Most of the time a business spends on expenses doesn't go into deciding anything. It goes into chasing receipts, retyping amounts, guessing categories and waiting for someone to approve a report. Streamlining expense management means taking those steps out, or making them happen on their own, until people only look at the expenses that need a decision.
This guide walks through the expense management process step by step, the practices that make each step faster and the parts worth automating. It applies to a five-person team as much as to a finance department, in Canada and in the US.
The expense management process, step by step
Whatever tools you use, every business expense goes through the same six steps:
- Policy. The company decides what it pays for, up to what amount, and who approves it.
- Spending. An employee pays, with a company card or with their own money.
- Receipt capture. The receipt is collected and attached to the expense.
- Coding. The expense gets a category, a general ledger account and a cost centre, with its sales tax split out.
- Approval. Someone checks it against the policy and says yes or no.
- Reimbursement and posting. Out-of-pocket spending is paid back, card spending is matched to the statement, and everything is recorded in the books with its receipt.
Employees see this as the expense report: they group their expenses, add a business purpose and submit. Finance sees the rest. Both sides lose time in the same places.
Where the time goes
The slow steps are rarely the ones that need judgment. They are the ones that depend on someone remembering to do something:
- Receipts arrive late or not at all. A paper receipt fades in a wallet, an emailed one sits in a personal inbox, and the employee rebuilds the report from a card statement weeks later.
- Coding is guessed. A card line that reads "SQ *CAFE 4471" says little about what was bought, and the category ends up depending on who types it in.
- Policy is checked too late. If the first person to compare an expense with the policy is a manager at month end, the money is already spent and the conversation is awkward.
- Approvals wait. A report sits with one approver who is travelling, and nobody else can move it.
- Month end becomes a chase. Finance spends the days before the close emailing people about missing receipts and fixing codes.
How to streamline expense management: nine practices
1. Write a policy people can read in five minutes
A clear expense policy answers four questions: what the company pays for, the limit per category (meals, lodging, mileage, software), which receipts are required, and how long employees have to submit. Short rules get followed. A twenty-page document gets skimmed once.
2. Set a submission deadline and keep it
A deadline stops expenses from piling up into one painful week. Many companies ask for expenses within 30 days or by the end of the month. In the US, under an accountable plan, the IRS treats expenses as accounted for within a reasonable time when they are substantiated within 60 days of being paid or incurred, with any excess advance returned within 120 days.
3. Get the receipt at the source
The fastest receipt is the one nobody has to collect. Ask for digital receipts at checkout, send emailed receipts to one place and photograph paper receipts when you pay rather than at month end. Make sure each receipt shows what the tax authorities need. In Canada, to claim an input tax credit on a purchase of $100 or more, you need the supplier's GST/HST registration number, and from $500 also your business name, a description of what was bought and the payment terms. In Quebec, keep the supplier's QST number as well. In the US, the IRS expects documentary evidence for lodging and for any other expense of $75 or more.
4. Code the expense when it is captured
Keep a short list of expense categories mapped to your chart of accounts, and assign the category, the GL account and the cost centre when the receipt comes in, based on what was actually bought. Coding from the receipt's line items is more accurate than coding from a card descriptor, and it saves finance from recoding everything at the close.
5. Check the policy at submission, not at month end
Run the rules when the employee submits. A hard rule stops the expense and says why, while a soft rule lets it through with a flag for the approver. Catching an out-of-policy meal while the employee still has the receipt in hand takes two minutes. Catching it three weeks later starts a dispute.
6. Route approvals by amount and cost centre
Not every expense needs the same approver. Small amounts inside policy can go to one person, larger ones to the budget owner and exceptions to finance. Give each approver the receipt, the policy result and the budget impact on one screen, name a backup for every approver and escalate approvals that stall. An approval workflow written down once saves the same question being asked every week.
7. Reimburse on a fixed schedule
Pay approved reimbursements on a known date, every week or every pay period. Employees stop asking when they will be paid, and finance sends one batch of payments instead of dozens of small ones.
8. Post to your books with the receipt attached
Every approved expense should reach the accounting system with its category, its tax and its receipt. If the receipt lives only in an email thread, the month-end close and any later audit depend on finding it again. Keep it for as long as the tax authorities require: six years in Canada and generally three in the US.
9. Review a sample after approval
Checks at submission catch what breaks a rule. They don't catch the same receipt claimed twice on two reports, or a pattern that only shows over months. Each month, pull a small sample of approved expenses, plus every expense from anyone new or anyone above a set amount, and look for duplicate expenses, split purchases that stay just under a limit, and receipts that don't match the card charge. Keep the audit trail of who approved what. A review that people know happens does more against expense fraud than a longer policy.
What to automate, and what to keep for people
Expense management automation works best on the steps that follow a rule. Judgment calls stay with people.
- Automate: collecting receipts from merchants and inboxes, matching receipts to card charges, suggesting the category and GL account, splitting sales taxes, running policy rules, reminding people about missing receipts, routing approvals and posting to the accounting system.
- Keep for people: writing the policy, deciding on exceptions, approving unusual or large expenses and reviewing patterns, such as a cost centre that keeps going over budget.
The test of an automated expense management setup is simple. An expense that follows the policy should reach the books without anyone touching it, and the only expenses a person sees are the ones that need a decision.
A simple expense reporting process for employees
For the people who spend the money, the process should come down to four habits:
- Pay, and get the receipt at the same moment: digital if the merchant offers it, a photo if it is paper.
- Add the business purpose while you still remember it.
- Submit before the deadline, grouping expenses by trip, project or client when that helps the approver.
- Fix a returned line right away rather than resubmitting the whole report.
A checklist to start this month
- Rewrite the policy on one page, with a limit per category and a submission deadline.
- Pick one place for every receipt and stop accepting receipts by text message.
- Trim the expense categories to the ones that map cleanly to your GL accounts.
- Name a backup approver for every approver.
- Choose a reimbursement day and announce it.
- Track two numbers each month: expenses still missing a receipt at the close, and days from submission to reimbursement.
Doing it in Smartbills
Smartbills is built around getting the receipt before anyone has to ask for it. At merchants that use Square, Toast, Clover, Lightspeed or Shopify POS, the itemized receipt comes over as data at checkout. Email receipt capture reads receipts from connected mailboxes, and the Smartbills app photographs the paper ones. Card charges are matched to their receipt as they post.
Expense management in Smartbills suggests the category, GL account and cost centre from the line items, checks your policy the moment an expense is submitted and routes it to an approver by amount and cost centre, escalating when an approval stalls. Employees build expense reports by selecting expenses that already carry their receipts and taxes, finance schedules the reimbursement, and approved expenses post to QuickBooks, Xero, Sage or NetSuite with the receipt attached.