Common Expense Management Problems (And How to Solve Them for Good)

Small businesses have to manage their expenses every day. This is a fine line between managing their day-to-day operations while also being mindful of their financials. In most cases, expense management is not a simple task, but rather a constant source of stress and error, losing valuable time for everyone involved.

We've spoken to hundreds of small business owners here at Ledgers.cloud about their financial management issues, and we have identified the same expense management software-related challenges repeatedly. The best part is each of the issues we've identified has a solution based on common sense and practicality – let's take a closer look at the most common issues we see as it relates to expense management and suggest ways to eliminate them.

1. Missing Receipts

Receipts go missing, fade visible, or are stuffed in drawers until they are needed later (tax time, audit time, etc.). All of these receipts, both paper & electronic, eventually end up in your email inbox until you need to retrieve some receipts for tax deductions.

Result: You may miss tax deductions overall; have problems with compliance; & will spend close to 10 hours hunting for receipts!

Solution: A digital-first solution which captures & stores receipts digitally using a smartphone app. With Ledgers.cloud, receipts may be captured from the moment you get them & can be instantly attached to their corresponding transaction (so you don’t have to search for them later), securely stored in the cloud, & quickly retrieved.

2. Manual Data Entry & Human Error

The manual process of copying data from your receipts/bank statements into an Excel spreadsheet is time consuming & error-prone. Errors caused by manual data entry include (but aren’t limited to):Incorrect amount; Incorrect Date; Incorrect type of transaction.

Result: You have inaccurate reports & inaccurate profit margins, leading you to make poor management decisions.   

Solution: Automate your data entry with accounting software (like Ledgers.cloud) that integrates directly with your bank feeds, allowing you to import your data directly. Additionally, use Optical Character Recognition (OCR) technology to automatically extract data from photo receipts. The time your team would use to manually input the receipt data could instead be redeployed in analyzing data.  

3. Combining Business and Personal Expenses

What The Issue Is: When you use a personal card to quickly cover a business expense, or you use a business credit card to pay for personal items, it creates a monumental mess for the accountant to sort through later; oftentimes this will take hours.

What The Results Will Be: You will end up with records that have too much information, hassle to prove valid deductions, and possible issues in your compliance with tax code.

The Solution: Establishing Financial Boundaries. Use separate Accounts/Cards for all Business Purchasing. By Having Fully-Categorized Transactions, you have everything you need to properly categorize and reconcile transactions with Ledgers.    

4. No Real-Time Insight

What The Issue Is: You have no idea how much you are currently spending until the end of the month after you have updated your books.

What The Results Will Be: A lot of surprise cash flow shortages, budget spillage that you won’t find out about until it’s too late, and an inability to budget effectively because you’re always in the reactive state.

The Solution: Having a Live Tracking Dashboard. By Using a Unified System Like Ledgers, You Will Be Able To View the Amount of Money you owe, Buy and Spend on All Current Expenses in Real Time Instead of a Month Behind.

5. Inefficient Approval Processes

 Delay caused to employees trying to receive reimbursement for an expense that they incurred because of delays caused by using either paper or email approval chains due to having to wait for their manager (and other approvers) to respond and approve the request, which also causes the manager to lose track of pending requests for reimbursement (one of the main reasons that approval processes get delayed).

Outcome to Employees: Unhappy Employees, Delayed Payment for Vendors, and Also Some Policy Violations Slip Through.

Solution: Implement Automated Digital Workflows and Create Rules That Automatically Route Expense To Proper Approver(s). The Status of the Approval Process Can Be Determined In Real Time. Using Ledgers.Cloud Can Help Streamline Approval Processes Consistently, Not Only In Real-time but From Purchase Order Invoice To Payment. 

6. Tracking Reimbursement was Difficult

The employee advances and reimbursements became confused. Who paid what? Who should I reimburse? Spreadsheets or your memory (to keep track of what you are reimbursing) is not a reliable way to track expenses.

Outcome To Employees: Unhappy Employees, Employee Out-of-Pocket Expenses That Were Never Reimbursed, Accounting Errors.

Solution: Tracking Reimbursement Using a Fully Integrated System and Tracking Employee Reimbursed Expenses and Employee Advances (this system could also track all other payables related to the employee). Ledgers.Cloud’s Payables Management Tracks, Schedules, and Pays Accurate Amounts Owed To Vendors And Employees For Every Dollar.

7. Inefficient Vendor and Invoice Management

The Issue: Without a proper system for managing vendor accounts, managing accounts payable can quickly become a complex process that leads to lost invoices, multiple duplicate payments and a significant amount of time being consumed by vendor inquiries.

The Consequence: Vendors experience uncomfortable relationships with your company, there is a financial loss due to duplicate payments, and discounts for early payments are missed.

The Fix: Centralized Vendor Management System. Keeping track of purchase invoices, payment statuses, and debit notes and returns. Ledgers Cloud is an ideal solution for keeping accurate purchase records, managing debit notes for returns, and ensuring payment deadlines are met.  

8. Unclear Spending Policies

 The Issue: Employees are unsure of the types of expenses they can incur, or what items require management approval. This may result in excessive caution when spending and potentially missing out on valuable opportunities, or conversely, it may result in overspending and not following company policy.

The Consequence: A vast array of inconsistent behaviors when spending money, unknown expectations for reimbursement, and surprises when it comes time to submit receipts.

The Fix: To create a clearer understanding of company expectations, document and communicate your company spending policies and then automate enforcement of those policies via your Expense Management System. Define both spending limits and approval thresholds for your employees within your Expense Management System. When policies are built into business processes and enforced through automated systems, compliance is achieved.  

Ledgers.cloud - A Solution for Your Actual Business Issues

 Expense management is not a stand-alone challenge. It is part of a series of connected problems and obstacles that face every small business every day.

Consequently, we have designed an integrated solution for the problems associated with expense control:

• End-to-end operation, from receipt to reconciliation.
• Real-time visibility into all purchases, sales, and expenses.
• Automated workflows that reduce the opportunity for errors and save users time.
• A single platform for integrating all accounts payable, accounts receivable, and inventory.

 The expense management process must not impede the growth of your company. The expense management solution must provide users with the tools necessary to control and manage their company's finances.

Tired of wrestling with expense chaos? See how Ledgers.cloud brings order, clarity, and control to your business spending-so you can focus on what you do best.