Expense management guide for UAE businesses

Expense management is a critical aspect of your operations. This process is more than simply tracking employee reimbursements; it is a comprehensive strategy that aids in financial planning, risk assessment, and identifying cost-saving opportunities. 

A GBTA Foundation study revealed that manual expense report processing costs an average of $58 per report, with an additional $52 for resolving errors present in one out of every five reports. Traditional manual methods have led to slow reimbursements, employee dissatisfaction, limited visibility, and increased fraud risk, causing significant challenges for finance teams and CFOs. 

However, with the advent of corporate cards combined with expense management software, you can effectively mitigate these issues. These tools simplify the process, reduce workload, enhance regulatory compliance, and provide valuable data for cost optimisation. 

Embracing this change can transform expense management from a headache to a strategic advantage for your business. Read on to learn more about the different aspects of expense management and why automating this process holds the key to success. 

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What is expense management?

Expense management involves the process of tracking, controlling, and analysing your company's expenses. By managing business expenses effectively, you can ensure optimal use of resources and maintain the financial health of your company.

The primary elements of expense management include tracking and categorising expenses, setting up approval workflows, generating reports for analysis, and integrating with accounting systems. These components work together to provide a 360-degree view of your company's spending patterns, helping identify cost-saving opportunities and make informed financial decisions.

Expense management advantages for business 

Here are some key reasons why you might find it beneficial to focus on expense management:

• Cost control: One of the primary benefits of effective expense management is cost control. By closely monitoring the expenses, you can identify areas where your business might be overspending. Expense management can bring financial discipline to your company and help implement strategies to reduce costs and increase profitability.
• Regulatory compliance: Maintaining accurate and detailed records of expenses is a good practice as well as a legal requirement. Beyond tax laws, expense management ensures adherence to a broader spectrum of financial regulations, including VAT, corporate tax, and industry-specific compliance requirements. This can help you avoid legal problems and potential penalties down the line.
• Fraud prevention: Informed expense management practices can significantly reduce the risk of employee fraud. By implementing strict financial controls and monitoring mechanisms, you can identify and stop dishonest activities such as suspicious transactions, false expense claims and unauthorised spending. Encouraging a culture of transparency and responsibility among employees reinforces the importance of ethical spending practices.
• Financial planning: Expense management goes beyond tracking and controlling costs, as it is also a valuable financial planning tool. By analysing historical spending patterns and identifying trends, you can make data-driven projections, optimise cash flow, and prepare for future economic fluctuations.
• Operational efficiency: Efficient expense management can streamline administrative processes and reduce the workload for your finance team. Automation tools and software can simplify tasks such as expense reporting and approval workflows. By integrating expense data with other financial systems, you can gain valuable insights into your operational performance and identify opportunities for process improvement. 

However, it's worth noting that reimbursements can often complicate this process and lead to inefficiencies. By moving away from a reimbursement-based system, you can boost the overall efficiency of your expense management process.

Why do you need an expense management policy?

An expense management policy is essential for businesses of all sizes in the UAE. It provides a clear framework for managing business expenses, ensuring financial control and efficiency.

A well-structured expense policy sets clear expectations for your employees regarding allowable expenses, proper documentation, and approval processes. This clarity reduces the potential for misunderstandings, errors, and fraudulent activities. By defining expense categories and limits, you can streamline the expense approval process, saving time and resources.

A detailed expense management policy helps ensure compliance with UAE's financial regulations and tax laws. It is useful to prevent overspending, detect irregularities, and support internal audits. By implementing a policy, you can establish a culture of financial accountability, empowering employees to make informed spending decisions.

For instance, a well-structured policy would detail allowable expenses like travel, meals, and office supplies, outlining clear limits and approval requirements. It should also define how employees submit expense reports, including necessary documentation and deadlines. 

What is the expense management process?

The expense management process is a systematic approach that involves a series of steps, each of which plays an important role in ensuring financial control and efficiency. Let's analyse the corporate expense management process flow further:

• Employee incurs expense: This is the first step in the expense management process. Employees incur expenses while performing their official duties.  These can include business travel expenses, client entertainment, office supplies, or other work-related purchases. It is vital to ensure that these spendings align with your company's expense policy.
• Receipts are captured: Once an expense is incurred, it is important to capture and store the receipts accurately. Receipts act as proof of costs that have been paid, and they can be utilised to apply for tax deductions and credits. If you don't have the right paperwork, you might lose the chance to save on taxes or draw the scrutiny of tax officials during an audit. As digital receipts can be easily stored and accessed, you should consider implementing a mobile app to streamline this process.
• Expense report creation and submission: After the receipts are captured, the next step is creating and submitting expense reports. This involves categorising expenses, adding details to reports, and submitting them for approval. Implementing expense management software and integrating it with your accounting system can simplify this process and reduce errors.
• Employees are reimbursed: The final step in the traditional expense management process often involves reimbursing employees. However, the reimbursement process is burdened with inefficiencies and delays. You should consider alternative approaches to eliminate delays and administrative burdens. Implementing corporate credit cards with spending limit control can eliminate the reimbursement process and ensure that expenditures are kept in check.

Challenges with manual expense management

While manual expense management might seem straightforward, it comes with its own set of challenges that can affect the accuracy of your finances. Here are some key challenges you might face with business expense management:

• Human error: Manual processes are inherently prone to mistakes and inaccuracies. Whether it's incorrect data entry or misclassification of expenses, these errors can lead to significant discrepancies in your financial records. This affects your bottom line and also complicates compliance with financial regulations.
• Time-consuming: Manual tracking and reporting of expenses can be extremely inefficient. From collecting receipts to entering data and processing reports, each step takes time and diverts your team's attention from more strategic tasks. 
• Lack of visibility: One of the major drawbacks of manual expense management is the difficulty in obtaining real-time insights. Without a consolidated system, your finance team cannot fully understand the spending patterns due to a lack of access to real-time reports and dashboards on mobile devices. Additionally, they cannot quickly and easily modify these reports or import travel and expense-related data from other sources and vendors. 
• Expense fraud: Manual expense management systems are more susceptible to fraudulent activities. From inflated expense claims to fictitious receipts and unauthorised spending, these fraudulent activities can heavily impact your bottom line.

Why do you need expense management software?

In the fast-paced business environment of the UAE, efficiency and accuracy are paramount. This is where integrated expense management solutions with corporate cards can be a game-changer. 

• Streamlined processes: Expense management software automates and digitises the expense reporting process. This eliminates the need for manual data entry and paper-based receipts, making the process more efficient. It also simplifies expense tracking, approval workflows, and financial reporting. The software can automatically categorise expenses, making it easier to analyse spending patterns.
• Enhanced control: With real-time expense tracking, businesses can monitor expenses as they occur for better control over budgets and financial planning. The software enforces company expense policies automatically, ensuring that all submissions comply with predefined rules. For instance, you can establish a card issuance policy to specify how admins can create cards for themselves and other users, including approval workflows. 

In your expense approval policy, you can also set up multiple approval levels for different spending amounts. These automated workflows streamline the approval process, reducing the time taken to approve expenses and ensuring that all submissions comply with your company’s expense policies.

• Improved accuracy: Manual data entry can lead to errors. Automated expense management systems use OCR (Optical Character Recognition) technology to capture data from receipts for improved accuracy and enhanced financial control. The software can automatically match receipts to expenses, reducing the risk of discrepancies.

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Using corporate cards integrated with an expense management platform provides real-time visibility and complete control over company spending. This integration simplifies the reconciliation process, ensuring accuracy and preventing fraud by automatically categorising and monitoring transactions as they occur.

Benefits of expense management automation

Automation in expense management can bring about a transformative change in your business operations. Here are some key benefits highlighting the importance of expense management:

• Eliminate reimbursements: Say goodbye to the hassle of manual reimbursements. By integrating corporate cards with expense management software, you can eliminate the entire reimbursement process. This removes the need for employees to submit expense reports and wait for reimbursement, improving employee satisfaction and cash flow.
• Accurate expense reporting: Automated expense reporting ensures accuracy and reduces the risk of errors. With clear expense categories and automatic data capture, your employees can easily record their expenses, and the system can validate them against company policies. This helps save time and enhance the overall quality of expense data.

• Efficient budget control: Expense management software provides valuable insights into your spending pattern. These insights can help you set tailored spending limits for corporate cards assigned to different employees. You can lock cards to specific merchant categories, create daily or monthly limits, and require managerial approval for any transaction over a certain amount. This helps you effectively monitor and control costs, ensuring your expenses never go over budget.

• Real-time spend monitoring: Gain complete visibility into your business spending with real-time monitoring. Expense management software provides up-to-date insights into employee expenses, allowing you to identify potential issues or trends quickly. This empowers you to make timely adjustments and prevent overspending.

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Optimise your expense management processes with Alaan

At Alaan, we offer an all-in-one business spending solution powered by smart corporate cards. Our integrated solutions are created to help businesses in the UAE optimise their expense management processes.

Our smart corporate cards are designed to transform the way your company manages its expenses. These cards can be issued instantly and used for a variety of business expenses, including e-commerce transactions, digital ads, SaaS subscriptions, government payments, fuel, and more. 

We also offer multi-currency cards, allowing your company to make transactions in multiple currencies, including AED, SAR, USD, and more. Our corporate cards come with bank-level security, multi-factor authentication, and tokenisation, ensuring that your money is always secure.

Our Alaan mobile app is designed to complement our corporate cards and provide real-time visibility into all your spending. With our app, you get real-time notifications when you spend using your Alaan corporate card. You can also track your business expenses in real time, see your card details, freeze and unfreeze your cards, and get rid of expense reports entirely via our app. Our expense management app also allows you to take a photo of your receipt, categorise the expense, and add a memo immediately. This simplifies the process of receipt matching and improves the accuracy of expense reporting.

But that's not all; our expense management software integrates seamlessly with multiple accounting solutions such as Xero and Intuit Quickbooks. This integration streamlines the entire spend management process, making it easier for you to automate expense recording, tracking, and budgeting processes.

Get in touch with our experts to learn more.

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