May 3, 2023
6 min read

Importance of ERP integrations with expense management software

A spend controller researching Importance of ERP integrations with expense management software from his warehouse.
Quick summary

Enterprise Resource Planning tools, or ERPs, are vital for large and growing businesses. While each ERP provider is different, they’re generally business management information systems that support the day-to-day operations of an entire organisation. But while they can provide key components (including accounting), to business operations, without expense management, they are just half the story.

Table of Contents

    Expense management solutions can help companies reduce costs, streamline processes, and take back productive time by providing all the necessary tools to control expenses, including travel and reimbursements. In addition to supporting the entire expense process, from receipt capture to card controls, these solutions also integrate with other systems, such as ERP accounting software.

    The best-in-class integrations also allow the data to flow directly from the expense management software into the ERP without data entry or multiple imports and exports.

    ERPs in a nutshell

    There are lots of ERPs to choose from, and while they’re not identical, they provide many of the same services. Generally, an ERP will provide detailed data and measures to help companies better manage their operations.

    Your ERP should integrate all the different business functions and processes into one centralised system. These functions include financials, sales, purchasing, and other critical business areas.

    Thanks to the above, ERPs will often act as the one source of truth for businesses, offer visibility across the enterprise, and provide valuable insights into your processes, systems, and data.

    How to enhance spend visibility and control with Payhawk

    Expense management software in a nutshell

    Expense management software will help you track the purchases you make on behalf of your company, manage employee reimbursements, and submit expense reports. The most innovative expense management software can also be used to create spend policies, set card controls, and generate reports.

    Modern expense management software is cloud-based and typically allows you to manage all of your organisation's expenses from one place (even across multiple entities). This includes tracking new expenses, setting policies, approving payments, paying invoices, monitoring subscriptions, reimbursing mileage, and more.

    The importance of ERP integrations with expense management software

    Integration between ERP systems and expense management software is essential. The data gathered by the expense management software is a vital piece of the puzzle for the ERP. Together they can show a complete picture of company performance, operations, and cash flow.

    Some of the other main benefits include:

    When integrated, the data collected from different sources will be more accurate and easier to manage. This connected view will help organisations make better decisions based on accurate information.

    Ease of use
    Employees usually prefer using one system for all their tasks instead of having multiple tools for different tasks. Asking cardholders and non-finance employees to use only the expense management software as a card and an app reduces the manual admin involved in expensing. No more collecting receipts and no more spreadsheets.

    Meanwhile, integrating the expense management software and the ERP removes massive data entry and reconciliation burdens from the finance team. And they can operate safely knowing that their colleagues are spending with the company’s chosen expense management solution (likely with in-built controls, approvals, and limits).

    Faster processing
    When data from two sources are integrated and combined, it becomes faster for employees to process and turn it into information that can help them make better decisions quickly.

    Automation of the expense management process
    ERP integrations enable automation of the expense management process by eliminating manual data entry into multiple systems. This automation helps eliminate manual errors while improving the accuracy and speed of data entry.

    Real-time visibility into expense data
    Integrating your expense management solution with your ERP system gives you real-time visibility into all expenses across departments, including approvals, payments, reimbursements, etc., so that you can make informed financial decisions.

    Improved accuracy of expense tracking
    Integrating expense management software with ERPs lets businesses track expenses more accurately and reduces the risk of fraud by providing real-time visibility into all transactions across all departments. This also helps organisations identify trends in spending and overspending by individuals or teams to take corrective action early on.

    Integration with accounting software
    Integrating your ERP solution with expense management software ensures all expenses are accounted for and recorded, reducing the chances of any discrepancy in the accounts.

    The challenges facing organisations without ERP integrations

    When used correctly, expense management software x ERP integrations can help mid-size, large, and growing businesses to reduce costs, improve efficiency, and support growth. However, despite the clear benefits, many organisations still don’t have this setup.

    What’s behind this reluctance? And what can be done about it? Companies that don’t have expense management software x ERP integration face many challenges, including:

    Inefficient approval workflows
    Without expense management software with in-built, customisable approval workflows, employees must wait for someone else to approve their expense reports manually.

    Waiting for expense approvals can cause delays and frustration for employees, cause delays in spend visibility for the finance team, and even increase costs for the business.

    Inability to track expenses in real time
    If finance teams can see spend data in real time, then they can make decisions in real time.

    Art fabrication business MDM Props shared their experience of using separate cards, expense management, and accounting software.

    “With the old system, we had to wait two to three days for payments to show up,” explained Finance Manager Uchenna. “But with Payhawk, we get to see our spend in real-time. And, we can categorise the spend by projects with custom fields, so it’s super easy to see what’s being spent and why.”

    Delays in data mean finance teams can’t react quickly enough to respond to the current business situation, budget needs, or even macroeconomic factors. They just don’t know where they need to reroute cash flow and when.

    Lack of compliance with company policies
    Companies can't easily enforce compliance with company spend policies without expense management software. And in the best-case scenario, finance teams can build the policies into the same tool that employees use to make payments for work.

    Take your Sales Manager Peter for example. He's recently purchased some new materials for a stand he's manning at an upcoming expo. In this example, Peter used Payhawk. Meaning he paid using a Payhawk card which is already assigned to Events. He categorised the spend from a drop-down menu which included Event materials and job done.

    Later, he couldn't take money from the ATM for a coffee using the same card. This is because it's blocked for withdrawals. So instead, he used his personal Payhawk card (which includes in-built per diems) in order to get his caffeine hit.

    Difficulty in auditing expenses
    Expense management software and ERP integrations mean that your business' spend data should flow directly into your accounting (including receipt data, categorisation/coding, and more). This smooth data flow means all your accounting data is audit-ready in real time.

    On the flip side, an inability to audit business expenses can lead to financial losses, which may then be difficult to recover. The main reason why this happens is that there's no clear documentation or evidence of what was purchased and who authorised it. This could also lead to an increase in fraud as it becomes difficult to track down who incurred the expenses and whether they were legitimate or fraudulent.

    Key considerations for ERP and expense management software integrations

    Compatibility with existing systems
    If you're looking to integrate an expense management system with your ERP, they must be compatible with each other.

    Both software systems should be able to talk to each other through a standard protocol format. With Payhawk, for example, many of our integrations are direct. This means that our data flows in accordance with the accruals concept and date-matching, so there's no reconciliation effort for finance and accounting teams.

    Data security and privacy
    When integrating multiple systems, all the data must always remain secure and private. Otherwise, you could run into compliance issues that could cost you money down the road if not handled properly.

    Many companies are concerned about data security and privacy when considering ERP integrations with expense management software — especially when sharing sensitive financial information such as credit card numbers or bank account information. Make sure that the vendor provides sufficient security measures (e.g., strong encryption, etc.).

    Implementation and training
    Once you've found a solution that works for both your needs and those of your employees' needs, it's time to implement the solution in your business processes. And if necessary, train employees on how best to use it.

    If your business is particularly complex, you may want to consider an implementation specialist and in particular an expense management provider who offers this.

    Ongoing maintenance and support
    This is an important factor when looking at ERP integration. You want any vendor you choose for this type of integration to have ongoing maintenance contracts so that they can keep up with any changes in their software. These upgrades may include new features, bug fixes, and more.

    The bottom line

    In the end, ERP integrations with expense automation software makes a lot of sense. There's no complicated procedure to implement, and it can save you valuable time that could be spent elsewhere.

    Our easy-to-use expense management software eliminates the need for manual, error-prone processes and allows teams to focus more on core business strategies.

    Want to improve the way your business spends? Let's talk integrations, expense management benefits, and more. Let's talk.

    Trish Toovey - Content Director at Payhawk - The financial system of tomorrow
    Trish Toovey
    Senior Content Manager

    Trish Toovey works across the UK and US markets to craft content at Payhawk. Covering anything from ad copy to video scripting, Trish leans on a super varied background in copy and content creation for the finance, fashion, and travel industries.

    See all articles by Trish →
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