Filing expense reports online has never been easier.

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May 24 2011 5:24 PM

Burn Your Receipts!

Finally, an online company has brought expense reports into the 21st century.

Expensify screen shots. Click image to expand.

The species of American known as the "frequent flier" has honed nearly every part of the travel experience down to its most efficient core. These Up in the Air-types have perfectly choreographed airport-security rituals that let them zip by the TSA and have VIP car-rental accounts that let them pick up a ride as soon as they land. For any city you choose, they can tell you exactly which airports, airlines, and hotels are most amenable to business trips. Yet for all their travel-savvy, there is one part of life on the go that these folks haven't managed to solve. Yes, I'm talking about expense reports.

Expense reporting seems like the last bastion of the American economy that hasn't yielded to the information age. Every month, businesspersons at pretty much every company in America spend hours tracking down everything they've spent on meals and travel and then filling out reams of forms to get reimbursed. Most companies still ask you to save and present paper receipts for your purchases. Some of them demand even more proof. For a university-sponsored trip I took last year, I had to send in actual boarding passes to prove that I did in fact show up at the airport. (I won't be surprised if I'm one day asked to save the airplane bag of peanuts, too.) Worse, every firm seems to have its own bespoke accounting process, with unique forms, spending categories, department codes, and other niggling things to remember every time you want to get your money back.

None of this is necessary. After all, you're probably paying for most of your travel expenses with your credit card. Why do you need additional documentation for your purchases? Why can't there be some way to automatically transform your credit card statement into an expense report? Alas, most firms don't seem to have such a process, unless you're a bigwig with your own corporate credit card. In fact, when I asked people on Twitter for an example of a good expense accounting system, I mostly heard back horror stories. Almost nobody likes how their firm handles expenses. A couple of people, though, did point to one advance—and when I checked it out, I swooned.

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It's called Expensify, a two-year-old startup whose website and mobile apps will revolutionize how you do your expenses. Expensify's motto is: "Expense reports that don't suck," which is a high bar. For the most part, the company delivers. It does so by automating every part of the expense-reporting process both for submitters and for companies that need to reimburse their workers. After using it a couple of times, I can't imagine doing expense reports any other way. There's only one hitch: You've got to convince your bosses to adopt it, too.

Here's how Expensify works: After you sign up for the site, you give it access to your credit card account. (If you're wary of this step or you mostly pay for stuff with cash, you can skip it, but the system will be less useful without it.) Then, when you're on your trip, use Expensify's mobile app—available for the iPhone, Android, WebOS, or BlackBerry—to keep track of all your receipts for purchases over $75. You do this just by snapping a photo of the receipt; the program automatically shoots a picture of every receipt to your online Expensify profile. You can also send in receipts by email—for instance, when you get a confirmation for your hotel booking from your travel site, just forward it to Expensify.

Now, when you get back from your trip, you can log on to Expensify's site and create an expense report in about five minutes. All you do is click on each item in your credit card history that corresponds to an expense. For the expenses under $75, Expensify generates an "eReceipt" based on your credit card statement that's just as good as the real thing—it meets all of the IRS's recordkeeping requirements, and Expensify even promises to pay any taxes associated with those expenses if the IRS audits you and finds the eReceipts inadequate. For all practical purposes, then, this means that you don't have to worry about saving small-dollar receipts, and you can safely throw out all those scrunched-up snips of paper you've collected from cab rides and coffee shops. (If you paid cash, or if your company won't allow the eReceipts, you can still snap and submit pictures of these sub-$75 receipts.) For larger purchases, just click on the corresponding receipt image you've already saved in your profile.

Best of all, Expensify automatically categorizes most purchases into the correct spending categories; if it makes a mistake, it will remember your corrections in the future. (For instance, if your office wants you to categorize dinner as "entertainment" rather than "meals," Expensify will do it automatically after the first time.) Earlier this month, Expensify added one more feature to make handling receipts even easier. Now when you take a picture of your receipt, the app offers to decipher it for you, using a team of humans and computers to scan the receipt and automatically categorizing it. In the end, Expensify is doing the vast majority of the tedious work you used to do.

But here's that one hitch. When you're done creating your report, you send it to your boss, who can review and approve it online, and then forward it to the accounting department. But if the accounting department hasn't adopted Expensify, you're mostly out of luck. You can still use this system as a way to organize all your receipts, but you'll still have to file the old way.

David Barrett, Expensify's founder and CEO, says that in many companies the people who process expense reports are overjoyed to discover that there's a better system than the one they're using. Because Expensify integrates with several popular accounting and sales programs—QuickBooks, Freshbooks, Salesforce, and any other accounting system that can import spreadsheet files—and it connects with bank accounts to allow for direct deposits, it lets accountants approve reimbursements in a matter of a few clicks.

The small and medium-sized businesses that make up Expensify's most fervent user base love all these features. "In a small company, no one has allegiance to their current system—none of the employees like it, the boss doesn't care, and the accountant hates it," Barrett says. "The only reason they use it is because it's all they know." As a result, Barrett says, Expensify has built up a user base of 300,000 people through "bottom-up adoption"—employees discover it, then introduce it to their bosses, who subsequently adopt it for the whole firm. The company has developed an ingenious pricing scheme to take advantage of this adoption curve. Expensify is mostly free for all employees, though the new receipt scanning feature costs 20 cents per receipt after the first 10. Companies, meanwhile, are allowed to have two employees submit reports for free each month; after that, it's $5 per submitter per month.

Will your company go for this? It won't hurt to try. If you're one of the first two people in your firm to submit a report via Expensify, your bosses won't have to pay anything to approve it, so they may well join the system just to check it out. Then, when your bosses see how painless Expensify makes the whole expense process, they may decide to adopt it companywide.

Of course, the accounting departments at bigger firms are likely to fight tooth and nail to cling to the old system. These are people whose entire job depends on arcane expense-reporting rules, and streamlining the process is bound to upset them. On the other hand, haven't you suffered enough? Isn't it time you stood up to your receipt-obsessed overlords? How many more hours of your life are you willing to waste while filing all your purchases in triplicate? It's time to storm the barricades. And who knows—you may even be praised for fomenting an expense-report revolution.

Watch Farhad's Review of Eye-Fi, a wireless photo transfer app:

Farhad Manjoo is a technology columnist for the New York Times and the author of True Enough.