Expense Management Automation

Managing your expenses entirely by hand can quickly become overwhelming, especially as a growing startup. Expense management automation is a great way to make the function more efficient, saving resources and improving accuracy.

Here’s what you should know about expense management automation as a startup founder, including how it works, what it’s capable of, and when you still need to rely on a human professional.

What is expense management automation?

Expense management automation refers to the use of software to streamline certain expense-related tasks, and in some cases, complete them automatically. It contrasts directly with manual expense management, which involves doing everything by hand.

In addition to automating routine bookkeeping activities, like categorizing transactions, reconciling expenses to bank statements, and generating initial financial statements, expense management software is capable of streamlining workflows related to:

• Accounts payable (AP) tracking and bill payment
• Employee expense reporting and reimbursement
• Corporate credit card issuance and spend enforcement

With the recent development and integration of artificial intelligence, solutions like Zeni are becoming even more powerful, facilitating the automation of increasingly sophisticated processes.

For example, Zeni uses machine learning to analyze patterns in your expenses, allowing it to recognize and merge duplicate vendors, generate accrual accounting journal entries, and offer meaningful insights into your projected outcomes.

Why automate expense management

Managing expenses with manual processes often requires employees to spend hours each month typing data into spreadsheets, hunting down paper receipts, and waiting for approval emails. 

In other words, it’s time-consuming, inefficient, and often tedious. 

Arguably the most significant benefit of incorporating software into your workflows and automating your expense management is that it saves time, freeing your employees up to spend their energy on more valuable tasks.

Streamlined approval workflows can also help give your employees the satisfaction–or at least peace of mind–that comes from knowing their expense request will be processed efficiently, rather than sitting for weeks at a time with approval pending.

In addition to saving time, expense automation can significantly reduce the occurrence of mistakes, such as incorrectly entered data, misplaced supporting documentation, and inaccurate application of expense reimbursement policies.

With a manual process, you’re highly vulnerable to these kinds of human errors. While they may start small, they can easily fly under the radar, causing them to snowball into more complex issues that cost even more resources to resolve.

Expense management software can minimize these kinds of occurrences by automating detail-oriented processes and building in checks and balances.

With automated expense management software as affordable as it is, there’s little reason to continue with manual systems. That’s why it’s becoming increasingly popular, with roughly 68% of businesses having made the switch as of 2023.

How expense management automation works

1. Automate employee reimbursements

Reimbursing employees is typically one of the most cumbersome aspects of manual expense management. It requires employees to save paper receipts, type data in by hand, and email managers for approval, often making them wait weeks for their funds.

Expense management automation tools are designed to streamline each step in the process, including:

• Expense submission: Employees can start the expense reporting process through convenient avenues, like an online portal or mobile app. With receipt capture features, they can take a picture of supporting documents, from which details like the vendor, amount, and date are often parsed automatically.
• Approval workflows: You can create customized approval workflows that requests follow automatically, always routing to the appropriate manager. Tracking requests is much simpler on a separate, dedicated platform, and automated follow-ups ensure they don’t slip through the cracks.
• Payment processing: As each expense claim is approved, payments process automatically, often through rapid methods like same-day ACH transfers that ensure employees get their funds as soon as possible.

In addition to streamlining reimbursements, automated expense management systems help keep your records safe and organized. You no longer have to worry about misplacing receipts, and it’s much easier to sort and review transactions.

Strategic planning is also often much easier with automation software than with manual expense reporting. For example, you may be able to sort employee expenses by date and department to monitor employee spending patterns and inform future budgets.

2. Automate bill pay

Paying your bills by hand is another time-consuming process with many opportunities for human error, and the stakes are especially high.

Delayed payments can result in late fees and additional interest charges, straining your budget unnecessarily. They can also damage your relationships with vendors and employees, potentially disrupting your supply chain or even costing you talent.

A manual expense management process can also create additional opportunities for expense fraud, and fraudulent expenses may slip through the cracks, such as duplicated or unauthorized payments.

AP automation helps mitigate these risks, functioning similarly to employee reimbursement automation.

When you receive an invoice from a vendor, it can extract key details from the document, such as the amount, due date, and vendor name, enter the bill into the software, and kickstart the approval process.

The bill then follows an automated workflow in accordance with your business expense policy, ensuring the proper parties have a chance to sign off. As before, the separate platform and automated reminders help keep the process moving.

Once bills are approved, the software can schedule them to be paid automatically on or before the due date using the appropriate payment methods.

3. Automate expense categorization

Tracking expenses manually is really only feasible for small businesses with low transaction volumes. As your company grows in size and complexity, expense categorization software becomes increasingly necessary.

The software can automate the process of recording transactions by pulling expense data directly from your bank and credit card accounts. By reading the merchant names and industry tags, it can also assign a general expense category.

However, the recent incorporation of AI and machine learning into bookkeeping solutions has taken automation to another level.

For example, Zeni’s expense tracking software combs through your general ledger to find and resolve problematic transactions that may be muddying your financial statements, like duplicate expenses, which it can automatically merge.

Zeni also uses machine learning to study the way you’ve characterized transactions in the past and update its internal rules accordingly. The more data it has to learn from, the better it gets at categorizing your activities the way you want them.

It can even learn to automate accounting processes that are more advanced, like creating journal entries to add non-cash transactions to the income statement, such as depreciation and amortization.

4. Control corporate credit cards

Expense management tools often include corporate credit card capabilities. In other words, they let you issue physical and virtual credit cards to some or all of your employees, effectively making them authorized users on a single credit line.

Not only does that reduce the need to reimburse them for business expenses they would otherwise put on their personal accounts, but it also has the added benefit of allowing you to accumulate additional credit card rewards.

Additionally, your expense management solution should let you use them to control your company’s spending with them. For example, you can:

• Prevent non-business-related or unauthorized expenses
• Limit spending on individual, department, and organizational levels
• Get real-time alerts for activities that would violate policies or budgets

Your dashboard will also include expense report features that help you monitor each cardholder’s spending and review transaction details, often in real-time. 

Some tools can even highlight trends and potential problems, like departments that consistently overspend.

5. Automate financial reporting

Financial reporting is the process of compiling your financial data into a complete set of financial statements, including the:

• Balance sheet, capturing your financial position on a given date
• Income statement, summarizing your financial performance over time
• Cash flow statement, documenting the cash inflows and outflows during a period

Financial reporting is one of the most frequently recurring and high-priority tasks for all businesses. Your financial statements are essential for financial planning, tax compliance, pitching to investors, and applying for loans.

Depending on your needs and circumstances, you may need up-to-date copies of these financial reports as often as every month. 

That can be incredibly time-consuming to do by hand, but automated expense reporting software can handle the process almost entirely.

In addition to tracking your disparate transaction data, these tools should automatically organize the information into initial financial statements. They also make it easy for you or your accountant to adjust them for accuracy and digestibility when necessary.

Warning: The limits of expense management automation

An automated expense management system can be incredibly efficient at handling tasks that involve limited variables, like categorizing transactions, routing invoices through approval workflows, and enforcing card spending limits.

When powered by AI, they can even learn to navigate more sophisticated processes, and the potential advancements we’ll see as the technology continues to evolve are incredibly exciting.

However, even the best software is still far from being a replacement for a human, and you can quickly get into trouble if you rely on it for something beyond its limits. Here are some of the most notable tasks you shouldn’t trust it to do, at least not on its own:

• Finalizing financial statements: Expense automation tools and accounting software can draft financial statements, but always have an accounting expert review them before you use them to make decisions or present them to a third party. 
• Tax planning and compliance: Expense management software may be able to organize your tax deductions, but it’s not capable of creating a comprehensive tax plan. For that, you’ll need a tax advisor with experience in your industry.
• Informing financial strategies: While software can analyze your financial trends and suggest a course of action, you should always run those ideas by a strategic expert, like a fractional CFO, before executing them. 

Of course, there’s also an undeniable human element that no software can replace. As powerful as they are, tools are always most effective when you pair them with human oversight, expertise, and support.

Automate expense management with Zeni

Automating expense management can be beneficial for every business, but it’s especially important for growing startups.

As your company scales, the volume and complexity of your expenses will naturally increase. Manual, traditional expense management can quickly become overwhelming, and it can be surprisingly difficult to dig yourself out of a bookkeeping hole. 

Your employee count will also inevitably grow, and reimbursing them for their on-the-job costs is another task you probably can’t afford to manage by hand for long.

If you’re a startup founder, consider using Zeni’s expense management for startups. Enhanced by artificial intelligence, our platform is a comprehensive expense management tool, capable of automating:

• Bill payments
• Employee reimbursements
• Bookkeeping and expense tracking
• Financial statement generation

Our new business credit card also offers AI-powered spend management, plus 1.75% cash back on all purchases with no annual fee.

Zeni clients also get 24/7 access to a dedicated team of financial experts, ready to provide whatever support you need. Schedule a demo to see if Zeni is right for you.