What Is Expense Reporting and Why Is It Important? A Beginner's Guide

Keeping tabs on employee expenses, including software spending, can involve a lot of back and forth as you double-check receipts, track down missing information, and ensure that software expenses align with company policies and budgets.

This makes things not only frustrating but also time-consuming. And ultimately, this can lead to poor visibility into spending, inefficient software usage, and hiccups in financial management.

Thankfully, creating expense reports can save you time and make tracking and managing expenses, including software costs, easy.

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What is an Expense Report?

As its name suggests, an 'expense' report refers to a report detailing the expenses incurred by employees on behalf of the company during a specific duration (weekly, monthly, or quarterly).

More simply, it's a report that tells you how much money employees spent on things like travel, meals, supplies, and software subscriptions while conducting company business.

Knowing these details is critical for efficient expense management, budgeting, and ensuring that software expenses are justified and properly allocated. The report helps you see where money is being spent and identify areas to cut costs, optimize software usage, or allocate more funds as needed.

The report also ensures you're properly reimbursing employees for legitimate business expenses, including necessary software purchases, in a timely manner.

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Why Expense Reports are Useful for Financial Management

Expense reports assist in several ways, including:

— Visibility into spending

An expense report gives you an easy-to-read snapshot of employee spending, including software expenses.

Instead of reviewing receipts and expense claims one by one, you can simply review the report to see the total amount spent across various categories, including software.

By showing you the itemized expenses along with the total, the report makes it easy to track and analyze spending, ensuring that software costs are not creeping up unexpectedly.

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— Budget management

An essential aspect of effective financial management is ensuring that actual spending, including software expenses, aligns with budgeted amounts.

Without insights into employee expenses and software costs, it's common for spending to exceed budgets, leading to cash flow issues.

When reviewed regularly, expense reports help you proactively identify software spending that is trending over budget so you can make adjustments as needed. This visibility is key to keeping budgets on track.

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— Proper employee reimbursement

As you review itemized expenses in the reports, you can easily identify legitimate software purchases that need to be reimbursed to employees.

This ensures employees are paid back in a timely manner for software they needed to purchase to do their jobs effectively. Prompt, accurate reimbursement is important for employee satisfaction and morale.

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Types of Expense Reports

There are a few main types of expense reports, including:

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• Travel expense reports - For expenses incurred during business travel like airfare, lodging, meals, transportation, etc. Usually submitted after the conclusion of a trip.

• Software expense reports - For expenses related to purchasing or renewing software subscriptions, licenses, or related services. Helps track and manage software costs across the organization.

• Recurring expense reports - For ongoing expenses like cell phone bills, home office costs, software subscriptions, etc. Often submitted monthly for reimbursement.

• Itemized expense reports - Provides line-by-line detail of individual expenses, categorized by type, including itemized software expenses. Submitted weekly or monthly depending on company policy.

• Summary expense reports - Rolled up report showing total expenses across major categories, including a category for software. Provides a high-level overview, often used by management.

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How to Create an Effective Expense Report

Here are some tips for creating effective expense reports that are accurate, complete, and easy to manage.

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Step 1: Gather and organize receipts

Throughout the month or reporting period, diligently collect and save receipts for all business expenses. This includes receipts for meals, travel, office supplies, and any other costs incurred while conducting business. 

Organize the receipts chronologically or by category (travel, meals, software, etc.) to make them easier to input into the report later on. Consider using an envelope or folder to store physical receipts, or create digital folders if you prefer to scan or photograph them.

If using expense management software, snap photos of receipts and upload them right away so you don't have to deal with physical copies. Many apps allow you to do this on-the-go, making it easy to capture expenses as they happen.

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Step 2: Use a template or software

Don't start from scratch when creating your expense report. Use an expense report template or software solution to ensure you include all necessary information and that your reports are consistent in format. 

Templates can be as simple as a spreadsheet with columns for date, merchant, amount, category, and description, or as complex as a fillable PDF with built-in calculations and fields for multiple expense types. 

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A sample expense report 👇

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Many software options will pull in expenses directly from linked credit cards or accounts, automatically categorize them based on merchant or description, and even route them for approval based on custom workflows. This can save significant time and effort compared to manual entry and categorization.

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When selecting a template or software, consider your company's specific needs and preferences. Look for options that are user-friendly, integrate with your existing systems, and offer features that streamline the expense reporting process.

Step 3: Include all relevant information

For each expense entry, include the date, merchant name, amount, expense category, and a brief description of the business purpose. If there are multiple items on a single receipt, itemize them out into separate lines.

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Be as specific as possible in your descriptions, especially for meals and entertainment expenses. Instead of just writing "client dinner," include the names of the clients and a brief explanation of the business purpose, such as "Dinner with ABC Corp to discuss Q3 project timeline."

Attach copies of receipts for all expenses - this is usually required for reimbursement and helps justify the business purpose. If using software, you may be able to link the receipt image directly to the corresponding expense entry.

Step 4: Managing software expenses

SaaS is a significant expense category that requires special attention in expense reports. Include a separate section or category for software expenses to make them easy to track and analyze.

For each software expense, include the name of the software, the purchase date, the amount, and a brief justification of the business need. If the software is a subscription or recurring expense, note the billing frequency and term.

Attach receipts or invoices for all software expenses, just as you would for other types of expenses. If the receipt is a digital invoice, download a copy and attach it to the expense entry.

To avoid surprise software costs, establish clear policies around software purchases and subscriptions. Require pre-approval for new software expenses over a certain dollar amount, and regularly review existing subscriptions to ensure they are still necessary and being used effectively.

PRO TIP: Consider using a software management platform like Spendflo to centralize purchasing, track usage and renewals, and integrate with your expense reporting system. 

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You can:

• Save time and effort in tracking and reporting SaaS spend
• Identify and eliminate duplicate or unused SaaS subscriptions
• Negotiate better pricing and terms with SaaS vendors
• Ensure compliance with company policies and security requirements
• Make data-driven decisions about SaaS investments and renewals

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Try Spendflo Now!

Step 5: Double-check your work

Before submitting your expense report, review it carefully for accuracy and completeness. Verify that all expenses are categorized correctly, all required receipts are included, and the totals are correct. Look for any missing or duplicate entries, and ensure that the report complies with your company's expense policies.

Pay special attention to expenses that may be subject to additional scrutiny, such as meals, entertainment, and travel. Make sure these expenses fall within your company's guidelines and have a clear business justification.

If you find any errors or discrepancies, correct them before submitting the report. It's much easier to fix issues proactively than to deal with questions or rejections later on.

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Step 6: Submit promptly and keep a copy

Once your expense report is complete and accurate, submit it promptly according to your company's deadlines and procedures. Timely submission ensures that expenses are recorded in the correct accounting period and that you are reimbursed quickly.

Always keep a copy of your submitted expense report and supporting receipts, either physically or digitally, in case there are any questions or audit requests later on. Most software solutions will store these records automatically, but it's a good idea to keep your own backup as well.

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Challenges in Creating Effective Expense Reports

While expense reports are extremely useful, there are some common challenges in creating and managing them effectively:

— Missing receipts 

Employees often forget or lose receipts, including for software purchases, making it difficult to have a complete record of expenses. Expense management software that allows receipt images to be easily uploaded can help.

— Unclear software expense policies 

Employees may be uncertain about what software expenses are allowed or how to properly categorize them. Clear guidelines and examples in the expense policy are important.

— Manual data entry 

Entering each expense line-by-line, including itemized software expenses, is time-consuming and prone to errors. Automated expense reporting solutions that integrate with corporate cards and pull in transactions automatically can streamline the process.

— Enforcement of expense policies 

It can be difficult to ensure that all expenses, including software, are in compliance with company policies regarding spend limits, approved categories, required documentation, etc. Clear communication of the policy and auditing of expense reports is important.

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How Spendflo Helps You Cut Down Excess Spending on SaaS With Detailed Expense and Usage Reports

With the proliferation of cloud-based software and the ease of purchasing subscriptions, it's all too easy for SaaS costs to spiral out of control. 

At Spendflo, we help you cut down excess spending on SaaS by providing:

1. Comprehensive SaaS discovery that automatically uncovers all your subscriptions across various payment methods.
2. Detailed expense reports that break down your SaaS spend by vendor, department, and employee.
3. Usage analytics that give you a clear picture of how each tool is being utilized across your organization.

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See how much you can save on SaaS with Spendflo

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