How Bad Expense Management Can Cost Your Business

Expense Management

Poor expense management is detrimental to most businesses, including small, medium, and large corporations. All companies, regardless of size, must spend money to generate revenue. And this expenditure is not limited to rent, office leases, or employee wages. They could be travel fees, business lunches, or the purchase of mobile devices. Managing these expenses can be tiresome for the business owner, members of their finance staff, and other employees. Sometimes, low-level employees might be reluctant to report expenses at the right time. Behavior like this can be catastrophic for the financial health of the business in question.


Sluggish Expense Processing Has Negative Impacts

In many SMEs, their employee expense management involves a lot of communication between different people or departments. This is because spending proposals need justification, analysis, validation, and approval. In many cases, these expense processing steps are not straightforward and take so much time to complete. This reduces productivity and should be more efficient. 

Businesses with updated financial management systems automate some of these processes. Automation helps them avoid the errors that plague businesses with traditional expense management systems. SMEs with outdated systems might lose receipts, incorrectly report numbers, and delay the release of funds, all of which impede growth. 


Employees Can Become Disgruntled

Employees might delay the submission of expense reports because of the long time it takes to process them. This habit can be avoided if better protocols are in place to deal with these delays. Management team members could also find it troublesome to review new spending proposals before approving them if the expense processing structure is below par. The longer business owners neglect expense management; the more unhappy their employees will be. 

Some situations will warrant an employee spending their money on business expenses. In most companies, employees would be reimbursed the full amount they spent out-of-pocket if the spending is justified. However, employees will be frustrated if reimbursements are regularly delayed or only happens after much hassle. It would make them distrust the management team and less likely to pay for things out-of-pocket in similar situations, which can disrupt smooth operations. Competent expense management would prevent this from happening, since it will guarantee standard procedures for employees to get reimbursed on time. 


Periodic Financial Insights and Reports Will Be Inaccurate

If a business is bad at managing expenses, its financial reports would be unreliable. There will be some unreported expenses, which will make it almost impossible to get a true picture of the spending pattern. On the other hand, if expenses are managed properly, it would be easier to discover ways to save costs, and will lead to better financial decision-making in the long run. Cutting back on expenses is one of the steps one can take to save an underperforming business.



Substandard expense management habits will make a business lose its ability to check and balance employee spending and see if there are anomalies. It also prevents a business owner from adjusting their business model to optimize and make it more sustainable. Companies should update their employee expense management strategy regularly because it keeps them financially healthy. 

Akeela Zahair