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Your expense management process is terrible. Here's why and how you can fix it.

30th Jan 2023
Brought to you by
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Aurelia are the automation and software experts for accountants and finance leads. We want to to...
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The world of business is changing. Today's companies need to be agile and adapt to the constant shifts in the market which can make managing expenses and cashflow really tricky. Expense management can turn into a manual process that takes up valuable time when you need it most, whether that's during busy periods or at year end when all self-employed people suddenly wake up. And expenses aren't just a burden - they're also a major financial risk. In fact, 60% of UK businesses lose over £1 million every year due to poor expense management practices. If you feel like your expense management process is lacking, read on. We’ll help you identify the blind spots and find remedy. Spoilers: automation is the answer to your headache.

Your expense management process is terrible. Aurelia on Accounting Web
Karolina Grabowska // Pexels

Spend management 

Spend management is hard because you need to act against human nature and laziness. It means that whenever something is too hard to use, it will not be used and receipts get lost. Missing receipts usually increase your clients’ tax bill and safe to say, your client will not be happy with that and will blame you as their accountant. 

It is also important to note that the smaller the companies are, the worse their spending management process is. It happens in a more ad-hoc way, through many ways like card payments from personal bank accounts, transfers without correct references, credit, subscriptions, invoices and so on. All this puts more pressure on you as their accountant and makes those emails or “nudges” to get receipts for them to happen more often.

Lack of visibility into expense categorisation influences cash flow and forecasting

Categorisation is key to improve the expense management process.  The influence of categorisation on cashflow and forecasting can be huge as it helps drive better decision-making about what money is spent on versus what it should be spent on. A good handle on cashflow makes business owners and their teams happy.

The pipe dream is to have a centralised system that allows you to manage expense categories, all in one place.  That way everyone - both you and everyone in your clients’ company will use the same set of rules to classify expenses. That way there’s no confusion as to what should go where and what’s an allowable expense vs what’s not. 

Unfortunately, the common pain point with AP tools that connect with accounting but still have their own static categories that you need to map to your own ones - we talk more about it here.

Lack of trust in the process

Trust is the base of any good relationship. Also between you and your clients or employees. If neither of them understands the importance of expense management and sees the process as unreliable, they won’t follow it. And that way, you’re likely to see more of the following: 

  • Wasteful spending. One of the first things that an incoming CFO does when they join a new company is getting the team to create a vendor list with all subscriptions.  Depending on how many separate teams the company has, the duplications of subscriptions can be enormous. Savings can also come from just downgrading, not just cancelling services.
  • Human error. Even when we try our best not to make mistakes, we still do – and those mistakes can cost us more than just embarrassment!

Also, many companies still track their own expenses manually instead of using software as they believe it will give them more control over what's being submitted and how much money they're spending. Unfortunately entering data into spreadsheets usually leads to more mistakes than getting everything flowing automatically into a single place of truth for a company’s finances. And the busier the company or the time of the year, the more likely those mistakes will go unnoticed. And that’s just a recipe for disaster. 

Manual expense management with no centralised system

A manual expense management process is inefficient and ineffective, which affects your business in a number of ways. 

You have no ability to automate your expense management process because all your tools are spread out. You collect receipts, and invoices through email, Slack, MS teams, download CSVs with transactions to cross-check what’s missing and then manually enter all this information into the accounting software. And then you still need to chase the business owner for missing receipts or payments.  

What this means for cash flow visibility too is that both you and your client have very different ideas of their actual business performance and expenses as you may not want to rely on their homebaked solutions for actual accounting. Makes you wonder how much more precise both of those sides could be if you could have one, centralised system, accessible for all. 

A clear, automated solution can help you simplify your expense management process and ensure compliance.

When it comes to simplifying and improving the expense management process, automation is key. A centralised system with automated processes will reduce costs by eliminating manual steps, reduce the risk of mistakes and improve productivity. Automating recurring tasks will provide great visibility over past and future spending habits and budgets. 

A good system should also remove barriers of use for everyone - accountant, business owner and their employees should all use the same, single source of truth for company finances rather than needing to log in to five different platforms. The easier it is to use, the faster good habits will form. Who knows they may even enjoy uploading the receipts in the end!

Aurelia’s Invoice Inbox is just that - an easy to set up and use, end-to-end expense management tool . It connects with your current tools like Xero & QuickBooks, and it helps you do invoice and expense management for all of your clients in a single place. Check it out to find out how you can do line-item level categorisation and payments straight in Aurelia.

Final word

The expese management process you and your clients follow is likely lacking but it’s not all lost. To recap, here’s how you can fix it:

  • Have a company use a single, automated process with all of their employees
  • Process needs to be low friction on the employee and accounting side. Keeping it simple is key!
  • Automate your spend management to reduce human errors on client-side
  • Reduce time spent on digitisation by using an end-to-end tool for all of client’s spend documents

What else are you struggling with in relation to expense management? Any nightmares that don’t let you sleep at night? Drop us a line at [email protected] - we’d love to hear you rant about it and ultimately see if we can sort you out with a solution.