5 Best Practices In Expense Management
You might have heard the phrase ‘you can’t manage what you don’t measure’, and this couldn’t be truer when it comes to expense management. Generally, it can be easy to let spending get out of control, especially when dealing with large amounts of money that could often go unnoticed by most employees. But if you want to keep control of your company’s overall spending, you must stay on top of every penny—however, this is easier said than done!
Given the complexity and frequency with which expenses are incurred in today’s business world, how do you ensure your business isn’t overspending? While there isn’t one perfect solution for every organization out there (nor should there be), here are some best practices in expense management that can help any company become more efficient:
- Track Your Expenses
One essential component of efficiently managing business expenses is knowing and understanding where your money is going and how your budget is being spent. This means you must keep an eye on the numbers throughout the year. Conduct regular audits of the various costs your operations have.
Furthermore, tracking your expenses also means you should have someone overseeing the expense management practices in your organization. This is especially true if you’re using banking and financial tools such as a corporate card. It’s essential that you’re on top of the purchases and expenses your team makes so you can easily determine areas in your organization where you tend to bleed financially.
- Communicate With Your Employees
Aside from understanding what’s coming in versus what’s going out, it’s equally important to ensure everyone in your organization understands the importance of expense management, not just in handling your business’s finances but also in the overall success of your business.
For one, you can’t expect your employees to understand and follow expense control policies if they aren’t aligned with the company’s financial goals. Therefore, you must regularly communicate with your team, explaining the budgeting process, how and why cost control policies are in place, and how they can affect the business, as well as their personal finances.
- Establish Strong Internal Controls
To ensure everyone in your organization is on the same page, internal controls and policies should be implemented. This set of rules aims to give employees guidance on proper expense management and how to utilize the company’s budget efficiently, which includes an outline of what are and aren’t considered official business expenses.
For instance, if there are business trips or out-of-town seminars, you should be clear from the start on whether or not plane tickets or accommodation expenses are covered by the company and if the employees can get reimbursed for that.
You could also implement protocols involving a step-by-step process of approvals of purchases and authorization of payments. That way, you can have a control point in managing cash flow and approving potential expenses.
- Leverage Technology And Automation
In today’s modern world, technology is your friend. It can help you automate your expense management process, making it faster and more efficient. By automating this aspect of your business, you get to save time and workforce hours since you don’t have to do the task manually. All you need to do is to provide basic details about the expenses incurred, and the system can do all the work of calculating how much was spent on different things.
You can utilize various apps to do this. Depending on the app you have, you can use it to send receipts from your phone, track mileage and time spent on business trips, and even get reports on employee spending patterns if necessary.
- Review And Monitor Results Consistently
Finally, you need to review and monitor the results of your expense management policies and processes. This is an essential step because it allows you to measure the efficiency of your current policies. This gives you a chance to determine which areas need improvement and what else you can do to strengthen your expense management strategies.
Aside from helping you review your current protocols, the insights you can get from such results can enable you to make more informed decisions regarding your business’s finances. For instance, you can look at how much resources you get to save. Or on the other hand, you can improve future costs by looking at how much money is spent on certain items or categories.
Final Words
Expense management is a necessary process to grasp to maintain control of your company’s spending activities and overall finances. This can go a long way in helping secure your business’s profits and success.
Hopefully, the tips above can serve as a starting point for your expense management process. And as your business grows, continue learning about new methods of managing expenses to keep up with the ever-changing business world.
