How to Build an Efficient Expense Approval System

How to Build an Efficient Expense Approval System

To make sure the expenses you reimburse your employees for are accurate and legitimate, you need a solid expense approval system. ??

Read on to find out how you can improve your expense approval process to prevent expense report errors — and even fraud.

*This article is an abridged, adapted version of the blog post originally published on the Clockify blog: https://clockify.me/blog/workforce-management/expense-approval-system/?

#1: Create clear expense categories

First, establish clear expense categories. Expense categories that overlap or are otherwise ambiguous may confuse employees regarding what expenses are reimbursable.

Here are some examples of common expense categories:

?? Office supplies,

?? Advertising,

?? Public transport,

?? Travel,

?? Meals, and

?? Entertainment.

If you use Clockify as your go-to expense management tool, you can easily create custom expense categories. Clockify also has pre-defined categories for most common business expenses.

To add a new expense category, first enter the category name. If you want to define the cost per specific unit, check the “this expense has a unit price” box. Then, enter the amount in USD and name the unit.

Creating an expense category in Clockify

Once you add clearly defined expense categories to Clockify, your team members will no longer be confused about categorizing each expense.??

#2: Revise your expense policy

The next step is to take a look at your current expense policy. If you’re experiencing frequent non-compliance, chances are that your policy is difficult to understand and memorize.

The policy should clearly identify:

  • Approvers,
  • Reimbursable expenses,
  • Submission deadline,
  • Required documentation, and
  • Spending limits.

Using Clockify for expense approval gives you control over who can approve submitted expenses. You can choose to give these permissions to:

  • Admins and team managers, or
  • Admins and project managers.

Expense approval permissions in Clockify

Admins are the only ones who can approve all expenses.

Team managers can approve expenses submitted by the members of the team they manage. On the other hand, project managers approve expenses across different teams but only those associated with projects they are assigned to.

#3: Automate the expense approval workflow

Relying on a manual expense approval workflow makes the process slower and less accurate, making your company more susceptible to fraud.

For illustration, the Association of Certified Fraud Examiners reported in 2020 that companies lost approximately $1,400 per month due to expense reimbursement fraud. For example, expense reimbursement fraud typically involves employees submitting exaggerated or completely made-up expenses.

In contrast, a Forbes article states that expense management platforms improve policy compliance because they:

  • Make rules easier to follow, and
  • Prevent out-of-policy spending.

One clear example of this is using Clockify for expense submission. For one, to add an expense in Clockify, your employees have to fill all required fields, which are:

  • Project,
  • Category, and
  • Amount.

Otherwise, they won’t be able to create the expense.?

Finally, employees need to select the team member and the expense date — and mark the expense as billable or non-billable.??

Creating an expense category in Clockify

The employees submitting the expense also have the option to add a note and attach the receipt, but these are not obligatory.

Once they create the expense and submit it for approval, the approvers can review it and choose to approve or reject it.

Simplify expense approval with Clockify

Using Clockify makes expense approval super easy. As the approver, all you need to do is select approve or reject. If you’re certain all expenses comply with the expense policy, you can click on the Approve all button to accept all submitted expenses at once.

Reviewing submitted expenses in Clockify

As you can see, Clockify can completely transform your expense approval process — from slow and error-prone to quick and expense policy-compliant.

If you need more information on how to use Clockify, you can contact our customer support. It’s available 24/7, for everyone, including the free plan users via chat, phone, and email.

On top of that, Clockify offers a free tailored onboarding program and concierge services to its users.

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