Top 7 Benefits of Expense Management Automation in 2024

Controlling expenses is the second most difficult cost to manage. And many businesses still rely on manual expense management. A survey of ~ 600 finance managers has shown that across small, mid-size, and large businesses, an average of 41% still rely on manual expense management (Figure 1).

Figure 1: On average, 41% of businesses rely on some sort of manual expense report process.

Source: Telly

Moreover, they survey also showed that the significant pain points of traditional expense management are (Figure 2):

• Employees losing their paper receipts and business expenses without a receipt
• Employees submitting their expense reports late
• Data reconciliation consumes too much of valuable work hours

Figure 2: Top five painful aspects of the manual expense management process.

Source: Telly

Expense management automation is the answer. Companies of all sizes should use automated expense management systems to minimize:

1. Painful data entry
2. Fraudulent expenses
3. Reimbursement time
4. Time spent on reconciling paper records
5. Approval processing time policy compliance violation and more.

In this article, we will discuss the top seven business benefits of using automated expense management software in more detail.

1. Less manual data entry

When employees come back from business trips, they submit their receipts for reimbursement. The finance teams then have to manually extract the expense data and input it into the company’s accounting system. Not to mention that employees have to hold onto paper receipts throughout the trip. An automated expense management system would undertake the ETL process in real-time as the receipts are scanned in the mobile app on the employee’s mobile device.

For instance, an expense management solution has integrated its software into the internal messaging app Slack to make expense receipt submission as easy as texting a friend (see Figure 3). 

The main benefit of this feature is that entries are made automatically and in real-time, with a digital footprint that allows for future auditing. In addition, employees making these expenses do not have to hold onto their receipts, and a resolution (e.g. accept/reject) is made instantly. 

2. Minimized fraudulent expenses

Fraudulent expenses, on average, cost a company $31,000 annually (Figure 3). A fraudulent expense report forces a company to pay for something that it shouldn’t do. Moreover, expense fraud also pushes reconciliation periods back, because the finance teams would have to keep searching for the source of the expenditure.

Figure 3: Wrong expense reimbursements cost companies $31k annually, and are amongst the most common types of fraud.

Source: Report to the Nations

An expense management software is programmed to only approve the reimbursement payment if the receipt qualifies as a “business expense.” Embedded NLP, NLU, and OCR software bots read the receipt content and categorize it according to different tiers. So reimbursements will be data-driven and rule-based.

3. Quick reconciliation

Automated expense management solutions integrate with the company’s accounting system. So once the final approval of an expense report is reached, it will automatically be logged into the journal. The benefit of automated reconciliation is that they happen in real-time, and do not get accumulated for the close season. The other benefit is that there will be fewer errors in the entries made, such as avoiding duplicate entries, or entries with the wrong amount. Especially if the company has to reconcile tens of thousands of receipts, an automated solution saves companies invaluable hours of manpower.

4. Faster employee reimbursement payment

34% of respondents in the Telly survey said that the reason why they turned to an automated expense management solution is it enables them to reimburse employees faster. That’s because one of the key features of modern T&E management solutions is they allow employees to book and manage their itineraries in a single application. So the finance team can benefit from the software’s in-built automated receipt matching feature.

For example, TripActions (now rebranded to Navan) allows businesses to book airplane tickets and hotel rooms, rent cars, and plan other travel accommodations through the app (Figure 4). And because these expense requests are visible and made with controls in mind, accounting reams can make reimbursements faster and easier.

Figure 4: TripAction users can book their airplane tickets and hotels, and arrange their car rentals through the application.

Source: TripActions

5. Digital requests and approval 

In the Telly survey, 26% of large companies said they don’t have a robust system to approve expense reports. In other words, they can’t tell when an expense report is compliant and when it’s not. Automated expense management software vendors offer integrated physical and virtual cards (Figure 5). These credit cards are purposefully made for business trips and have built-in controls to approve/reject a payment based on the company’s expense policies.

Figure 5: Example of an expense management automation vendor’s credit card built specifically for T&E (travel and expense) management.

Source: Brex’s Website

6. Improved transparency and analytics

Businesses can manage expenses and forecast their short-term cash flow better if they have visibility into employees’:

• Travel expenses
• Permission levels
• Expense requests
• Expense breakdowns
• Credit card statements 

The modern expense management platform automatic data extraction of all expense reporting data and inputs it on a visible dashboard (Figure 6). The benefit is improved analytics and transparency. Visible dashboards also shed light on employees’ spending habits and result in better management of the company’s budget.

Figure 6: TripActions offers a visible dashboard of each employee’s budgetary and spending allowance.

Source: G2

7. Cost-saving suggestions

An expense management platform doesn’t only “react” to expenses – e.g., approving an expenditure after it is made. It also has in-built web scrapers and ML models to offer more affordable suggestions and recommendations before an expense is made.

For instance, Navan has a “Per Diem” feature that suggests cheaper hotel rooms with the same features as originally requested. Moreover, to incentivize employees to book those, the solution offers employees a percentage of the cost savings as a “Per Diem” reward. So a reason why expense management processes should be automated is that the dedicated software can have significant cost savings for a company.

For more on fintech

To learn more about the various applications of financial technology, read:

• Top 4 Benefits of Automating Your Tax Returns
• Best 8 Chatbot Use Cases & Applications in Finance
• Anti Money Laundering Algorithms: Tackling AML with AI

And if you believe your business would benefit from adopting a fintech solution, head over to our finance hub, where you’ll find a data-driven list of vendors for different financial use cases.

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