Accounting
Why it’s time to rethink expense report workflows for company-paid credit cards
For decades, employee expense reporting has followed a familiar path: employees submit reports, managers approve them and the accounting department performs a final review. This workflow made sense when employees paid for business expenses out of pocket and reimbursement was at the company’s discretion, but this legacy model breaks down when applied to company-paid credit cards.
When employees use a company-paid card, the purchase has already occurred and the company is contractually obligated to pay the card issuer. Yet, many organizations still require managers to “approve” these purchases via traditional expense reports. What exactly is the manager approving? There’s no disbursement pending. The funds are already committed.
Declining an expense report in this context doesn’t reverse the transaction. Instead, it blocks the transaction from reaching Accounting — creating reconciliation issues, delaying month-end close and compromising the accuracy of financial records. The act of declining becomes a symbolic gesture with real operational consequences.
Why managers decline reports
Managers typically decline expense reports for three reasons: budget enforcement, policy enforcement and accounting validation.
- Budget enforcement: In traditional reimbursements, a manager might decline a report to avoid reimbursing an unplanned or unauthorized expense. But with a company-paid card, the money is already spent. Expense reports are poor tools for budget control because they can’t prevent overspending — the purchases are discovered after the fact.
- Policy enforcement: Many organizations have policies that include both “hard” and “soft” rules. Hard policies cannot be overridden, such as a rule that dry cleaning is only reimbursable if the employee is on a trip of at least three nights. Soft policies allow for manager override — for example, a parking limit of $100 per day that can be exceeded with manager approval. For company-paid cards, enforcing either policy type requires downstream action, not approval or denial. Soft policy exceptions should be routed for manager review as part of an audit, not in the accounting workflow.
- Accounting validation: Some companies expect managers to verify the accounting accuracy of their employees’ entries, such as checking whether the right expense type or project code was used. However, this task is better suited for Accounting, which has both the context and the expertise to ensure transactions are coded correctly.
The breakdown in reconciliation
When a manager declines an expense report, the associated card transaction remains unresolved in the accounting system. It shows up on the monthly statement but hasn’t been coded, posted or documented. This creates a black hole in reconciliation. Accounting can’t finalize the books and auditors are left without a clear trail.
In trying to enforce policy or budget controls, the manager inadvertently makes the situation worse. The company must still pay the card issuer, but now lacks the accounting data and audit trail needed to properly report the expense.
Unauthorized purchases belong to HR, not accounting
Occasionally, employees make valid business purchases without proper pre-approval. For example, an employee might book a last-minute business trip for a client emergency without first getting approval. If the purchase complies with policy, the company typically reimburses the employee — despite the lack of prior authorization.This is not an accounting issue. It’s a management issue. Denying reimbursement for a legitimate business expense is rare and counterproductive. Instead, a situation like this is best addressed through HR channels — such as coaching or policy reinforcement — rather than blocking the reimbursement or reconciliation.
A more effective approach is to notify managers of purchases in real time. If they identify unauthorized activity, they can address it through HR, not by disrupting the accounting workflow.
A better model: parallel workflows
The solution is to stop treating manager approval as a proxy for audit. Instead, companies should implement two parallel workflows:
The accounting workflow: This workflow ensures that all company-paid card purchases, regardless of compliance, flow into the accounting system in time for reconciliation and payment. Employees are responsible for submitting their company-paid card purchases on an expense report. This includes providing required receipts, selecting the correct expense types and completing any additional reporting fields. Nothing about this step of the traditional expense report workflow changes. What does change is the manager’s role. Instead of reviewing expense reports to approve them, managers are removed from the workflow. This saves their time and prevents bottlenecks.
Accounting then takes over the review function, but only after the employee submits the expense report. Their job is to review reports for accounting accuracy and compliance — not to approve spend that has already occurred. Once approved, purchases flow into the accounting system.
The auditing workflow: In parallel, an audit process reviews company-paid credit card purchases for policy compliance, fraud and misuse. Auditing card transactions for fraud and policy violations is a specialized task, one that auditors and finance professionals are trained to handle. Unlike line managers, auditors know what to look for, have experience spotting patterns of misuse and work with clear documentation of the company’s expense policy. Shifting this task away from managers and into the hands of auditors not only saves managers time, it also results in more accurate and consistent compliance reviews.
If an audit determines that a transaction includes a nonreimbursable or personal expense, a correcting journal entry is made to reclassify part or all of the transaction and, if needed, record an employee receivable. For soft policy violations, the audit workflow may route the transaction to the manager for exception approval.
The path forward
The shift to company-paid credit cards has made the old reimbursement-based approval model obsolete. Organizations need workflows that reflect today’s purchasing reality: spend now, audit after. With parallel accounting and auditing workflows, companies can reconcile accurately, enforce policy effectively and ensure compliance without sacrificing operational efficiency.
It’s time to change outdated approval processes and build workflows that work for the modern finance organization.
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