Managing expenses is one of the most overlooked areas for small businesses. Without a clear process, it can quickly lead to errors, delays, and missed opportunities to save money. Manual systems often create confusion, and policies are not always followed. Fortunately, these problems are avoidable. With the right structure, better tools, and clear rules in place, small businesses can take full control of their spending and improve accuracy, speed, and visibility across all expense-related tasks.
What is expense management?
Expense management is the way a company tracks, reviews, and handles its spending. It includes everything from the moment an employee pays for something on behalf of the company to when that money gets approved and reimbursed. For small businesses, it also means keeping expense categories up to date, making sure employee expenses are logged properly, and following the rules set by tax authorities.
The process usually starts when someone submits a report with receipts and a short note about why the expense was made. A manager checks the details, approves the expense, and then the employee gets paid back. Managing expenses well means more than keeping records. It also involves setting clear policies, using reliable tools, and building simple processes that help avoid mistakes.
When businesses rely on spreadsheets or paper receipts, it can create confusion, delays, and missing data. It also becomes harder to spot spending problems early. Businesses that do not update how they manage expenses risk making costly errors, breaking their own policies, or losing track of how money is used.
Further Reading: The Complete Guide to Business Expense Management
How do expense management and spend management differ?
Expense management and spend management may sound similar, but they cover different parts of how a business handles money. Expense management deals with costs that have already happened. These are usually things employees pay for upfront, like travel, meals, or office supplies, and then request reimbursement.
Spend management focuses on planning and controlling costs before any money is spent. It includes setting budgets, choosing suppliers, and making smart decisions about where and how to spend. The goal is to use resources wisely and avoid overspending.
For small businesses, knowing the difference matters. Expense management helps keep track of day-to-day spending, while spend management helps avoid waste and keeps long-term finances on track. When both are used together, businesses have a better chance of staying organised and in control.
What makes expense management so important?
Accurate expense management keeps finances in check and supports day-to-day decision-making. Poor tracking often results in cash flow problems, late tax reporting, and missed chances to manage costs in a smarter way. In many companies, the absence of a clear process creates spending habits that drift away from business priorities.
Understanding how money is spent is essential for proper planning. When records are incomplete or disorganised, managing budgets becomes more difficult. Resources may be misallocated, with some areas overfunded and others left short.
Regular business costs like travel, subscriptions, and office supplies account for a large part of company spending. If these expenses are not reviewed properly, the risk of duplicate payments, unauthorised charges, or fraud increases. A reliable process helps reduce such mistakes and keeps spending under control.
Employee spending also needs structure. When the reimbursement process is slow or unclear, staff may stop following the rules simply to avoid delays in getting repaid.
Expense management challenges
Many small businesses run into problems when setting up an expense management system. Some issues come from how expenses are tracked, while others are linked to unclear rules or outdated tools.
Common challenges include:
- Manual work takes too much time
Entering expenses by hand and sorting paper receipts slows everything down. Employees often postpone submitting their reports, causing missing records and delays in reimbursements.
- Unclear or missing expense policies
If rules are not clearly defined, employees may go over budget without meaning to. This often causes confusion, disputes, and extra work for finance teams trying to sort it out.
- Outdated tools and poor visibility
Relying on spreadsheets or disconnected systems makes it harder to manage spending. When expenses are not tracked in real time, it’s easier to miss problems until they grow.
- No system integration
If expense tools don’t connect with your accounting or ERP systems, data gets stuck in different places. This increases the chance of errors and makes reporting more complicated.
What you need to know about managing expenses
Good expense management starts with clear rules. Each company should decide which types of spending are allowed, how much can be spent, and what the approval process looks like. These rules should be easy to find and updated regularly to reflect how the business is changing.
Technology is also important. Using reliable software helps reduce manual work and lowers the chance of mistakes. A good system should support mobile use, connect with your current tools, and show spending data in real time.
Clear communication helps make the process work. Employees should understand the rules, know how to report expenses, and feel confident using the tools. Brief training sessions or simple guides are often enough to keep everyone aligned.
It’s also important to check spending patterns regularly. Reviewing reports each month can reveal problems early and show where small changes might reduce waste or improve control.
Further Reading: How to Build an Expense Policy That Actually Works
How do employee expense reimbursements work?
When employees cover work-related costs out of pocket, the reimbursement process should be clear and simple. Here’s how it works:
- Collect receipts and details.The employee keeps the receipt and notes why the purchase was made. Some companies may also ask for extra details like dates, locations, or client names, depending on the type of expense.
- Submit an expense report.The report is submitted through the company’s chosen system. To avoid delays, employees need to follow the company’s rules on what to include and how soon to submit after the purchase.
- Manager review and approval.A manager checks that the expense fits company policy, reviews the supporting documents, and approves it if everything is in order. More expensive or unusual costs may require additional review.
- Processing the reimbursement.Once approved, the finance team processes the payment based on the company’s schedule. Some companies reimburse weekly or monthly, depending on internal policies.
- Using digital tools.Many businesses now use expense management software to handle each step. These tools can automatically route reports for approval and connect with payroll.
What are the types of expense management?
Expense management can cover different areas depending on how the money is spent. Here are the main types:
- Direct expenses
These are costs linked to a specific project, client, or task. Examples include travel for a client meeting, materials bought for a project, or services hired for a specific job. Since the purpose is clear, these expenses are usually easy to track.
- Indirect expenses
These are general costs that support the whole company but can’t be tied to one project. Office rent, electricity, software subscriptions, and admin services all fall into this group. Tracking them often involves setting rules for how they’re shared across departments.
- Employee-paid expenses
Sometimes employees use their own money for work-related costs, such as meals during travel or small supplies. These expenses need to be reported, reviewed, and reimbursed through a simple and fair process.
- Capital expenses
This includes larger investments like equipment, vehicles, or office renovations. These costs often need higher-level approval, long-term planning, and special accounting rules to reflect their value over time.
Each type requires a slightly different approach, but all benefit from clear policies and well-organised systems.
How effective expense management can benefit your organisation
Managing expenses properly has a direct impact on how well a company runs. Key benefits include:
- Clear visibility over spending.With accurate records, companies can see where money goes and spot areas of waste or overspending.
- Stronger internal processes.When expense systems are automated, employees spend less time on paperwork, and managers can approve expenses faster.
- Better tax and policy compliance.Automated checks help flag unusual spending early, while organised records make it easier to handle tax reports or audits.
- More stable cash flow.Tracking expenses regularly helps predict costs more accurately and avoid sudden cash shortages.
All of these improvements contribute to better decision-making and reduce the pressure on teams managing company finances.
Top 12 tips on how to improve your expense management
Technology and automation:
- Implement modern expense management software that integrates with your existing accounting systems.
- Use mobile apps to capture receipts and submit expenses in real-time.
- Set up automated approval workflows to speed up processing times.
- Integrate with company credit cards for automatic expense capture.
Policy and process improvements:
- Create clear, comprehensive expense policies that cover all types of business expenses.
- Establish spending limits and approval hierarchies based on expense amounts.
- Implement regular policy reviews to keep guidelines current and relevant.
- Provide easy access to policy documents through digital platforms.
Training and communication:
- Conduct regular training sessions for employees on expense policies and procedures.
- Create user-friendly guides that explain how to submit and track expenses.
- Establish clear communication channels for expense-related questions.
- Recognise and reward employees who consistently follow proper procedures.
Keeping an eye on spending patterns is a smart habit. Reviewing expense reports every month can reveal trends, highlight unusual costs, and point out areas where the company might be spending more than necessary.
It also helps to keep employees informed. When people know why the rules matter and how their reports affect the bigger picture, they’re more likely to follow the process properly. Clear communication around expense policies and how they impact the business builds a shared sense of responsibility.
Further Reading: What are Disallowable Expenses and Allowable Expenses in the UK?
Expense management policy: Why is it important?
An expense policy gives everyone clear rules to follow. It explains what can be claimed, how much can be spent, and how the approval process works. Without written rules, employees may submit expenses that don’t match business goals or fall outside the company’s budget.
Unclear or missing policies create problems. Misunderstandings, delayed reimbursements, and incorrect documentation become more common when staff are unsure what’s allowed. A written policy sets the expectations in advance and guides people through everyday situations.
When the same rules apply to everyone, the process stays consistent. Finance teams don’t have to make case-by-case decisions, and reviewing company spending becomes more straightforward.
Expense policies also support tax and legal requirements. Proper documentation is essential for audit checks and tax reports. A clear policy helps the business stay organised and keep all records in good shape.
If you’re looking to create or update your company’s policy, read How to Build an Expense Policy That Actually Works.
Choosing the right expense management software
Modern software can replace manual processes and save time, but the right tool depends on how your business works. A good system should be easy to use, connect with your current tools, and support your team without adding extra steps.
Here’s what to look for:
- Easy integration.The software should work well with your accounting tools, payroll system, and company cards.
- Mobile access.Employees should be able to upload receipts and submit reports on the go. A mobile app helps them stay on track wherever they are.
- Simple interface.If the system is hard to use, people won’t use it. Choose something with a clean layout and clear instructions.
- Cloud-based features.Online systems update automatically, offer stronger security, and let you access data from anywhere. They’re often more affordable too, especially for small businesses.
- Good support.Even simple tools need a support team behind them. Make sure help is easy to reach when something doesn’t work.
Choosing software with these features can make expense management faster, more accurate, and less stressful for everyone involved.
Typical features of expense management software
The best expense management tools come with a range of features that make tracking, approving, and analysing spending much easier. Here are the most useful ones:
- Receipt capture
Employees can take photos of receipts using their phones. The system pulls out key details like the amount, date, and vendor automatically, so there’s no need to type everything in by hand.
- Automatic data extraction
Many tools use optical character recognition (OCR) to fill in expense reports based on receipt images.
- Custom approval workflows
Expenses can be routed to the right manager based on the amount, category, or department. The software follows company rules, so approvals are handled consistently.
- Real-time expense tracking
Managers and finance teams can see expenses as they happen. Dashboards show budget status, spending trends, and anything that looks out of line.
- Notifications and reminders
Built-in alerts keep the approval process moving. If something needs review or is waiting too long, the right person gets a nudge.
- Detailed reporting
The system generates ready-made reports for accounting and tax filing. You can also create custom reports to see exactly where the money is going.
- Analytics and insights
Some tools include dashboards that highlight trends, unusual activity, or areas where costs can be reduced. Advanced platforms may even connect with business intelligence tools for deeper analysis.
Further Reading: Break Free from Manual Financial Reporting with Wallester Business
Benefits of using expense management software
Using the right software to manage expenses can make a big difference in how a company handles money, saves time, and supports its team. The main benefits include:
- Lower costs
Automation handles tasks that would otherwise require manual effort. Finance teams spend less time entering data, and fewer errors mean fewer costly mistakes. Many companies cut their processing costs in the first year of using a proper system.
- Happier employees
When the process is simple and fast, employees don’t have to wait long for reimbursements. They can easily submit reports, check their status, and get paid on time.
- Better compliance
The software can follow company rules automatically and warn you about anything unusual. It also keeps clear records of every step, which helps with tax reporting and audits.
- More accurate data
Digital receipt capture and card integration reduce typing mistakes. With cleaner data, companies can rely on reports and make smarter financial decisions.
CFOs’ best expense management software in 2025
There’s no shortage of expense management tools on the market right now. Some focus on the basics, like receipt uploads and report approvals. Others go further, offering full financial dashboards, custom rules, and integrations with your entire accounting setup.
For small businesses, the best software usually shares a few key qualities:
- Easy to use – If the interface is confusing, people won’t use it. A clean, simple layout makes all the difference.
- Quick to set up – You shouldn’t need a whole IT team just to get started. Most top tools now work straight from the cloud.
- Works well with other tools – Look for something that connects with your accounting software, payroll, and company cards.
- Mobile access – A mobile app is no longer optional. Staff should be able to submit expenses and receipts from anywhere.
- Scalable – Choose something that fits your business now, but can also grow with you.
Many companies rely on a mix of user reviews, industry awards, and free trials to narrow down their options. It’s a good idea to test two or three platforms before deciding. What works for one team may not work for another – but with the right tool, expense management gets faster, cleaner, and far less stressful.
Take your expense management to the top level with Wallester
Wallester helps growing companies manage expenses with clarity and control. The platform is built for businesses that need fast card issuing, real-time tracking, and custom rules – all in one place.
Key features include:
- Corporate cards, both physical and virtual
Create and assign cards instantly. Set individual rules for online purchases, recurring payments, travel, and more.
- Clear control over team spending
Define limits, block specific merchants, and require approvals for certain types of transactions. All settings can be adjusted in real time.
- Live tracking of every transaction
No need to wait for end-of-month reports. Finance teams can view expenses as they happen, directly in the dashboard.
- Fast, simple expense reporting
Employees can upload receipts and tag purchases through the mobile app as soon as they pay – no need to hold on to paperwork.
- Smooth integration with accounting tools
All expense data syncs with your existing systems automatically, so there’s no need to enter the same information twice or deal with avoidable mistakes.
Wallester gives companies the structure and visibility needed to handle spending with precision – from everyday purchases to larger operational costs. Try Wallester Business today and take control of company expenses from the first transaction.
