Expense management is an essential part of any business – big or small. With that being said, it can be an incredibly frustrating process for both finance teams and those spending.
Those within the finance function often struggle with chasing receipts, categorising transactions and analysing business spending, whilst colleagues in other departments have to wait months for their expenses to be reimbursed.
The good news is that there are ways to manage your business expenses which lead to fewer frustrations in the workplace – and they might just end up saving you some precious cash, too.
We’ll cover what small business expense management is, how it’s done and the benefits of switching from manual to automated expense management.
Key takeaways:
- Expense management is all about carrying out, tracking and auditing business expenses – from software subscriptions to travel expenses.
- Manual expense processes are holding small businesses back. Relying on spreadsheets and paper trails leads to delays, errors and frustration for both employees and finance teams.
- Automated expense management saves time and money by streamlining reporting, reducing human error and boosting overall efficiency.
- The employee experience matters. Faster reimbursements and easier expense tracking improve satisfaction, trust and productivity – all of which favour automation.
- The right software scales with your business. Look for tools that offer intuitive design, smart categorisation and real-time insights to support growth.
What is small business expense management?
Expense management is the way a business carries out, tracks and audits the spending that’s needed to make the business tick. This covers everything from travel expenses to software subscriptions and is an essential part of every company – no matter its size. With that being said, in this article we’ll be focusing primarily on small business expense management.
Every company has its own bespoke methods for tracking expenses, tailored to the way the particular business operates. Since no two companies’ spending needs will be identical, neither will their expense management process.
Expense management can be tricky, especially when relying on older (more analogue) methods of bookkeeping.
Historically, expense management has been a patchwork of different, often inefficient, methods of logging spending. This typically includes trailing through the business bank account with a combination of spreadsheets, scanned receipts and paper invoices, which is no fun for anyone involved.
The more employees you have – and the more geographically spread out they are – the more operationally difficult this expense claim process becomes, leading to a long and time-consuming paper trail with small mistakes cascading into much bigger issues.
Why small business expense management matters
So why is small business expense management necessary?
Well, there are a few different reasons your business should place good expense management at the top of the priority list:
Cost reduction
The average cost of processing a single report comes in at around £37.96. This number may not sound too big – but it doesn’t actually end there.
It’s long been known that one in five (19%) of all expense reports contains errors or missing information, costing an additional £40 and 18 minutes to correct. By this logic, the cost of human error, even for a small company, is staggeringly high.
Employee satisfaction
One of the major issues with a manual system is employee satisfaction.
Most employees paying for travel expenses will be using their own accounts. For larger travel payments, even having to wait a week to be reimbursed could put them deeply out of pocket. If your expense system leaves your people waiting to be repaid, satisfaction levels will inevitably take a hit.
Eventually, this could mean that productivity and trust in the company go down.
Nobody wants to work somewhere that jeopardises their own financial security. Over time, employees may become more hesitant to take on company expenses, which is ultimately limiting for the overall company growth.
Disputes that hold up payments only further exacerbate these feelings of frustration. If managers feel that their employees are taking advantage of the system, whether they’re right or not, tensions are more likely to build.
You might also be interested in: How finance teams can strike the right balance between trust and control
Feast and famine finance
Manual processes make it much more difficult to keep a real-time overview of company money. Since companies usually wait for employees to submit their claims, there’s often a delay in data for how company money is being spent.
Without enough working capital or insight into company cash flow, life for those in the finance team can be difficult. The everyday monitoring of the company’s margins and ROI can be wildly inaccurate. Add this to errors in employee claims and the figures get more muddied and complex. Yikes.
In short, effective expense management isn’t just about tracking receipts – it’s about maintaining financial clarity, building employee trust and supporting sustainable business growth.
Without it, small businesses risk unnecessary costs, strained team dynamics and poor visibility into their financial health. Investing in smarter systems now can save time, money and headaches down the road.
Types of company expense management
Travel and expense management
Business travel can rack up a surprising number of costs – flights, hotels, meals, taxis, even the odd coffee. Travel and expense (T&E) management is all about keeping track of those costs, making sure they align with company policy and ensuring employees get reimbursed quickly and fairly.
But managing it all manually? That’s a fast track to errors, overspending and unhappy staff. Travel and expense management software helps set clear rules, automate approvals and give employees the freedom to spend within limits – all without back-and-forth emails to finance. It keeps spending under control, whilst giving your team the tools they need to get on with business.
Technology expense management
If your business is looking to scale up, putting systems and software in place can be one of the biggest aids in keeping the quality associated with your business. But sometimes, small businesses can find that all these subscriptions get a little out of control.
Like travel management software, your tech stack can be tracked, categorised and analysed so that you can measure its genuine impact and effectiveness. By keeping a closer eye on subscription outgoings, your business can grow more strategically.
Marketing and advertising
Each year or quarter, most companies will allocate a certain budget towards advertising in order to increase sales. But without clear spend controls put in place, this budget could easily get out of hand.
By referring to marketing expense management, your team can optimise efficiency and strengthen their reach, capturing those precious leads.
Equipment, utilities and hardware
Finally, the day-to-day running of the business includes the likes of non-operational expenses, such as office equipment and energy. While these costs are unavoidable, they should still be trackable. For a small business, knowing just how much of an impact these expenses have on your overall revenue can be the difference between healthy profits and severe losses.
Company expense management in this category is just as vital as travel and expense software – and it’s not just because everyone needs to have their cup of coffee each morning.
The process: How expense management is done
Every business has their own expense management process. The best flow for your business is whatever’s most suitable to your company's needs at every access point.
With that being said, the first step towards managing your expenses is tracking them. This is either done manually or automatically – and it’s probably no surprise which is more efficient.
- Manual expense reporting is the way business expense tracking has traditionally been done. Expense tracking is processed by hand through repetitive work, which typically includes using outdated or low-level software that does little more than move things from paper to screen – think spreadsheets, paper forms and even Excel.
- Automated expense reporting is when the routine and menial aspects of expense management are processed automatically through a web or phone app. It makes expense management far more efficient, freeing up accountants’ time to work on more productive, critical tasks. It also reduces the risk of error and fraud, as there’s less opportunity for data to be affected by anyone.
If you’ve yet to jump on the automation wagon, here’s one thing you should consider: expense management begins with your employees and their needs – and the most straightforward process is always going to win big with them.
Requiring your staff to handle tedious, mundane tasks and fill out details like VAT, reasons for claiming and exact amounts being charged from each receipt makes the process a deep drain on their time.
Automation lifts that weight from your employees’ shoulders and makes their day much easier – and that benefits both them and your bottom line.
Read more about expense report automation here
Benefits of small business expense management automation
There’s a reason that automated expense management systems are quickly becoming the norm. They come with a plethora of benefits whilst streamlining a process that all companies partake in.
Here are just a few of the benefits of switching to an online expense management system:
Save time and money
The most obvious benefit is how much time and money you’ll save by automating your business’s expenses.
Financial tasks – more than just about any other kind of work – are largely automatable by the right tech solution. This means that the tedious, time-consuming work that would typically be done by hand could be done automatically in a fraction of the time.
Automation saves time and money in two major ways:
- It reduces the amount of time your employees spend doing repetitive, simple tasks like data entry, transfers and tracking. Rather than paying employees to do work that could easily be done by a computer, you can pay them to perform a more meaningful and critical role in your expense management. For example, figuring out how to retain more revenue and use working capital more efficiently to grow the business.
- It vastly reduces the risk of errors occurring. Human beings are naturally prone to making mistakes, which can add up fast. In fact, accidentally duplicated paperwork is costing businesses approximately $3 trillion per year in the US. These kinds of errors are completely avoidable through automated processes, which have a significantly lower error rate than their human counterparts.
In short, there’s a lot to be won through expense management automation.
Increase financial security
Another benefit of letting software streamline your company’s numbers is security.
Whilst the majority of employees are perfectly responsible, there are those that attempt to work the system – namely through fraud. In fact, in the first half of 2020 alone, expense fraud losses in the UK hit £374.3 million.
Automated systems not only prevent fraud and other security risks by handling portions of the work outside of human influence, but also by utilising fraud detection services.
These kinds of features can detect fraud before and as it’s happening, preventing it from having the costly effects it would have in the past.
Expense from anywhere
Thanks to modern technology, we’re living in an increasingly mobile age, where ‘the office’ can be just about anywhere. With the remains of the pandemic finally becoming a relic of the past, we’re also seeing more spread out workforces with plenty of travel, remote work and many returning to the office.
Technology advances allow employees greater flexibility within their roles, letting workers accomplish tasks whilst on the road, away from work or from multiple devices. In order to get the most out of the possibilities of modern technology, look for cloud-first software solutions to help with travel and expense management.
This kind of innovation in expense management helps keep your team agile and able to incur essential business expenses wherever they might be, without having to then send paper receipts across borders via snail mail.
Make smarter decisions
If modern technology has taught us anything, it’s that data is king. The more data you have, the better you’ll understand your business and the better you’ll be able to make decisions on its behalf.
Automated expense management software doesn’t just track and manage your company’s expenses: it also learns from them and distils that information back into your business budgeting.
The advanced data analytics integrated into most automated solutions can provide you with resources that your company has never had before. You can instantly look at how much your company is spending, what it’s spending it on and what sort of trends your business tends to fall into – and you can even look at predictions of what your expenses will look like in the future.
Making smarter, more forward-thinking decisions relies on good facts and statistics. So help your business by using modern technology to inform the strategy.
What to look for in an expense management solution
Choosing the right expense management software can save your business time, money and stress – but only if it’s the right fit. For small businesses especially, the ideal solution should be easy to use, quick to set up and powerful enough to handle your everyday needs without unnecessary complexity.
Here are the key features and considerations to look for:
- Ease of use: Your team shouldn’t need a training manual to submit or approve expenses. A good solution should be intuitive from the start, making life easier for everyone – from the employees spending money to the finance team reconciling it.
- Smart expense reports: Look for tools that automatically generate detailed, real-time reports. These should centralise your company’s spending data, covering everything from mileage to cash withdrawals, and give finance teams the insights they need to manage budgets effectively.
- Automated categorisation: Manually labelling every transaction is a time sink. The best platforms use AI to automatically assign expense categories (like travel, software or entertainment) based on the transaction details, helping you stay organised without lifting a finger.
- Custom approval workflows: Control matters – especially when budgets are tight. Choose a system that lets you set up custom approval flows so you can flag out-of-policy spending or assign managers to review expenses that exceed specific limits.
- Scalability: Even if you’re a small business today, your needs may grow quickly. Look for software that can scale with you, handling everything from individual reimbursements to team-wide subscriptions, travel and equipment costs.
- Support for all types of expenses: From train tickets to SaaS tools and office coffee machines, make sure your chosen solution can handle a wide variety of expenses. Think beyond receipts and consider the full spectrum of purchases your team makes on a regular basis.
Ultimately, the best expense management software is one that works for your team – not against them. Get this decision right, and you’ll free up valuable time, cut unnecessary costs and give your business more room to grow.
Time to upgrade? Time for Pleo
If you’ve been considering switching to an automated expense management system, then you’re on course to relieve a lot of unnecessary overhead and time commitment surrounding your expense reporting.
With the right expense management solution, this becomes not just achievable, but affordable – and your company can also improve the ways in which company money is spent.
By equipping your team with Pleo Reimbursements, our online expense management system, you can:
- Empower your team with in-pocket spending solutions, whilst maintaining full control over spending limits. They’re not out of pocket, and you know exactly what you’ve authorised.
- Gain back countless hours of lost time by no longer having to manually process individual expenses.
- See where company money is going in real-time whilst integrating seamlessly with your accounting system.
As a small business, the outlay for an automated system might initially seem hard to justify. But finding one that works for you can help you reduce costs, save the company thousands of pounds each year and keep employees happy – and in the long run, that’s all more than worth it.
Ready to make the jump? Try Pleo today!
