Expense Reconciliation: Improving Financial Clarity and Control

Reconciling employee expenses is an important accounting process to ensure accuracy and compliance. Increasingly, companies are using technology to accelerate the expense reconciliation process and ensure proper, consistent, and precise financial management.

What Is Expense Reconciliation

Expense reconciliation is the overarching process used by accounting departments to balance the books, ensuring that payments to suppliers and employees are accurate.

It involves checking submitted expenses, to ensure they are compliant with company policies, entered in the correct expense categories, and charged to the appropriate budget lines.

But what does it mean to reconcile?

For example, when a company looks to reconcile expense reports from employees who travel on company business, it will review to ensure that the employee expenses were appropriate given travel policies.

It will then look to make sure that the expenses such as air travel, hotel stays, ground transportation and meals, are filed under the appropriate categories. Finally, it ensures the expenses are being charged to the employee’s department account, and paid for from the right budgets.

The Importance of Expense Reconciliation

Expense reconciliation is a critical financial process. Some crucial reasons for diligent expense reconciliation follow.

Fraud Management

Reviewing financial records, employee credit card usage, and purchases ensures that employees are spending the company’s money properly. Reconciling transactions is an effective way to identify or confirm suspicious activity.

The process allows you to highlight questionable transactions and ask clarifying questions or for additional information. It can flag indicators of problematic spending and allows you to take steps to prevent future misuse.

The due diligence can be used in multiple ways:

• Identify unauthorised financial transfers
• Find and correct duplicate charges
• Confirm proper deposits and withdrawals from company bank accounts

Detecting fraud is the first step to preventing it.

Error Prevention

Not all errors found in the reconciliation process are fraudulent or malicious. In some cases, simple mistakes are made in the calculations, data entry, or approval process.

A thorough expense reconciliation process helps to ensure that multiple entries, incorrect entries, or gaps in information are detected and can be resolved quickly. The process can help identify opportunities for further educating employees about how to accurately enter information and how they can help in reducing errors in the future.

Financial Health

A good reconciliation system is an essential element of a strong accounting process. It’s a useful tool in assessing your company’s overall financial health. Balancing your books, and being confident in the data presented, helps you make informed decisions about spending, budgets, priorities, and needs.

It helps provide a clear financial picture of spend in various expense categories, and may illuminate ways to reduce expenses.

Streamlining Data Collection

One of the challenges of expense reconciliation is the time-intensive process it entails. If your expenses are kept on paper records or multiple spreadsheets, it can be overwhelming to track down data.

Data collection and recording is challenging for several reasons:

• Multiple Data Sources. Expense data comes from various sources – purchase orders, emails, invoices, credit card statements, approval forms. With such a diverse range of sources of, reconcilers need to find information in multiple ways
• Formatting Differences. The data may also be listed in multiple formats. Converting and accurately recording this information in accounting systems can be a tedious task, as it involves ensuring information is using the right general ledger accounts and codes. When completed manually, this can be time-consuming and fraught with potential errors
• Reporting Delays. Getting the right information in a timely manner can be a challenge. Credit card statements and invoices may be delayed and employees may get behind in reconciling their expenses. These delays can lead to challenges in reconciling the books
• No Context. If documentation or explanations are missing, it can be challenging to complete reconciliation

These are only a handful challenges that show why it’s critical for businesses to streamline the collection and management of data. Using advanced technology can accelerate the process, replace paper, and ensure accurate and timely reconciliation.

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The Role of Automation in Expense Reconciliation

Automation may already be a part of your accounting practices and reconciliation lends itself to using technology for better results.

Software can scan thousands of entries in seconds to match records and identify gaps. By freeing up time in reconciliation, your team can focus on more mission-critical tasks.

Digitisation is at the core of reconciliation automation. Today, paper can be problematic. However, automation allows you to leverage best practices for better results, including:

• E-receipts that can be attached digitally to transactions or expense reports
• Digital invoice storage to reduce paper and route paperwork electronically
• App-based submission and approval of expense reports

Automation tools can also log transactions and ensure that approvals are completed in a timely manner for better end-of-month accounting work.

Reconciliation Best Practices for Different Business Types

While your business may have different units that operate slightly differently, there are fundamental best practices to use during the reconciliation process, including:

• Planning, categorising and tracking expenses consistently across units and business types
• Shifting to paperless systems whenever possible
• Creating clearly defined and simple workflows for staff to use during the reconciliation process
• Having a well-defined employee expenses policy that outlines what expenses are allowed and not allowed

Evolving Reconciliation Practices

The shift to automation is revolutionising the way finance departments operate. Automation can transform all aspects of the business, from travel expense management to expense report filing to bank statement reconciliation and ledger distribution.

A strong automation tool can simplify and improve the accuracy of intra-company accounts, foreign accounts or business units and balance sheet creation. It allows for smoother audit processes and fewer errors.

By shifting to automation, you’ll have a clearer understanding of company finances in real time, with accurate data to make informed financial decisions.

SAP Concur is an industry leader in expense management. With SAP Concur solutions, you have visibility and insights into your spending, automatic capture of invoices and expense reports and customisable settings to fit your business needs.

Learn more about how SAP Concur solutions can help automate your reconciliation and expense processes.