It’s challenging to understand where to start when managing your business finances. Particularly, expense management can be a problem when you don’t have the resources to do it effectively.
Expense management records employee spending and defines how the organisation will reimburse expenses. It also implies the policies and procedures used to regulate this type of spending.
There’s no one-size-fits-all method for expense management; however, there are rules that can be implemented for any expense management companies, which should point towards process excellence and strong employee relations. In light of this, we have compiled our top ten tips for managing expenses.
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10 expense management best practices
Expense management is the method adopted by a company or organisation to treat, pay, authenticate and refund expenses initiated by its workforce. It also refers to the procedures and systems that direct spending and the technology used to process and analyse its data.
The following are best practices businesses can use to successfully create, manage, and execute their expense management procedures.
1. Stay up to date on your expenses
Whether you operate a business or work as a freelancer, remaining up-to-date is essential to avoid getting overwhelmed with unnecessary administrative burdens at year’s end.
Also, by never letting your expense monitoring go more than one week out of date, you can easily catch expenses spiralling out of control before they become a concern.
2. Document everything
Document everything on paper for you and your team to ensure that your expense management process runs smoothly. That way, you and your staff can use your rules as a guide.
Businesses should mention the following in their expense management policy:
- What expenses can workers be compensated for (e.g., supplies, travel, etc.)
- What you cannot reimburse employees for
- the procedures employees must follow to get reimbursed (e.g., filling out a form, providing receipts, etc.)
- How long does the reimbursement process take?
3. Assign someone to reduce expenses regularly
Inexpensive services are rarely the best, so it is difficult to cut down expenses. In the same breath, saving ten or twenty pounds on a product, you purchase 200 times per month amounts to a saving of between £24,000 and £48,000 over a year!
With such numbers, you could even engage someone to work dedicatedly to negotiate the best price on each supplier contract. Constantly having to check and double-check current contracts is time-consuming. But if your company deals mainly with suppliers, this might be an essential post to fill your finance department.
4. Utilise expense management software
To further simplify your expense management process, consider giving up your spreadsheet and investing in online expense management software for your business. Software and other expense management tools can assist you in keeping track of your costs and evaluating who has and has not been reimbursed.
5. Integrate accounting and payroll procedures
Find expense management systems that integrate with your accounting and payroll procedures.
Integrating makes everything a breeze from all sides. When you integrate with your accounting, you don’t worry about updating your accounts. And if you find a system that integrates with your payroll, you can reimburse your staff more quickly.
6. Make expenses as simple to track as possible
Create a reporting system that lets employees submit their receipts and expenditure reports quickly and easily. Knowing that paper receipts fade, tear and get lost, today’s workforce uses smartphone cameras to capture receipt images.
Many businesses are using automated software that allows image uploads, monitoring and submission of expenses. With these solutions, accounting teams, managers, and approvers can view reports, approve or reject them, and start the expenditure reimbursement process using their own mobile devices or laptops.
7. Educating the employees about best practices
Many companies like to keep it a secret regarding expense management. But if we consider it practically, there is no benefit in doing so. Instead, businesses must aim to get the entire workforce to understand the correct ways of recognising, establishing, and tracking the best practices.
As reimbursable workforce expenses are a vital line item on most company balance sheets, it is ideal for creating a cost-conscious culture.
8. Negotiating better prices on expenses/travel
Regarding the hotel, airfare, and transportation expenses, discounts are usually offered to those who ask for them. Rest people have to pay published rates. As workers travel frequently, companies must inquire about restaurants and national hotel chains for bulk discounts to prevent them from falling into the second category.
9. Reward employees on a sliding scale for low spending
If employees spend 15 or more per cent less than the budgeted amount for a business trip, give them a proportion of that savings into their own pockets. Let’s say you decide to reward employees with “50 per cent of the money saved” during their work trip.
If their work trip has a budget plan of £1,000 and they spend only £600 (i.e., 40 per cent less], then give them 50 per cent of what they saved (£400) into their pockets, i.e. £200.
10. Issue business credit cards
Corporate credit cards not only assist businesses in monitoring spending but also help streamline the reporting process for employees and eliminate the need for workers to cover costs and wait to be reimbursed.
Credit cards assist firms in maximising cash flow by offering terms (often net 30) before payment is required and streamlining record keeping by centralising spending data. Companies that don’t want to give workers permanent cards, often with high limits, might consider single-use cards.
Businesses must thoroughly evaluate expenses to ensure that they comply with regulations and that employees aren’t spending too much or buying non-work-relevant things. Expense management online tools help with business audits by providing an insight into what finances are coming in and out of the company.
These 10 expense management tips will help you control how your business money is spent and ensure you’re on the right track with your Accounts Payable this year.