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Procurement Management: A Guide to the Basics of the Procurement Cycle

Vlad Falin

December 11, 2023

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Picture handling hundreds of weekly purchase requests from different departments, each demanding new vendor searches. When you finally make purchases after going through the cycle of approvals and negotiations, you end up facing goods and invoice discrepancies. 

That’s a chaotic situation you certainly want to avoid. 

While procurement may seem like a simple purchase on paper, the process requires planning and structure for larger organizations. 

One way to avoid this chaos is through procurement management, which helps businesses streamline the acquisition and record-keeping process. This reduces overhead costs and helps you remain profitable.  

In this post, we will explore what is procurement management, outline the steps involved, and give tips to optimize your procurement cycle for an effective procurement management system. 

What is Procurement Management? 

Procurement management refers to the strategic acquisition of goods and services to meet the needs of an organization. It covers the entire goods procurement process from raising purchase requests to settling payments with vendors. This involves the procurement team’s planning, sourcing, negotiating, validating, and clearing payments to ensure a proper supply chain. 

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Steps Involved in the Procurement Management System

Steps Involved in the Procurement Management System

A standard procurement management process is intricate and involves several stakeholders. Here are the key steps:

  1. Needs Assessment: Identify internal requirements through meticulous forecasting.
  2. Vendor Selection and Database Establishment: Thoroughly vet vendors, creating a robust database for strategic partnerships.
  3. Negotiation of Terms: Engage in negotiations on pricing and delivery schedules to optimize resource utilization.
  4. Purchase Order Generation: Transform approved purchase requests into precise orders to minimize potential errors.
  5. Goods Receipt and Matching: Validate received goods against purchase orders (GRN matching) to ensure order accuracy and quality control.
  6. Invoice Approval and Payment Processing: Ensure accuracy before approving invoices and proceeding with payments.
  7. Record Maintenance for Auditing: Systematically document all transactions for transparent auditing, ensuring compliance and accountability.

Although the process looks simple, it has several loopholes. There are numerous steps involved, and the entire process becomes tricky to execute. These steps are scattered across multiple platforms, complicating reconciliation during the audit season.

Furthermore, it requires approvals at certain stages, making it unfavorable for larger teams with complex hierarchies. 

How to Optimize the Procurement Management System

You can overcome these challenges by automating your systems. 

Automation makes this lengthy and complex process a simple and efficient procurement cycle. The employees get a dedicated platform to raise requests. Furthermore, stakeholders can efficiently review and approve requests with automated notifications. 

Automation also simplifies GRN matching through the data stored in the software. Accounting and payment integrations help clear approved invoices within seconds. 

Throughout this process, you gain real-time visibility and control over expenses. Moreover, having all your information on a unified platform simplifies reconciliation and ensures a proper audit trail.

Here are five ways automating the procurement process helps your business:

1. Internal Control Over Financial Reporting (ICFR)

Automation ensures compliance with ICFR standards and upholds quality controls throughout the procurement process. It does this by using trigger-based approval workflows that follow predefined financial controls. It implements validation checks to ensure that procurement transactions meet quality control standards. This makes two-way and three-way matching seamless. 

By deploying a single software solution, you detect and prevent potential errors or discrepancies in financial reporting.

2. Documentation

Automation brings together purchase requests, purchase orders, receipts, and all the relevant conversations on a unified platform. This makes storing and retrieving information easier, especially during the audit season. Also, optical character recognition (OCR) technology simplifies extracting key information, eliminating the need for manual data entry. 

As a result, you improve document accuracy and prevent errors such as late or incorrect returns due to missing receipts, invoices, payables, and supporting documentation.

3. Integration

Automation software integrates with your accounting software, payment gateways, and ERPs bringing together the scattered pieces of procurement. 

It allows you to request, manage, match goods receipts, and pay vendors from a single place. The best part is that your data remains consistent across all your software making the lives of financial controllers easier.

4. Measure

Automation offers you real-time visibility through a custom dashboard. It gives you a holistic view of the procure-to-pay process with a centralized data repository. 

This makes it easier to extract insights and optimize the process to improve margins, such as average payables due, top vendors, department-wise expenses, etc.

5. Standardize Workflows

Automation helps you create standardized workflows to ensure consistency and efficiency. As a result, each stakeholder gets notified to complete their part. So, be it approving expenses or GRN matching, these set workflows eliminate the need to chase employees averting potential delays. 

Challenges of Automating the Procurement Cycle 

While automation does offer several benefits, choosing the right tool is crucial. One wrong decision and you might end up in one of the following situations:

  • You invest in a basic software that lacks functionality and doesn’t solve your procurement issues.
  • You choose a complex product that is difficult to understand and operate. 
  • You get a tool that doesn’t integrate with your existing accounting and payment software, increasing the manual task of syncing data across these systems. 
  • You get multiple products for different steps that lack integration, hindering efficient and streamlined procurement management. 

Automation becomes a nightmare with the wrong software. All these scenarios lead to resource wastage. Moreover, weeks and months spent on implementation disrupt the supply chain.

What a Good Automation Procurement Management System Looks Like

Here’s how a comprehensive automation platform makes your procurement process easy, functional, flexible, and scalable. 

1. Standardize Process

Standardize Process

You have a centralized platform to consolidate the scattered procurement process. Whether purchase requests, approval workflows, or recurring SaaS payments, it allows you to automate as many procurement elements as you want. 

It lets you digitize the entire process without compromising your current workflows. This boosts transparency and provides better control over your expenses. 

2. Streamline Approvals

Streamline Approvals

You get a no-code trigger-based approval workflow engine that helps you set exact approval hierarchies to get approvals without disruptions.

For example, you can add if-then rules and set a precise and intricate workflow. Thus, when an employee raises a purchase request, instead of chasing stakeholders, this system notifies them to review and approve the requests. 

Additionally, all queries or clarifications unfold within the procurement software, ensuring comprehensive documentation and visibility. This eliminates maverick spending and fosters an accountable procurement process. 

3. Vendor Management 

Vendor Management 

You can sync all your vendors to your accounting software and ERPs. This creates vendor consistency across platforms, accelerating the purchase order creation. You also get the ability to add the list of items and simplify the purchase order and GRN matching process.

4. Receipt Management 

Receipt Management 

You get a dedicated dashboard to manage all your receipts. The software captures invoices from emails and WhatsApp and uses OCR technology to extract key information. This streamlines GRN matching as all vendor, purchase order, and invoice details are in one place. 

Pluto's procure-to-pay module is an excellent example of this centralization. It accelerates reconciliation with GL codes and tax codes, enhancing finance teams' visibility and control over purchase order spending.

5. Centralize Documentation

Centralize Documentation

You have a unified information source as the software integrates with your accounting and payment software and your ERP. Hence, it becomes easy to store and maintain data while maintaining consistency across. 

For instance, Pluto offers you a wide range of integrations, such as NetSuite, Xero, QuickBooks, Zoho, etc., so that you focus on procuring goods and get complete documentation with accuracy. 

6. Detailed Reports 

Report

You get comprehensive reports, making it easier to extract insights and make data-driven decisions. Also, as all the information is stored within the software, there are no gaps or loss of context. You get an accurate picture of your procurement process. This allows for strategic planning and forecasting. 

For instance, with Pluto, you get insights, such as average time for approvals, average payables due, top vendors, department-wise spending, location-wise spending, etc. 

7. Audit Trails

Audit Trails

Since there’s a unified platform to maintain thousands of receipts, you get complete visibility into each order from purchase requests to stakeholders involved and order status. This audit trail becomes a blessing during the audit season when you need less than 30 seconds to retrieve a specific receipt or document.  

There’s More to Procurement Management than Automation

Procurement management is not just about automation. While it does enhance the three core components of procurement—people, process, and paperwork, procurement management requires more than the adoption of software. 

Pluto aims not just to automate your processes but also to support your existing workflows. Then, be it purchase requests, accounts payable, or accounting, it strives to improve your processes by removing all the bottlenecks that cause chaos.  

Know more about how we can help your business. Book a demo and we’ll see you across to maximize the efficiency of your procurement process.

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At Pluto Card, our mission is to assist businesses of all scales make well-informed choices. To uphold our standards, we follow editorial guidelines to guarantee that our content consistently aligns with our high-quality benchmarks.

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Spend Management
October 26, 2023

Vlad Falin

How to Manage Petty Cash Effectively in 2024

Not every expense in the company requires you to issue a check. Payments like petrol, supplies, stamps, etc., are paid via cash. For these business transactions, either the employees take cash in advance or put in a request for reimbursement. This mechanism requires you to set some cash aside and employ a person for receipt management and reporting. The cash is referred to as petty cash. 

What Is the Meaning of Petty Cash?

Petty cash refers to a small amount of money that businesses keep readily available for handling minor payments and expenses that are too small to be processed through regular accounting procedures. It is often kept on hand and is reimbursed periodically.

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What are Petty Cash Examples?

Petty cash includes small miscellaneous expenses, such as:

  • Office supplies
  • Gifts
  • Client lunch
  • Refreshments
  • Postage
  • Medicine and first aid
  • Minor repairs
  • Transportation

What Is the Process of Petty Cash Disbursement?

The first step in petty cash disbursement is to define policies and procedures. This includes specifying:

  • The purpose of the fund
  • The maximum cash amount 
  • The types of expenses the fund can cover
  • The process for replenishing the fund

The next step is to appoint a petty cash custodian. They are responsible for handling the petty cash fund. 

Then, you set up the fund by transferring the initial sum of money into a safe or locker. This amount should be sufficient to cover minor expenses for a defined period. 

When employees make small purchases, they request funds from the custodian. After the purchase, they return with a petty cash voucher, receipt, and cash balance. 

The custodian reviews the receipts and provides reimbursement. They maintain detailed records of every transaction, including the date, purpose, recipient, amount, and a brief description of the expense. This record-keeping method ensures transparency and accountability.

After that, the custodian reconciles the petty cash fund at regular intervals. They add up the safe's cash balance and the receipts' value. The total should match the original amount in the fund. 

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What are the Two Types of Petty Cash?

To manage petty cash, the custodian relies on either of the petty cash book systems:

1. Imprest Petty Cash Book

An imprest petty cash system involves maintaining a fixed amount of money in the petty cash fund at all times. 

For instance, you set up a fund of $100. When the fund gets down to $20, the custodian requests reimbursement and replenishes the fund to $100.

2. Columnar or Analytical Petty Cash Book

A columnar or analytical petty cash book is a detailed and structured method of recording petty cash transactions. It categorizes expenses into different general ledger codes for better tracking.

For instance, you create separate columns, such as "office supplies," "refreshments," "meals," etc. Whenever a transaction occurs, the custodian records it in the appropriate column and specifies its purpose.

What are the Challenges of Petty Cash?

While the process of petty cash seems linear and simple, it has many intricacies in practice. 

Imagine the custodian getting hundreds or thousands of requests and receipts every day. So, maintaining a petty cash system is easier in a smaller business with limited expenses and reporting needs. However, for larger enterprises, relying on manual vouchers and physical safes/lockers causes a lot of chaos. 

1. Vulnerability to Theft and Misuse 

Unlike an automated system, a manual petty cash system lacks controls and security measures.

For example, if the custodian is not vigilant, employees can use the cash for personal expenses. Similarly, if the custodian gets stuck between multiple requests and receipts, it leads to oversight.

Moreover, the physical nature of cash in a petty cash box makes it an easier target for theft. Since there's no immediate digital record, anybody can steal money, which goes unnoticed for a while. This lack of transparency and a digital audit trail makes it difficult to identify funds misuse.

2. Poor Receipt Management 

Receipts are the document of proof for the expense. With the traditional approach, custodians have to chase employees for receipts. This results in incomplete or unaccounted-for submissions. 

Moreover, relying on the manual petty cash process makes it harder. The custodians have to manage countless receipts daily, making reconciliation tedious. Hence, you end up with misplaced, duplicate, or even damaged receipts. 

A common example of this issue is when a custodian receives multiple receipts and with an analytical petty cash book to maintain. It takes them hours to reconcile, report, and ensure accurate categorization. 

The worst is when it's time to report, and locating these receipts takes hours.

3. Chaotic Approval Workflow  

In smaller companies, getting approval for expenses is easy. But, in large enterprises, even small expenses can prompt approvals from various departments and stakeholders. This makes the approval workflow complicated and time-consuming. This delays the fund release, disrupting the workflow and reimbursement process.   

For example, imagine an employee who wants to buy a subscription for less than $300. In a big company, it will prompt approval from the manager, IT, finance, and legal departments.  

All this back-and-forth slows things down a lot.

4. Internal Resentment

In big companies, there's tension between the finance team and other departments.  This issue occurs when employees can't access the funds and have to wait for approval. Such a delay disrupts the work or delays the reimbursement.

For instance, an employee needs to buy a subscription for work. But the delay in approval impacted the deadline and client relationship. This creates problems and stress between the finance team and other departments.

5. Branch-Level Petty Cash Management

Large enterprises use separate petty cash systems for departments at the branch level. This means that each department has its own petty cash fund to manage.

Managing small amounts of cash at individual branches is tricky. Employees misuse/steal the money as there's not much oversight. There is no visibility on how money is being spent. Maintaining funds for multiple branches becomes a headache. Also, departments find it challenging to request more funds.  

Reconciliation becomes challenging as the finance teams have to chase branches for complete information. This leaves a lot of loopholes for employees and branch custodians to misuse petty cash.

6. Tedious Reconciliation Process

Reconciliation ensures that the petty cash fund's balance matches the sum of all expenses. 

Manually, reconciliation in large enterprises takes weeks and is prone to errors. Moreover, when adding up expenses, the process is prone to manual errors, which are hard to identify and correct.

For instance, the custodian overlooks a receipt. This mismatch between the recorded expenses and the actual cash on hand can take him weeks to spot errors. 

7. Low Visibility Over Expenses

Traditional petty cash systems lack real-time data. At any given point of time, the custodian is unaware of the fund's current status. This lack of visibility delays financial decision-making. For instance, it can take weeks before the custodian realizes that the petty cash fund is running low. This can lead to temporary cash shortages for essential expenses.

The absence of a clear record makes it slower to notice problems and reconcile the cash. Moreover, transactions and expenses are recorded on paper, which leads to further errors. For example, when an employee uses petty cash to buy office supplies, there will be a delay until the expense is recorded.

Similarly, when many employees spend money simultaneously, tracking them in real-time is tough. This lack of transparency allows employees to misuse petty cash for personal expenses.

How to Manage Petty Cash Effectively With Pluto? 

To overcome the challenges described previously, you can not rely on any automation tool. Instead, you need a product that is tailored to your specific needs. While many tools can assist you in digitizing petty cash management, Pluto goes the extra mile.

With Pluto, you no longer need to maintain a physical safe or countless vouchers and receipts. Pluto records every transaction in real time and gives you visibility at each step. From receipt to reimbursement, you manage everything with complete control and clarity.

Unlimited Corporate Cards

Pluto enables you to issue unlimited corporate cards, simplifying petty cash management. It eliminates the need for physical lockers or safes, promoting smoother cash flow. The availability of unlimited cards allows you to replace shared credit cards. This enables the use of cards for even small petty cash expenses. 

Finance teams get full control and visibility over each petty cash expense in real time.

Employees can either swipe the cards for a seamless process or withdraw cash from ATMs. Every expense made with the corporate card triggers an approval workflow. It prompts employees to add receipts and managers to approve expenses. They can then add the receipts simply via WhatsApp and get reimbursed without any delays.

With all the data consolidated on a single platform, reconciliation becomes easier. This simplified process eliminates the need for a dedicated custodian to manage petty cash.

Not only do you get more control, but you save money with visibility at each step.  

Budget Control

Pluto allows you to specify limits for corporate cards issued. This ensures employees stay within budget. 

When the spending exceeds, employees can request more funds. The budget expands on the manager's approval in seconds, allowing for necessary spending.

Administrators can also issue zero balance cards. These cards with zero balances prompt an approval request for each expense. This approach ensures budget control without causing any delays or resentment.

Easy Receipt Management 

Pluto simplifies receipt management thanks to its seamless WhatsApp integration. 

Your employees can upload receipts via WhatsApp, which are recorded in real-time. The custodians no longer need to run after employees for the receipts.

However, Pluto does more than just store receipts. It extracts vital information through OCR, including vendor names, amounts, and GLs. As a result, your accounting team spends less time on manual tasks like creating logs.

Approval Workflow  

Normally, getting approval for expenses can involve a lot of back and forth. But with Pluto, you can set up custom approval processes to make the process smoother. 

When an employee uploads receipts, Pluto automatically starts the approval workflow. It notifies the custodian and managers to approve the expense, removing the friction.

The reimbursement process accelerates without any compromise on efficiency.

Further, Pluto uses OCR to detect duplicate receipts to avoid dual payments and fraud. This makes it easier to double-check expenses and approve the legitimate ones. 

Digital Expense Report  

Pluto offers digital expense reports that compile data from all the receipts. 

The report simplifies the task for your finance teams to see how each branch/department is spending. It enables them to make adjustments to policies and procedures as needed.

For instance, a company has small office supply purchases spread across various departments. Pluto's real-time visibility and report help to locate these costs. As a result, finance teams can reconsider and promote bulk purchases for cost savings. 

With Pluto, the custodian gets complete visibility into the expenses and the available funds at all times.

Close Books 10X Faster  

Pluto simplifies the process of closing books. 

Since employees can submit receipts directly through WhatsApp, custodians don’t need to chase employees for receipt submissions. This enables you to close the book 10X faster by accelerating the reconciliation process.  

Pluto records all transactions in a centralized digital platform. This streamlines audit logs and eliminates the need to maintain physical records.

With its OCR-based receipt retrieval, finding specific receipts and information becomes more effortless. This simplifies the reconciliation process, making the entire book-closing process faster. 

Replace Petty Cash With Corporate Cards

Small expenses and cash transactions can not be removed. However, finding an expense management tool can make petty cash management simpler. 

Stop relying on manual traditional processes to manage petty cash. Choose Pluto to replace your tedious petty cash books and vouchers with corporate cards. 

Sign up today to digitize your petty cash for complete visibility and control.

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Spend Management
December 6, 2022

Vlad Falin

Efficient Receipt Management For UAE Businesses

Collecting, storing, and otherwise managing receipts is essential to a well-oiled expense reporting machine. 

Each receipt serves as confirmation of payment processing between yourself and the customer or vendor. You also need expense and sales receipts to file taxes and maintain your peace of mind.

Unfortunately, while saying receipt management is easy, the whole process itself is daunting. Tracking hundreds, thousands, even millions of employee and customer receipts leaves loopholes for fraud and misreporting. 

Physical expense receipts are especially susceptible to being lost, damaged, or fading with time.

Fortunately, there’s a better way to do it: digital receipt management with Pluto.

  • Automate more of the expense management process
  • Reduce the risk of fraud and inaccuracies
  • Create more efficient workflows and financial departments
  • And overall streamline modern business operations

While you probably can’t eliminate 100% of paper receipts from your workday, you can still improve your process with an increasingly-digital footprint!

What is Receipt Management?

Receipt management is the process of collecting, tracking, and storing business receipts. This task is usually handled by internal finance teams. Their role involves collecting various receipts, tracking costs in accounting software, and storing these receipts for future reference. Additionally, they may need to manually sort each expense, depending on the system in place.

Why Do You Need It?

  • A well-run receipt management protocol is crucial for businesses for several reasons:

1. Simplify Employee Reimbursement Programs: It aids in the smooth operation of reimbursement programs for employees.

2. Track and Report Tax Deductions: It's essential for accurately tracking and reporting tax deductions.

3. Provide Proof during Tax Audits: It serves as necessary documentation during tax audits.

4. Streamline Expense Reports and Budgets: Helps in making expense reports and budgeting more efficient.

5. Combat Internal Fraud and Inauthentic Chargebacks: Plays a key role in preventing fraud and false chargebacks within the company.

6. Avoid Repair or Replacement Costs for Items Under Warranty: Keeps track of receipts necessary for warranty claims, saving costs on repairs or replacements.

7. Calculate and Improve Long-Term Profitability: Receipt management is vital in calculating and enhancing the long-term profitability of a business.

Different types of receipt management systems are in use today, including those for printed receipts, e-receipts, and even handwritten receipts. This diversity can be challenging for businesses, as they need to follow multiple procedures to reconcile their books effectively.

Types of receipt management

Today, there are three basic ways to handle receipts directly:

  • Manual receipt management involves handling, tracking, and storing paper receipts
  • Digitization receipt management scans physical receipts to digitize the tracking process
  • Digital-only receipt management is used for online or digitally generated receipts

While many businesses are moving toward digitization and digital-only receipts, some businesses are stuck in the dark ages. (The kind that involves typing physical receipt information into a digital spreadsheet.)  

And as we’ll see below, manual entry strategies come with some…problems.  

Difficulties of Manual Receipt Management

1. Easily Lost or Damaged Receipts

Perhaps the most obvious problem with physically tracking expense receipts is that there’s so much that can go wrong. Lost, damaged, or faded receipts make the business expense tracking process that much harder.

Even if the employee who spent the money doesn’t drop their receipt, it’s possible for paperwork to get lost on a desk somewhere. And if you need to find a receipt two years later? Better hope it was filed properly and hasn’t faded completely.  

2. Consumes Human Resources

Manual receipt management is an extremely hours-intensive process.

Your financial team has to collect invoices, type their data into your accounting software, and double-check their work. Then, they have to reconcile business expenses against company credit card statements and track down potential instances of fraud or misreporting.

Not only does this require a lot of time, but it also impacts employee productivity. Every hour an accountant spends tracking receipts is an hour of productivity lost elsewhere.

3. Leaves Room for Human Error

Aside from the time and human resource cost, manual receipt management presents the potential for human error. And unlike on the product line or in customer service, every reporting mistake risks an unfavorable tax audit.

Even the simplest receipt management and tracking process involves several steps from collection to reconciliation. Every stage is an opportunity for an employee to get distracted, mistype a name or number, or duplicate entries. In bigger cases, they might even duplicate a payment, costing you more money.

And even if you catch the mistakes before they’re submitted, that’s more human hours wasted double-checking and correcting completed work.

4. Increases Fraud and Misreporting Risk

The risk of fraud is higher in manual receipt management programs, and instances of fraud may be harder to detect. Types of fraud that commonly crop up in expense reporting include:

  • Inflated claim amounts
  • Claiming personal costs on the business’ dime
  • Submitting expense reports twice
  • Falsifying “proof” to claim for money that wasn’t spent

Unfortunately, manual receipt management makes these kinds of fraud more likely and difficult to catch. For example, if the employee who authenticates receipts is committing or permitting the fraud, it’s harder to detect until after you’ve lost money.

Over time, even small acts of fraud can have massive financial consequences.

5. Contributes to Employee Dissatisfaction

For many companies, employee reimbursement programs contribute both to the need for manual receipt management – and to employee dissatisfaction.

Think about it. In a modern, tech-savvy business world, why should employees have to pay out of pocket, ever? 

Virtual cards and online-based businesses have all but eliminated the need for an employee to front your expenses.

But if you’re still stuck doing manual receipt management, chances are, your employees are still submitting reimbursement tickets. (And grumbling about the time it takes to get paid back.)

And that’s not even touching on the frustration, tedium, and headaches manual receipt management programs cause your high-paid finance teams.  

6. Jacks Up Business Costs

Together, all these factors paint a picture of increased business costs.

The time and human resource cost to track, reconcile, and store receipts.

The human and financial cost of detecting and counteracting fraud.

Even the maintenance costs for your printer and filing cabinets.

Every dollar spent on manual receipt management is a dollar sucked from office parties, growth, or your bottom line.

Benefits of Digital Receipt Management

It’s easy to see the costs that manual receipt management impose. Fortunately, there’s a simple solution: digital receipt management.

In short, digital receipt management involves using digital copies of receipts in your expense reporting strategy. Digital smart receipts are easy – simply integrate them into your accounting software and let automation take you away.

But even physical sales receipts can be digitized, Pluto allows you to digitize your receipt very simply - through your phone. 

Incorporating such technology means that even paper receipts fold neatly into your overarching digital strategy.

And as you’ll see, the process comes with tons of benefits.

1. Increases Integration Potential

A massive benefit of digital tracking is the sheer integration potential. Most receipt management tools, from receipt scanning devices to receipt tracking software, easily mesh with your existing expense reports system.

From there, you can automate mindless tasks and set up occasional human checks to ensure the system works as intended.

2. Fewer Costly Errors

Another way that a digital receipt management program saves costs is by reducing employee errors. Digital receipts should meld seamlessly into your tracking system – no surprises there.

But even processing physical receipts is cheaper and easier.

With their mobile phones, employees can scan receipts and upload them instantly. From there, Pluto categorizes the information and adds it to the overall report.

While employees may spend a second filling in any blanks, increased automation greatly reduces the risk of input errors.

3. Reduces Risk of Fraud

Less human interference means your financial system is more resilient to fraudulent activities. Pluto improves speed and accuracy while digitizing the receipts.

That leaves fewer opportunities for fraudulent claims.

4. Reduces Clutter

Uploading physical receipts means less physical space is needed for storage. That can save you on storage costs and reduce desktop and file cabinet clutter.

And because everything’s digitally maintained, you’ll still meet or exceed your tax authority’s required financial record storage period. 

Not to mention, just finding your records will be easier than ever!

5. Easier Audits

No person or business enjoys tax season. But digital management makes the process at least a little easier. 

Because all of your information is stored online, it’s easier to access and export receipts as needed. 

When tax time or the dreaded audit comes around, your data will be well-organized and easily accessible.  

6. More Efficient Expense Reporting

Traditional receipt management is a costly, time-intensive, error-prone manual process that used to be necessary. With modern tools, businesses can streamline the entire financial structure of their organization.

No more lost receipts or worrying about fraud.

Less time spent inputting and double-checking data, and more time helping your business grow.

All these positive benefits will improve efficiency – and even bring smiles to your accountants’ faces.

7. Faster Reimbursements

Like using a virtual corporate card, digital receipt management speeds up the reimbursement process. 

Since everything is tracked and verified electronically, it’s easy to set up an automatic or streamlined reimbursement protocol.

8. Putting Your Eco-Friendly Foot Forward

Lastly, any step your business can take toward going paperless is good news for the environment. 

Cutting down fewer trees and reducing printer ink usage are laudable goals that can decrease your environmental footprint. 

Not only will you enjoy cost savings, but you’ll feel better about doing business in an increasingly eco-conscious world.

8 Tips for Efficient Receipt Management

Digitizing your receipt management strategy is just the first step toward expense report success. To ensure you’re operating at maximum efficiency, consider the following tips.

1. Use Pluto App

The first step is to get Pluto and start managing your spending digitally. 

While you’re moving toward digital efficiency, your vendors aren’t required to follow. Keeping the proper tech on hand ensures you can digitize any paper receipts that come your way.

Pluto allows you to take a picture of the receipt, upload it to your expense and just like that the reconciliation process is done!

2. Save Your Receipts

While you can set up secure digital folders to store all your digital originals and copies - Pluto does that for you! 

Just take a picture of the receipt, upload it to the app and that is it.  

3. Ensure High-Quality Digital Format Uploads

There’s no point in uploading and saving documents if you can’t read them. 

Before tossing your physical copies, make sure you can clearly read the essential information on each receipt. (Such as the company name, date, purchased item(s), and amount.)

4. Categorize Submitted Expenses

Take some time to categorize your expenses (most businesses do this in chronological order). Pluto helps you with that, but just make sure to check the right category so the reporting stays in top notch condition. 

5. Set Up a Simple Expense Report Strategy

Expense reporting is the backbone of any business’ financials. For prompt, complete reporting and tracking, ensure that you design a straightforward strategy. 

Same-day submissions, fewer Excel sheets, and faster reimbursement protocols will improve efficiency and attitudes. Better yet, invest in a quality expense and receipt management software.

Or even better - start with Pluto, we have a free package. It will allow you to completely digitize and control your spending, while keeping your reporting in the best possible shape. 

6. Establish Accountability

A top-notch expense reporting strategy only works if people use it.

To ensure your protocols are followed, emphasize and encourage accountability. Keep all managers and supervisors up-to-date with company spending and card policies and remind them to disseminate that information appropriately. Follow up with employee expenditures as needed.

7. Run Regular Internal Audits

Regular expense report audits help businesses track receipts fraud, clear up discrepancies, and streamline inefficiencies. 

Take time each month or quarter to check for fictitious or overblown expenses or troubles with your expense reporting strategy. 

Pluto allows you to run real-time reports at any given moment for any period of time.

8. Switch to Virtual Corporate Cards

Virtual corporate cards make managing receipt tracking even easier. Not only can you digitize the entire process end-to-end, but corporate p cards give you greater control over your expenditures and tracking.

Sure, you can’t prevent vendors from handing you physical receipts. But you can greatly minimize instances of employees walking in with a big stack of thermal paper to scan in.

Pluto offers unlimited virtual cards which will book all your expenses right into the dashboard!

Key Takeaways

  • Proper receipt management is key to running a financially successful business.
  • While manual receipt management reconciles physical copies, it’s increasingly unnecessary in an increasingly digital world.
  • Digital receipt management simplifies the collection, reconciliation, and storage process.
  • Digital tracking also reduces fraud potential, time and financial waste, and increases employee satisfaction.
  • Digitizing your expense reports pairs nicely with digitizing your own payments with virtual corporate cards.

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Spend Management
November 3, 2022

Vlad Falin

Employee Expense Reimbursement Management: Types & Policies

Business expense reimbursement is one area of spend management that business owners do not always give its due. And yet, nearly every organization will have to reimburse employees for their expenses at some point.

Part of the problem is that these expenses can vary significantly, from buying office supplies to traveling or even medical costs. If your business deals with many types of expense reimbursements, you might wonder what you need to cover and how you should handle it.

If you’ve had trouble working out your organization's different business expense reimbursements, or you want to learn more about repayments, you’ve come to the right place.

Today, we’ll take a look at the different types of business expense reimbursements and even share some tips to help you streamline your expense reimbursement process.

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What is expense reimbursement?

A business expense reimbursement is simply the act of paying back an employee for expenses incurred while performing a job for your organization.

Technically, almost any type of expense can qualify as a business expense for the purpose of reimbursement, depending on the reimbursement policies of the business. But to give you a clearer idea, here are some common examples of reimbursable expenses:

  • Business travel costs
  • Meals and entertainment
  • Employee education or training
  • Medical expenses
  • Gas expenses for a company-issued or private vehicle
  • Business supplies or tools
  • And other miscellaneous business-related expenses

You could handle these expense reimbursements individually, meaning you review each expense separately, or you could create a policy for employee expense reimbursement. 

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Do I Need to Have an Expense Reimbursement Policy?

You are not required to have an expense reimbursement policy, and in some cases, reimbursing expenses is not even mandatory to begin with. Though that largely depends on the legal framework of your country.

However, since it is customary in the UAE and the MENA region to reimburse employees for expenses, then it would be wise to create guidelines and policies to help you organize and streamline that process.

Creating a policy for reimbursements helps set the right expectations for employees about what qualifies for repayment and enables you to streamline your expense reimbursement process.

With an expense reimbursement policy, your employees will know precisely what they can be reimbursed for, how to request said reimbursement, and how long it would take to receive the funds.

Whether you have a business reimbursement policy or not, you need to have a clear picture of which expenses your employees might incur for your business and how you would go about reimbursing them.

  • Is the expense tax deductible?
  • Is this a common type of business expense in your industry?
  • Do you have a policy in place for this expense?
  • Are there any types of emergency purchases that an employee might need to make?

Types of expense reimbursements

Traveling and accommodation

One of the most common types of reimbursement requests is for travel expenses. Gas has been a particular pain point for many businesses in the MENA region due to the rising costs of fuel. Other examples of travel expenses include moving to and from an airport or travel terminal, travel tickets, public and private transportation expenses, car rentals, and lodging.

Office supplies and communication

If your organization relies heavily on digital work, you might need to reimburse your employees for supplies like laptops, tablets, software purchases or subscriptions, training materials, and more. 

Also, if your team needs to move around frequently and you need to maintain communication at all times, reimbursing them for their cell phone plans might be necessary. In particular, this applies to teams in sales, marketing, and business development. 

Food and entertainment

Business trips typically cover employee meals as reimbursable expenses. As long as the expenses are incurred in the interest of the business, they’re reimbursable.

Other expenses

Medical expenses, such as health insurance, insurance premiums, and tuition, are another form of employee expense that is often reimbursed by companies. If your business deals with these types of expenses, make sure you have a clear policy for handling them.

8 tips to simplify your expense reimbursements

1. Learn what you need to reimburse

Although the legalities of employee reimbursements vary from country to country, it’s traditionally customary for employers to reimburse their employees for expenses incurred on behalf of the company. 

It is important to note, however, that your employees cannot claim reimbursements for every purchase made, only those that are specifically tied to your business in some form.

While the specific type of expenses you have to reimburse will vary from industry to industry, you should have a general idea of what costs an employee might have to cover out of pocket in the process of working for you.

  • Do they need to travel around in their own vehicle?
  • Do you need them to be communicated at all times?
  • What kind of equipment do they require?
  • Are there any health risks associated with their job?

These types of questions can help you figure out which expenses you will have to deal with. Clear guidelines about what is and isn’t reimbursable will help reduce instances of fraudulent reimbursement requests.

2. Use a spend management platform

With the right expense management software, you would be able to automate and optimize end-to-end workflows throughout your process. 

For instance, with a spend management platform like Pluto, employees can use a mobile app to record expenses as they incur them.

In this way, your employees no longer have to save receipts or wait before entering their expenses. Plus, Pluto can automatically assign reports to the right reviewer, making the review and approval process more efficient.

Not only that, but Pluto can also tag the receipt so the categorization of the expense is much easier and reporting is real-time.

In addition to providing digital copies of relevant documents, Pluto can notify your finance team of approvals and deadlines.

Spend management platform for expense reimbursement
Pluto Spend Management Platform

3. Spend management platforms enhance collaboration

Pluto’s expense management solutions come with an employee portal so that your finance team can collaborate seamlessly with your employees. 

This allows you to save time when you need to discuss any irregularities with their expense reports. Additionally, your employees can use Pluto to check the status of their reimbursement requests.

The finance team can also use Pluto  to manage costs more efficiently due to its analytical capabilities, real-time reporting and instantaneous spend limit settings.   

4. Create a Thorough Expense Reimbursement Policy

When creating your reimbursement policy, you’ll want to make sure that it covers as many angles as possible. 

One way to do so is to invite stakeholders from multiple different departments, such as HR, finance, legal, and procurement, to a brainstorming session, as their knowledge will make it easier to draft the policy.

5. Crafting your reimbursement policy

It’s also critical to consider the following when drafting your expense reimbursement policy:

  • The specific type of expenses that can be reimbursed
  • The process your employees need to follow to submit their expenses, including any proof and supporting documentation
  • Whether any allowances will be given for expenses, and how to manage any excess
  • The specific time an employee has to submit their expense report
  • How the approval process will be handled
  • When and how your employees are reimbursed

6. Promote the adoption of the policy

One way to help employees adopt the policy more quickly is by making it readily available to them. The policy should be emailed to your employees or posted on your internal networks.

Employees should be informed when they will receive their payment from the company. You should set up a transparent and clear process to communicate what can be expected in terms of expense reimbursement. 

7. Be extra clear about deadlines and payments.

Be sure to let them know how they will receive the payment, such as via direct deposit or check, as well as how they will receive recorded confirmation of the payment made (such as a statement on their paycheque). You can complete this step easily with the help of an online payroll solution.

It is important to keep things running smoothly when it comes to paying employees. By processing reimbursements timely and reliably, you can easily prevent frustration caused by late payments. 

Having your employees pay out of their own pockets and not receiving payment back sooner rather than later can cause unnecessary ill feelings toward your company. When you handle reimbursements well, it reflects back on you as a respectable and considerate employer who cares about employees.

8. Make sure your employees follow the deadlines you set

You need to provide employees with deadlines for submitting expense reports, such as one week before their next pay date, so they can be reimbursed and get approval for their claims. 

Make sure the expense reports comply with the policy guidelines by giving yourself enough time to review them. By doing so, you can consult with the employee if there are any discrepancies, missing or incomplete documentation, or expenses that do not fall within the policy.

It’s important to submit expense reports on time since certain business expenses are tax deductible. 

Optimize your expense reimbursement management process

It’s not enough to know what your expenses are and to create a policy for their reimbursement. 

You also need to make sure that your reimbursement process is organized and efficient.

Otherwise, you run the risk of creating bottlenecks if you get slammed by more requests than you can handle. You can avoid this by optimizing the process used to submit reports and their attachments, ensuring all reports are reviewed in a timely manner and processing reimbursements as quickly as possible.

Having put all of this in place, it’s now time for the audit. The importance of audits is particularly important for enterprises and mid-size firms where employees incur large expenses. Auditing your expense reports also helps you identify loopholes in your policy and reduce instances of fraudulent claims.

You can also use audits to analyze your business expenses and identify areas for reduction.

Ensure there is an organized system for expense reimbursement requests

You should ensure that the system your employees need to use to submit their expense reports is easy to use and understand. 

Pluto allows the employee to submit all necessary supporting documentation, such as their receipt, the total amount of the purchase, a description of the goods or services purchased, and the date of the transaction.

Use a corporate card or direct deposits to remove the need for reimbursements

A corporate p card is a great way to prevent employees from paying out-of-pocket for business expenses.

You can track your expenses more efficiently and effectively with corporate cards, which provide spending limits that prevent employees from abusing their privileges.

Consider issuing corporate cards only to your regular travelers, or try direct deposits if you’re concerned about the cost. 

Alternatively, you can also use direct deposits of reimbursement funds to eliminate the reimbursement process. 

Two benefits result from this: One great perk of following either process is that your finance teams will have better visibility into the reimbursement process, making auditing employee expenses easier.

Key Takeaways

  • The best way to deal with business expense reimbursements is to have a rock-solid reimbursement policy in place. This way, you can reimburse employees for their costs on your terms.
  • Another great way to manage your expenses is to make use of a corporate card to eliminate the reimbursement process altogether, though this might not be feasible for all cases.
  • As in many situations, your best option will most likely come in the form of digitization. Using a spend management platform like Pluto, will not only give you much better visibility over your employee spending but also streamline the reimbursement process for you.