The process of expense management has changed dramatically in just the past 10 years. It used to be a very manual process, but finance teams can now leverage all manner of software to automate their tasks and better control company spending.
In this article, we discuss why modern expense management is important for business success and examine the key components of an effective system.
Key Takeaways
- Expense management is the process of tracking, analyzing, adjusting, and controlling business spending — including operating expenses (e.g., salaries, benefits, and insurance), capital expenses (e.g., new equipment, real estate, and software licenses), cost of goods sold (e.g., overhead, direct labor, and raw materials), and general expenses (e.g., administrative salaries, marketing, and advertising).
- Expense management is crucial for businesses because it makes cost control and savings possible, creates financial transparency, simplifies compliance, and improves efficiency.
- Key components of an effective expense management system include a comprehensive expense policy, an expense reporting and approval process, integration with accounting systems, and the use of a corporate/business credit card or p-card instead of a reimbursement system.
What Is Expense Management?
Expense management is the process of tracking, analyzing, adjusting, and controlling your business’s spending.
There are many different types of business expenses, but the most common can be organized into four categories:
- Operating Expenses: Salaries, benefits, insurance, professional fees, utility bills, office supplies, rent
- Capital Expenses: Software licenses, new equipment, real estate, vehicle purchases
- Cost Of Goods Sold: Manufacturing overhead, direct labor costs, raw materials
- Selling, General, And Administrative Expenses: Administrative salaries, marketing, advertising, travel expenses
Keeping track of these expenses — and making sense of how they impact your bottom line — is what expense management is all about.
Why Is Expense Management Crucial For Businesses?
Cost Control And Savings
One of the most visible and significant advantages of modern, software-driven expense management is cost control and savings.
By setting clear spending limits, scrutinizing expense reports, and identifying areas of unnecessary spending, you can shore up financial leaks and optimize spending habits across the board.
This will often translate directly into improved profitability and a healthier bottom line.
Financial Transparency
With an expense management system in place — one that includes detailed reports and analytics — you’ll have a more transparent view of your business’s spending patterns.
This improved transparency provides insight into the who, where, and why of your business’s spending habits and allows for better budgeting, forecasting, and strategic financial planning.
Compliance
A comprehensive expense management system helps ensure compliance with all local, state, federal, IFTA, and tax laws that apply to your business, thereby minimizing the risk that you’ll have to deal with penalties and legal issues.
Efficiency
Manual expense management systems that rely on paper receipts and cumbersome spreadsheets can be time-consuming and prone to error for both employees and administration.
Software and automation can streamline these workflows, reduce administrative burden, and allow employees to focus on more business-forward tasks.
Key Components Of An Effective Expense Management System
Comprehensive Expense Policy
One of the most important components of an expense management system is a well-defined and clearly communicated policy. The policy should be easily available to all employees — whether they are authorized to make purchases for your business or not.
It should describe in as much detail as necessary everything that goes into company spending, including:
- The types of expenses that are reimbursable
- Spending limits for various types of purchases
- Necessary documentation (e.g., itemized receipts)
- The process for submitting expense reports
- Approval and payment deadlines
Corporate Card Instead Of Other Spending Systems
Many businesses are still holding on to the old manual expense management/spending system that includes employees paying out of pocket, expense reports, and reimbursement.
A much better system involves using a corporate credit card, business credit card, or p-card to manage, track, and control business spending.
For more on these modern options, check out these articles from the Coast blog:
- Modern Corporate Cards: Features To Look For
- 3 Business Credit Card Benefits
- P Cards (Purchasing Cards): What Are They & How Do They Work?
Efficient Expense Reporting And Approval
Submitting expense reports and waiting for approval (and reimbursement) is one of the biggest speedbumps to an efficient expense management system.
To streamline the process, create standardized expense report forms (physical or digital) and provide plenty of instruction on how to complete them accurately and with the right supporting documentation.
You can also implement a mobile app that allows employees to capture receipts on the go and submit them digitally for more efficient recordkeeping.
Integration With Accounting Systems
It doesn’t matter how efficient the first two-thirds of your expense reporting process is, if the tools you use aren’t integrated with your accounting system, you’re throwing up a huge bottleneck that can slow things down.
Matching your expense tracking and your accounting system eliminates the need for manual data entry, reduces errors, and provides an unobstructed view of the company’s cash flow and financial health.
Improve Your Expense Management System With Coast
Traditional expense management is often reactive, manual, and frustrating, for both employees and finance teams. Coast changes that by giving fleet businesses real-time control, simplified workflows, and full visibility into spend across the organization.
Whether it’s drivers fueling up, field teams picking up supplies, or office staff managing day-to-day expenses, Coast replaces clunky processes with one streamlined platform.
Here’s how Coast improves your expense management process:
- Built-in policy enforcement: Set spending limits by employee, department, or category, so expenses stay within budget automatically.
- Real-time tracking: Every transaction shows up instantly, giving you live visibility into where company money is going and why.
- Easy, mobile-first receipt capture: Employees snap and submit receipts on the spot, reducing errors and saving hours in admin follow-up.
- Simplified reconciliation: Clear transaction data, GL mapping, and export-ready reports make closing the books faster and more accurate.
Coast brings together the control finance teams need with the flexibility employees want. The result? Smarter spending, less friction, and a modern expense management process that keeps your business moving forward.
To learn more about how Coast can help your company, visit CoastPay.com today.
Frequently Asked Questions
How often should employees submit expense reports?
How often employees submit expense reports depends on your business’s needs.
Some companies ask their employees to submit reports every week in order to stay on top of the process. Some companies prefer that their employees submit reports every two weeks. Still other companies allow employees to submit reports once a month.
Again, it all depends on what works best for your business and the finance team that handles the reports.
If your company deals with a high number of expense reports, more frequent submission can help keep the process manageable for all parties involved.
On the other hand, if your finance team only expects three or four expense reports in a 30-day period, it may work better for employees to submit at the end of every month.
How long should I keep expense records?
Retention periods for financial records, including expense reports, are often dictated by legal and tax regulations. Consult with your business’s legal and accounting advisors to determine the appropriate retention schedule for your jurisdiction.
As a general rule, keep all records that support an item of income, deduction, or credit on your tax return — including expense reports — for at least three years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
How can I prevent expense fraud?
The best way to prevent expense fraud is by implementing a spending policy, requiring detailed documentation, establishing clear approval workflows, auditing expense reports regularly, and using expense management software with fraud detection features.
Training (and retraining) your employees is also an effective way to keep your company spending policies top of mind and prevent the type of fraud that comes with a lenient system.
Should I include mileage reimbursement in my expense management?
Your business can choose to reimburse mileage or not.
If you do include it in your expense management system, the spending policy you create should cover the necessary details, including company vehicle vs. personal vehicle, current mileage reimbursement rate (typically based on government guidelines), required documentation, and what qualifies as business use.
