Giving employees the ability to make purchases on behalf of the business certainly drives operational efficiency, but it also opens up additional risk.
Many companies manage both sides of the coin by implementing an expense approval process to ensure that spending is authorized in advance.
In this article, we’ll explore what an expense approval process is, the types of expenses that usually require approval, and the typical steps in the workflow.
What is an expense approval process?
The expense approval process is a formal workflow organizations use to review and authorize employee expense requests before reimbursement. It helps control spending, prevent fraud, and ensure policy compliance. Typically, employees submit requests that managers or finance teams validate against company guidelines.
It helps make sure that all expenses align with internal policies, budget constraints, and even compliance requirements. By using an expense approval process, companies maintain financial control, preventing unnecessary or fraudulent spending.
Key stakeholders involved in the expense approval process include:
- Employees who initiate and submit an expense report or request
- Department managers or budget owners who are reviewing that request against departmental plans and priorities
- Finance teams or controllers who are in charge of validating compliance, reconciling documentation, and ensuring high-level budget alignment
- Executives or approvers who sign off on high-value or policy-sensitive expenses
Naturally, it's important to clearly define roles and steps in the process to support better financial oversight, more predictable cash flow, and smoother audits.
Examples and types of employee business expenses requiring approval
While there are many forms of employee expenses, most fall into a standard set of categories, including:
- Travel and transportation, such as flights, hotel bookings, car rentals, and mileage reimbursements
- Meals and entertainment, such as business emails with clients and team lunches
- Software, tools, and subscriptions
- Marketing and advertising spend, such as ad placement, agency fees, and influencer partnerships
- Office supplies and equipment, such as stationery, monitors, and laptops
- Training and professional development
- Home and office and remote work expenses, such as internet, ergonomic chairs, or co-working memberships
- Miscellaneous employee reimbursements, such as parking, tolls, and courier services
Steps in the expense approval process
A clear, well-structured approval workflow ensures that business expenses are reviewed consistently, processed efficiently, and aligned with company policies.
While every business has a slightly different process, owing to its size, systems, and appetite for risk, most expense approvals follow these key stages:
1. Initial submission
First, the employee submits an expense report or request. This typically takes place via an expense management system.
The request includes supporting documentation such as:
- Receipts
- Expense descriptions
- Relevant cost codes or project tags
2. Managerial review
Next, a direct manager or head of department reviews the expense request to confirm that the expenditure is valid, necessary, within budget, and tied to a legitimate business purpose.
This first approval step ensures team-level accountability.
3. Policy and finance verification
Depending on the expense amount and category, and on company policy, the finance team may be charged with a secondary approval.
Here, they’ll verify that the submissions comply with the company policies, budget constraints, and any applicable tax or audit requirements.
4. Final approval
For larger or sensitive expenses, a second-tier approver (such as a financial controller, director, or executive) may be required to sign off on the expenditure.
In most companies, thresholds are typically based on dollar value or spend category.
5. Reimbursement or payment
Once the expenditure is approved, the finance team will initiate payment or reimbursement via payroll or accounts payable, or issue formal approval for the employee to use a company credit card.
The expense is then recorded for reporting, budgeting, and audit tracking.
Pro tip: Automating these steps with an automation tool can reduce manual errors, shorten approval cycles, and provide full visibility across teams.
Benefits of a streamlined expense approval process
Expense management software like BILL can help you create efficient expense approval processes that do more than speed up reimbursements, but that strengthen financial control, reduce risk, and help finance leadership make smarter spending decisions.
Key benefits of a streamlined, automation-driven expense approval process include:
- Increased efficiency and reduced processing time: Automating and standardizing the approval workflow eliminates manual follow-ups, reduces delays, and shortens expense reimbursement cycles
- Enhanced accuracy in financial reporting: A structured process ensures that expenses are always categorized, documented, and recorded correctly, improving the accuracy of financial statements
- Improved compliance: Built-in checks help enforce internal expense policies consistently across teams, reducing non-compliant spend.
- Reduces costs: By preventing duplicate or unnecessary spending, flagging out-of-policy requests, and controlling spend at the approval stage, you can significantly lower operating costs over time.
- Better visibility: Real-time expense tracking provides clear insight into where money is being spent, by whom, and why, enhancing spend visibility and allowing leadership to make more informed decisions.
Best practices for effective expense approval
A strong expense approval process balances speed, accuracy, and control.
By implementing these best practices, you’ll help your organization manage expenses efficiently while maintaining policy compliance and overall financial oversight.
Design clear and comprehensive expense policies
Set clear guidelines for what can be expensed, who can approve spending, and what documentation is required.
Policies that are well-designed and easy to access will reduce confusion and allow employees to more easily submit correct and complete reports, streamlining approvals.
Use technology to automate the approval process
Expense management platforms like BILL reduce manual work by routing requests automatically to ensure no step is missed. This kind of automation reduces overhead but also improves tracking, consistency, and audit readiness.
Regularly review and update approval workflows
A business's needs change over time, and your approval process should be updated to reflect the organization’s current needs.
Periodically reassess approval thresholds, routing rules, and policy details to ensure your process stays aligned with your current structure and spending patterns.
Define escalation paths for exceptions
Try as we might to fit all cases into a single workflow, the truth is that not all expenses will fit neatly into the standard policy.
Establish clear escalation procedures for when this is the case, such as for high-value or out-of-policy expenses, so they can be reviewed promptly without delaying the entire process.
Train employee and approvers
Processes are only as good as those following them, and it's your job to ensure that everyone involved in the approval workflow, from employees submitting requests to finance leaders approving them, understands how the system works and their role in it.
Invest in training to reduce errors, speed up approvals, and improve overall compliance.
Expense management software to automate approval process
Expense approval processes are an important part of financial control, employee expense management, and improving spend visibility.
With BILL’s powerful expense management solution, you can streamline the approval process, enabling:
- Real-time visibility
- Automatic reconciliation with your accounting platform
- Fully automated expense reports
