
Tips For Managing Business Expense Reports
When it comes down to business functionality, it’s essential to ensure seamless management of business expense reports. It will help prevent fraud and mitigate costs. In the section below, we are sharing the tips to streamline expense report management, such as;
- Firstly, you must have a valid and transparent expense policy. Before communicating the policy make sure that the company has the capacity to cover it. In addition, provide criteria of the reimbursement of claims.
- Secondly, make sure that all the expenses are convenient to track and report. For this purpose, it’d be best to set up the reporting system, so employees can report the expenses, track the spending, and submit everything on time.
- Thirdly, it is better to issue credit cards on business account to keep track of every bit of information and expense. In addition, you will have a bank statement as proof, so cross-checking the claims will be convenient.
- Lastly, you must set up a regular audit. The audits can be quarterly, annually, or bi-annually as they help identify the fraudulent cases, identify the big expenses, and design strategies to reduce the costs.
Wrapping It Up
Business expense reports and employee expense reports are crucial for businesses. They help track each penny spent on reimbursement from the company’s bank account. This promises better business revenues as with regular use of these reports it eliminates frauds, financial losses, and penalties. At this point, we do want to say that automated expense report software is a better choice, and you can ask Folio3 for help!
