There is no doubt about the necessity of efficient expense management for any size organization; from the smallest startup to the largest corporation, implementing best practices for managing business expenses is a key component in the growth, income, and, ultimately, success of the firm.
By effectively managing and tracking your business’s expenses, you stand to gain a number of advantages:
- Plug up hidden sinkholes: sometimes, money is being lost in areas where it really shouldn’t be
- Maximize revenue: by eliminating wasteful expenses and maximizing your tax deductibles, you stand to gain a significant amount of revenue
- Create opportunities for growth: knowingly exactly where your money is going, and how effectively it is being spent, is a huge aid in planning out and achieving future growth
To optimize your expense tracking procedure, make sure to implement the following best practices:
Make Sure Your Expense Policy is Fair, Firm, and Clear
Your expense policy needs to be firm, it needs to be fair, and it needs to be unambiguous. ‘Exceptions’ should be reserved for exceptional circumstances; make sure that this is understood by employees, managers, and clients.
When devising your expense policy, it is important to prioritize ease of communication; you don’t want your employees to have to slog through a textbook to be able to gain a solid grasp of the policy. Simplicity is key, which brings us to the next point…
Keep Expense Reporting Processes Simple
Simplicity has a number of advantages.
First of all, the simpler the process, the more likely people are to comply. While you may be able to strong-arm your employees into drowning in a pool of bureaucracy every time they want to file an expense, your clients will be harder to convince.
“Simplify the procedure, and people will stick to the plan.”
Second, complexity goes hand in hand with inaccuracy. The higher the number of excel spreadsheets and administrative boxes that need to be filled in, the higher the probability of a mistake being made somewhere – a mistake that could, potentially, result in the loss of an expense claim.
Finally, simplicity equals speed. The simpler the system is, the less time your employees and clients will have to spend on it.
This will not only keep everyone happier but free up their precious time to be spent on tasks that will directly contribute to the growth and success of the business.
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Collect Relevant Information for all Expenses
When the time comes to file your tax returns, there is one thing that can instantly kill your chances of seeing any money: non-compliant invoices.
Every time a reclaimable expense is incurred, it is of vital importance that the associated receipts and invoices hold the right information, so as to be approved by the relevant taxation office.
The specifics of this information depend on the type of expense; for example, client entertainment expenses require the name of the company, as well as the names of all the attendees.
Having said that, you don’t want to spend an inordinate amount of time recording every single detail of every single expense; for this reason, it can be a huge time (and money) saver to simply automate the process.
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Timeliness – Submit and Approve all Expenses on Time
Punctuality is important when it comes to managing business expenses; this ties into the first point, about having a firm and unambiguous expense policy. Your time-frames on every aspect of expense management (submitting invoices, receiving payments, paying employees, etc…) should be very specific and clearly defined.
This means insisting that your employees submit all expenses on time; conversely, it means processing and paying your employees on time as well.
Going beyond matters that occur inside the business, it is also very important to uphold this firm expense policy when dealing with clients and service providers.
Insist that clients honor their invoices and make payments on time; additionally, ensure that service providers are paid exactly when payment was agreed upon.
This practice not only fosters a healthy amount of respect in client relationships, but it ensures that potential cash-flow problems (which could cascade and morph into huge problems down the line) are avoided.
Also, learn more about our expense receipts
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Accountability is a crucial part of maintaining a firm policy (and ensuring that people actually stick to it!).
“Accountability, and ensuring that people actually stick to it, is a crucial part of maintaining a firm policy!”
For medium-to-large businesses with more than a couple of employees, this means giving managers the responsibility to make sure that their people are aware of the company’s expense tracking policies, as well as ensuring that all invoices and receipts are compliant when submitted.
Make Remote Submission/Tracking Easy
With the ever-increasing popularity of remote working, and with more and more workplaces taking on international, location-independent employees, it has never been more important to make the whole expense procedure (tracking, submission, and approval) not only able to be done remotely, but able to be done in a way that is painless, easy, and hassle-free.
This means expense management software.
Finding the right tools to use can be hugely beneficial to your expense management procedure; communication, time management, the actual reporting of the expense itself… all areas that can be greatly improved by using the right software (and, with cloud-based software, the fact that your employees might be half a world away becomes a triviality).
Take the Time and Effort to Audit Yourself
While auditing yourself might, at first glance, seem like an unnecessary annoyance and a waste of time and resources, it can actually prove to be incredibly beneficial.
When you audit your expense management processes in their entirety (from start to finish), you can pinpoint exactly which part of the process is lacking, potentially allowing you to uncover fairly large anomalies in the procedure (anomalies that may be costing you quite a bit of revenue).
Furthermore, the prospect of a semi-regular audit can do wonders to keep employees vigilant when it comes to tracking receipts and maintaining compliance. Ultimately, when it comes to self-auditing, you’ll inevitably find that the benefits far outweigh the costs.