This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Improving your expense approval process may help your organization manage reimbursements more efficiently, reduce unwanted spending, and prevent expense fraud.
Integrating best practices such as utilizing auto expense approval tools and having clear documentation may help your business better mitigate risks.
What Is an Expense Approval?
An expense approval is a part of business expense management that involves reviewing and authorizing reimbursement requests. This type of process can help provide a structure for employees to understand allowable expenses and the correct way to submit a request.
Businesses could incorporate approval processes in an expense process document that might include:
The types of expenses that are eligible for reimbursement
Instructions on how to create an expense report
Process and workflow steps for expense approval and reimbursement
Why Are Expense Processes Important?
Expense processes are important to help facilitate the tracking of business spending, budget management, and transparency in cash flow. Documenting spending may also help a company to comply with regulations.
Best Practices for Expense Report Approvals
Having an effective expense approval workflow could help make your business reporting process more accurate and efficient. Here are some best practices to consider following:
1. Set transparent expense approval rules and roles.
Having clearly defined rules and roles may help ensure accountability, facilitate greater consistency, and reduce confusion over the process.
Leveraging automation tools can help streamline expense approval by setting and enforcing processes as seamlessly as possible.
For example, your expense approval process may outline a section on the purpose and scope of the document. This section could also outline teams and employees that can request, submit, and approve expense reimbursements.
Other aspects to potentially incorporate in the document to help set transparent rules could include:
- Allowable expenses
- Non-allowable expenses
- Spending limits for expense categories
- Documentation to include for a reimbursement request
- Timeline for approval or denial of expenses
- Point of contact for questions about the process
2. Leverage automation and streamlined workflows.
Leveraging automation tools can help streamline expense approval by setting and enforcing processes as seamlessly as possible. For example, an expense management software workflow could be used to help set limits for budgeting or merchant categories.
Automation tools could also be used to impose limits on certain types of spending, helping to reduce the need for additional oversight. If additional approvals are needed, the tool could flag the item and indicate next steps for the employee.
Aside from streamlining requests, expense management software could help create customized reports or identify expense trends. The visibility into this type of data can help monitor transactions in real-time, and potentially indicate when changes into the expense approval process might be needed.
3. Regularly monitor and refine your expense approvals.
Reviewing and updating expense processes and workflows could help ensure that your business is aligned with its own goals, as well as current and future regulations.
How regularly you choose to review your expenses approval process may depend on factors like company size, the volume of reimbursement requests, and other major events like a merger or changes in financial regulations. For example, if you’re a smaller organization that is looking to grow, consider reviewing expenses more frequently, then switching to a less regular schedule as you have a better understanding of your company's spending.
When reviewing your existing expense process, consider the following best practices:
- Updating any outdated or inflexible processes
- Determining whether current processes meet compliance guidelines and current technology trends
- Gathering feedback from leaders and employees to help assess for transparency and efficiency
- Monitoring any changes to see whether they’re more effective
Taking Control of Your Expense Approval Process
An effective expense approval process could help ensure compliance, maintain financial control, and encourage transparency within your business. Best practices could include defining employee roles and responsibilities, integrating automation tools, and having a clear approval process. Regularly reviewing and updating processes as needed also may help to meet changing regulations and evolving business needs.
Expense Approval FAQs
What is an expense approval process?
An expense approval process is a system businesses use to collect, assess, and authorize reimbursement requests from its employees. The process may be structured to follow company processes, comply with regulations, and stay within spending limits.
Why is it important to have a structured expense approval process?
It's important to have a structured expense approval process to help ensure compliance, improve transparency within the business, and maintain financial control. It could also help create a more efficient reimbursement process and potentially offer more visibility into business spending.
What are the best practices for an expense approval process?
Some best practices for the expense approval process might include setting clearly defined guidelines, defining who approves expenses, and implementing automation tools to create more efficiency.
How often should expense approvals be reviewed?
Expense approval processes should be reviewed as often as necessary to help ensure your operations are working smoothly. Larger businesses and industries that face changing regulations may need to review more frequently.
Who is typically responsible for approving expenses?
Typically, managers, department heads, the finance team, or some combination are responsible for approving expenses.
Photo: Getty Images
The material made available for you on this website is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.
