10 Expense management practices to optimise finances

Expense management shouldn't be complicated, but for finance teams across the UAE, it can often become a time-consuming and repetitive task affecting productivity. Controlling employee spending is essential for your company to ensure a healthy bottom line and compliance with the UAE tax laws. 

Effective expense management is crucial for companies of all sizes, from small startups to large enterprises, aiming to enhance their financial health and operational efficiency. By leveraging the right blend of technology and best practices, you can simplify and streamline your expense management processes. This can help you save time, reduce errors, and gain greater visibility into your company's financial activities. 

This blog covers 10 best practices for managing expenses to help streamline your financials. Read on to learn more.

What is expense management?

Expense management is the systematic process of tracking, recording, and managing business-related expenditures. It involves establishing clear guidelines, collecting receipts, verifying expenses, and processing reimbursements in a timely manner. The purpose of expense management is to ensure that every business spending aligns with financial policies, ensures accountability, and supports the company's financial health.

Typically, expense management processes include these steps:  

• Tracking: It involves monitoring every expense incurred, whether it is for travel, office supplies, or client entertainment. This is often done through detailed expense reports submitted by employees. 
• Recording: These expenses are logged into a system, ensuring a clear and accessible record of all transactions. This step is vital for maintaining accurate financial records and providing a strong foundation for audits.
• Managing: It involves analysing these records to ensure they adhere to company policies and strategic financial goals. This step allows for real-time adjustments and informed decision-making.

What are the benefits of streamlined expense management?

Streamlined expense management allows you to focus on process optimisation, create a trustworthy work environment and ensure accuracy in financial reporting. Here are some of the key benefits that you can achieve through efficient expense management:

• Optimise budgeting and expense forecasting: By keeping a close eye on your expenses, you can gain a clear understanding of where your money is going and identify any trends or patterns. This level of precision can help you adjust budgets in real-time and avoid overspending. 
• Reduce expense frauds: Fraudulent expense claims can be a significant drain on your resources. By implementing robust expense management practices, you can detect and prevent these activities. This includes setting clear expense policies, regularly auditing expense reports, and using technology to flag suspicious transactions. 
• Avail accurate input VAT credit: In the UAE, businesses can claim a credit for the Value Added Tax (VAT) they paid on qualifying business expenses. However, to do this, they need to maintain accurate and detailed records of all expenses as per the regulatory requirements. A streamlined expense management system ensures that every transaction is accurately recorded and categorised, making it easier for you to submit VAT claims.
• Create a culture of transparency: Transparency is key to building trust within your company. By implementing transparent expense reporting processes, you can show your employees that you value honesty and integrity. 

Expense management best practices for companies

In this section, we will explore some expense management best practices to optimise your spend management processes:

Implement a detailed expense policy

Creating an effective expense policy is the first step towards effective expense management. Your policy should clearly define what constitutes an acceptable expense, the process for submitting and approving expenses, and the procedures for reimbursement.

You should consider including the following elements in your policy:

• Acceptable expenses: Clearly define what types of expenses are reimbursable. This might include travel, meals, office supplies, and other business-related costs. Be as specific as possible to avoid confusion and encourage financial discipline.
• Acceptable payment methods: Your expense policy should clearly outline the payment methods the employees can use to pay for business spending. The focus here should be on using corporate cards as they help eliminate the long-drawn process of reimbursements. 
• Approval process: Clearly identify who is responsible for approving expenses and outline the steps employees need to follow for submitting their expense claims. This can include specifying any required documentation, such as receipts or invoices, and setting timelines for submission and expense approvals.

Make sure your expense policy is easily accessible to all employees and that it is communicated clearly and regularly. Review and update your expense policy to make sure that it is relevant and effective.

Digitalisation of receipts and invoices

Moving from paper-based to digital receipts and invoices is a significant step towards efficient expense management. Digitalisation reduces the risk of errors associated with manual processes and ensures the availability of accurate financial data.

Here are some of the key benefits of digitalisation that your company can avail:

• Reduce errors: Digital receipts and invoices are less prone to errors than their paper counterparts. They can be easily tracked and managed, reducing the risk of lost or misplaced receipts.
• Save time: Digital receipts and invoices can be processed much faster than paper ones. This could free up some precious time for your staff, enabling them to concentrate on tasks of higher priority.
• Improve accessibility: Digital receipts and invoices can be accessed from anywhere, at any time. It simplifies the process of expense submission for the employees and the approval process for the managers.

By implementing digital tools, you can ensure that all receipts and invoices are automatically captured, stored, and categorised, making it easier to track and review expenses. For example, at Alaan, our mobile app allows your employees to photograph their receipts and upload them directly into the accounting system. Our spend management solution comes with features like automated expense categorisation (using OCR) and integration with accounting software to further streamline your processes.

Assign corporate cards to employees

Unlike traditional reimbursement methods, where employees pay out-of-pocket and then submit claims, corporate cards allow you to streamline expense tracking and eliminate the hassles of the reimbursement process.

Corporate cards provide a direct way to manage and monitor expenses as they occur. Every transaction is automatically recorded, making it easier for your finance team to track spending in real-time. 

Another advantage of corporate cards is the enhanced control they offer over spending. You can set spending limits, apply category controls, and receive instant alerts for any unauthorised transactions. This level of financial control helps ensure adherence to the expense policy and reduces the risk of fraud or overspending.

When setting up a corporate card program, consider the following tips:

• Choose the right provider: Look for a provider that offers features such as detailed reporting, integration with expense software solutions, and seamless foreign transactions if your business operates internationally.
• Define usage policies: Clearly communicate to your employees how and when corporate cards should be used. Include guidelines on acceptable expenses, spending limits, and the process for reporting lost or stolen cards.
• Monitor usage regularly: Use the reporting tools provided by your card issuer to monitor card usage in real-time. This will help you spot any discrepancies or potential issues early on.

Ensure that your employees are familiar with the company's corporate card policy to prevent misuse.

Integrate expense management software with the accounting system

Integrating an expense management solution with your existing accounting software can bring significant benefits, including improved accuracy, efficiency, and financial oversight. When these systems work together, you can achieve real-time data synchronisation, which ensures that all financial information is up-to-date and consistent across your organisation.

One of the primary benefits of integration is the reduction of manual data entry. When your expense management software is linked to your accounting system, expense data is automatically transferred and categorised. This eliminates the need for double entry, lowering the possibility of errors and saving precious time. Real-time integration also allows for faster reconciliation, which is particularly beneficial for VAT compliance and auditing.

To ensure a smooth integration process, you might find the following steps helpful:

• Evaluate your needs: Determine the most important features you require. For instance, do you need detailed expense reporting, multi-currency support, or advanced approval workflows? Recognising your needs will assist you in selecting the appropriate software.
• Choose compatible software: Ensure that the expense management software you select is compatible with your existing accounting system. Recognising your needs will assist you in selecting the best option from the different expense management platforms. 
• Plan the integration: Work with your IT and finance teams to map out the integration process. This might include setting up user roles, configuring data flows, and conducting test runs to ensure that everything functions correctly.

Make sure that your staff is trained on how to use the integrated system. This includes understanding how to input data, generate reports, and troubleshoot any issues that might arise.

Conduct regular audits of expense reports for fraud

Regular audits help maintain financial integrity and discourage fraudulent behaviour by reinforcing a culture of accountability. To conduct effective audits, consider the following step-by-step guide:

• Establish an audit schedule: Regularly scheduled audits, whether quarterly or monthly, can help you stay on top of potential issues. By having a clear timetable, you can ensure that all expense reports are reviewed consistently and comprehensively.
• Use data analytics: Leverage data analytics tools to identify patterns and anomalies in expense reports. These tools can help flag unusual spending patterns, such as frequent claims just below approval thresholds or multiple claims for similar expenses within a short period.
• Review high-risk categories: Pay special attention to expense categories that are more prone to abuse, such as travel, entertainment, or client gifts. These areas often have more flexible rules, making them potential targets for fraudulent claims.
• Look for red flags: Common signs of expense fraud include missing receipts, altered documentation, duplicate claims, and expenses submitted long after they were incurred. Be vigilant for these red flags, as they often indicate potential issues that need further investigation.
• Interview employees: In cases where discrepancies are found, it might be beneficial to have a discussion with the employee involved. This can help clarify any misunderstandings and determine whether the issue was a genuine mistake or an intentional act.
• Document findings and take action: Keep a detailed record of all audit findings, including any actions taken as a result. If fraud is detected, take appropriate measures, which could range from additional employee training to disciplinary action, depending on the severity of the case.

Assign spending limits and automate approvals

Setting spending limits allows you to define clear boundaries for employee expenses. For example, you might set specific limits for different categories of expenses, such as AED 500 per day for meals or AED 1,500 per month for travel-related expenses. These limits ensure that spending stays within budget and aligns with your company's financial goals.

To implement spending limits, you can start by:

• Reviewing past spending patterns: Analyse historical expense data to determine appropriate limits for different expense categories. Consider the average spending amounts and adjust limits based on the needs of your business.
• Communicating the limits: Clearly communicate the established limits to all employees. Ensure that they understand the rationale behind these limits and how to comply with them.
• Monitoring adherence: Use your expense management software to monitor expenses in real time. The software can automatically flag any expenses that exceed the predefined limits. These valuable insights would allow you to address issues promptly.

To automate approvals, look for systems that integrate well with your existing accounting software and allow for customisable approval workflows. Then, set up approval workflows based on your organisational hierarchy. For instance, expenses within certain limits might be automatically approved, while higher amounts could require additional scrutiny from managers.

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Opt for a paperless approach to expense reports

Transitioning to a paperless approach for expense reports offers both environmental and operational benefits. Opting for digital solutions reduces the need for physical storage, lowers paper-related costs, and supports eco-friendly practices, which can enhance your company's sustainability profile.

To shift to digital expense reports from paper receipts, consider the following tips:

• Select suitable software: Choose an expense management system that seamlessly integrates with your present software and supports digital receipt submission and processing.
• Train employees: Offer extensive training using the new system effectively. Ensure everyone understands how to submit and track expenses digitally.
• Implement digital record-keeping: Establish protocols for securely storing digital records. Ensure that all documents are backed up on cloud storage and protected against unauthorised access.
• Encourage compliance: Promote the benefits of going paperless to employees, including faster processing times and reduced administrative burden.

Regularly communicate with employees

Ongoing communication with employees about expense policies and procedures is vital for maintaining compliance and efficiency. Keeping employees informed ensures they understand and adhere to your company's expense management best practices.

Here are some methods to enhance communication:

• Hold regular training sessions: Schedule periodic training to refresh employees' knowledge of expense policies and address any new updates or changes.
• Provide updates and reminders: Use email newsletters or internal communication platforms to send regular updates about policy changes or reminders about compliance.
• Create accessible resources: Develop and maintain an easily accessible repository of expense management policy documents and FAQs on your company's intranet or digital workspace.
• Solicit feedback: Encourage employees to provide feedback on the expense reporting process and address any concerns or suggestions they may have.

Use a common vendor for travel bookings

Utilising a common vendor for all travel-related expenses can provide significant advantages, including cost savings and streamlined expense tracking. Consolidating travel bookings with a single provider allows for better negotiation of rates and simplifies the process of managing and reviewing travel expenses.

Here's how you might benefit from using a common vendor:

• Achieve cost savings: A common vendor often offers discounted rates or special deals for bulk bookings. Leveraging these discounts can reduce overall travel expenses.
• Simplify expense tracking: Centralising travel bookings with one vendor makes it easier to track and consolidate expenses. This approach reduces administrative overhead and enhances visibility into travel costs.
• Improve vendor relationships: Building a strong relationship with a single vendor can lead to better service and tailored solutions that fit your company's needs.

To select and manage your vendor relationships effectively, you can follow the following suggestions:

• Consider vendors with a strong reputation, competitive rates, and the ability to meet your company's travel needs.
• Discuss pricing structures and service agreements to ensure they align with your expense management goals.
• Regularly review the vendor's performance and seek feedback from employees to ensure the service meets your requirements.

Analyse expenses to identify spending issues

Analysing expense data is crucial for uncovering trends and identifying potential issues that can impact your company's financial health. By systematically reviewing expense reports, you can adjust your policies to improve financial management.

Let's understand the steps you can follow to effectively analyse your expense data:

• Collect and consolidate data: Gather expense reports from various sources and compile them into a comprehensive dataset for analysis.
• Identify trends: Look for patterns in spending, such as recurring high costs in specific categories or frequent claims from certain departments.
• Detect anomalies: Spot any unusual or inconsistent expenses that deviate from the norm. This might include unexpected spikes in spending or expenses that lack proper documentation.
• Make informed decisions: Leverage the actionable insights from your analysis to adjust budget allocations, refine expense policies, or implement cost-control measures.

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Streamline your expense management with Alaan

At Alaan, we provide an all-in-one business spending solution that empowers your employees to pay for what they need to get work done while enabling your finance team to get full visibility on business spending. We present an extensive range of features designed to streamline your expense management processes.

• Corporate cards: We offer unlimited virtual and physical corporate cards. These cards are designed to make life easier for your employees while giving you better control over business expenses. With our corporate cards, your employees do not have to worry about carrying cash or filing for reimbursements. As for your finance team, they can easily track, monitor and control all business expenses.
• Mobile app: Our mobile app provides real-time notifications when you spend using your corporate card. It allows you to track your business expenses in real-time, see your card details, freeze and unfreeze your cards, and get rid of expense reports completely. You can take a photo of your receipt, categorise the expense and add a memo immediately.
• Spend management solution: Our spend management solution provides real-time visibility and control over all your spending. It automates your finance team, saving hours every month. You can establish robust financial processes and stay in control. It helps you get rid of petty cash issues and procurement payment delays.

Get in touch with our experts to learn more about our expense management solutions.

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