Comparison Guide: The expense of expenses
All businesses, from the single proprietor Schedule C self-employed practitioner to the practice with thousands of staff, have expenses that need to be tracked, and in many cases, laid out by the employee and reimbursed. Expense tracking, especially in these days of the Tax Cuts and Jobs Act, has become one of those aspects of doing business of which everyone should be more aware.
Lots of businesses simply record expenses on a spreadsheet, but with more than just a few employees, this approach becomes unwieldy. Also, with the new constraints on business meals and travel, keeping accurate expense records is a must, not only for reimbursement, but to comply with record-keeping requirements in the event of an audit.
To compare the top expense management solutions, see the 2018 Comparison Guide.
And while you can find dozens, if not hundreds, of expense-tracking and reporting templates, most of these aren’t very well supported or verified to be accurate, if they are supported at all by the creator. Unless you have created and tested your own spreadsheets, there’s always the chance that expenses will fall through the cracks, or be incorrectly classified and reported. Developing training and documentation for an in-house expense-tracking spreadsheet is time-consuming, and this approach also often results in an expense-tracking application with poor workflow, and lacking many of the convenient features available in commercial expense applications. And that is before even starting to figure out how much your “free” DIY application actually costs in time spent and opportunity costs.
There are a number of popular features that many vendors offer to increase the ease of use and utility of their expense-management offerings. One such feature is receipt OCR (optical character recognition). With OCR, users can scan receipts, or in many cases, just take a photo of the receipt with their smartphone or tablet, and the software will extract the amount and who it was paid to as well as the date, and export it to the cloud where it can be retrieved later by the application and applied to an overall report. In some cases, you might initially have to classify the expense, but some of the applications memorize where a recurring expense should be posted. Along with taking photos of receipts, some vendors’ applications allow users to scan receipts with a portable or desktop scanner and import them into the application to be OCRed and applied.
Another desirable and popular feature is the ability to import charges from credit cards and bank statements. Where this feature is available, you generally have to train the application to recognize which charges or payments are expenses, but once the software is trained, it’s a great time-saver. Keep in mind that neither OCR or payment/expense extraction are 100 percent accurate. A human being will still have to double-check that the details and amounts have been picked up correctly. But even with the occasional error, both features are desirable if a business has a high volume of expenses.
One feature you won’t find in a do-it-yourself or downloaded Excel template is automated mileage tracking and computation. Many of the vendors we surveyed incorporate this feature in their application; some even use the GPS capabilities, if available, in your smartphone or tablet. And if the expense application you choose doesn’t offer this, there are stand-alone mileage tracking apps such as MileIQ for Android and iOS that can be used along with an expense tracker.
In addition to the features mentioned above, many vendors have included additional desirable features. These include the ability to do currency conversions (which is great if employees travel internationally), create expense reports, track reimbursements, and even, in some cases, as with the integration with SAP Concur’s TripIt software, help with travel plans and reservations.
Some vendors offer free trials of their software, or even free access for a limited number of users or transactions per month. And many of the vendors’ applications are cloud-based, so you can grab expenses as they happen and upload them to the cloud. Just make sure that the mobile part of the application supports your device’s operating system.