As its name suggests, business expense management is usually done to track business and team member spending. For the latter, business expense records also help determine how much to reimburse employees for the costs they’ve incurred for the business. It’s crucial, especially for companies where employees are always out and about.
Without proper management and monitoring, your business could unknowingly be overspending in certain areas of employee spending. It hurts both the current financial stability of the company and even that in the near future.
Today’s entrepreneurs can use various tactics to control better and manage business expenses. Preferably, the solutions your business implements are easy to use while being smart and specific enough to make it easy to spot frauds and errors. Data should be transparent and quickly fed into the system used for your business’ finance team to be able to keep tabs on spending.
Below are the most effective business expense management tips to consider:
1. Make Use Of Online Solutions
In this day and age of digital supremacy, it’s safe to say that even banking and finance matters are now becoming online. This fact isn’t exactly novel, as online banking has existed for many years. But what’s new are all-in-one platforms or digital solutions that make managing different business expenses easier in just one app.
One of these is travelbank.com, among others. These online solutions enable easy and accurate business tracking with team members constantly traveling for work. You can do all on that website or app for travel, expenses, or business card transactions.
Because everything about expenses is in one central location, there’s a better sense of coherence and uniformity. Whoever has access to the login details of your business account can perform all the needed transactions without moving from one website or app to another. It also helps set everyone on the same page with changes made in the financial records. Everyone in your business finance team can catch up and stay in the loop with any changes.
2. Organize Expenses In The Right Categories
Whatever ways your business monitors the expenses, such will still be inaccurate and futile if the costs aren’t organized and categorized in the correct sections. The categories you make for your business help you budget and analyze your business performance. Organizing under the proper categories also makes it easier to identify any expenses that need to be lowered, assessed, or perhaps corrected.
Generally, there are two broad categories of business expenses, which are:
- Operating Expenses: These are aligned with the regular course of the business. Research and development can also be added to the usual operating expenses.
- Non-operating Expenses: Those that don’t necessarily contribute to the overall goals and operations of the business but are nonetheless essential. These can include impairment, taxes, and interest.
From the broad categories, your business can have more specific categories. Many companies believe that the more precise the categories are, the better. These particular expenses recorded in the general ledger include:
- Rent and utilities;
- Interest and taxes;
- Supplies and clothing;
- Research and development;
- Salaries and wages.
Recording financial transactions according to groupings like the one above is helpful for many records, especially financial statements like income statements and statements of assets and liabilities.
3. Be Very Analytical
Being analytical would mean you have a finance team that’s consistently checking and comparing this year’s transactions to those of the past years.
For example, like last year, there are five employees this year off on a work-sanctioned trip for training. Before approving any claim for reimbursement, the finance team assigned to this should double-check whether the amounts are reasonable. An excellent way to have a close-to-accurate estimate is to check the actual receipts of the transactions and then go back to last year’s records, taking into account fluctuations or increments brought about by changes in rates and inflation, among others.
Your finance team can have critical insights from closely tracking the weekly, monthly, and yearly spending through the business expense reports. This help to identify areas that may be under or over-budgeted so you can make the proper adjustments.
4. Keep Business And Personal Expenses Separate
This fourth tip is perhaps one of the most repeated ones, but it still can’t be emphasized enough. Especially when it comes to employee spending, some businesses still allow employees to charge company expenses on their cards, with receipts collected for reimbursements. There is nothing wrong with this system, as it does work. But, this manual tracking is prone to errors. When the travels are quite frequent, it may be hard for your business finance team to track whether or not the reimbursement claimed is, in fact, business-related and not a personal one made in the guise of the company.
To make tracking and control more manageable, have a business credit card to which all company transactions will be charged. Make it a strict company practice to keep business and personal expenses separate. This system allows your business more control, whereas now, the likelihood of unauthorized personal charges is reduced if not abolished.
5. Organize Your Paper Trail
Despite the availability of online banking, digital wallets, and credit cards, there may still be instances where cash payments are required. It means the actual payment of physical money. With that, it’s a must for your finance team to keep the paper trail as well-organized as possible.
Start using a rigid filing system for invoices, receipts, and forms. Take note; any lost paperwork means no more opportunity to do a check and balance. Expenses may be void, or any tax benefit (if any) could be lost.
Businesses with minimal manual accounting won’t have to worry about this as much as those with frequent travel and team member expenses do. If you belong to the latter, break the tasks into smaller chunks. The smaller the groupings are, the better. Human error can be significantly reduced now that you face shorter accounting records.
6. Establish A Clear Travel And Spend Policy
How much do employees spend per meal? Per transportation? Per night at the hotel? The answer to these questions differs on factors like your business’ status, employees’ identity, and the trips’ distance. For instance, top business executives naturally would have higher-end accommodation than rank-and-file members when the latter goes on business trips, too.
Your business has to have a straightforward travel and spending policy to keep expectations on the same page. That way, employees know how much they’ll budget for meals, accommodation, and even their pocket money. Anything beyond the company-specified amount is on them as their personal expense.
With precise travel and spend policy, your business will no longer have to face unpleasant surprises where, upon their return, you now have reimbursement claims that are substantial in amount, as meal after meal, everyone on the trip has been lavishly spending. It adds to the monthly budget, so be strict about this. It’s not about being stingy. Instead, it’s about setting clear limitations without hurting the business’s and team members’ well-being while they’re on a trip representing your business. Thankfully, nowadays technology is helping to complete these tasks with the use of business spend software that helps you keep track of the compliance of your company’s T&E policy. Learn more at https://www.coupa.com/products/travel-expense-management/expense-management
7. Negotiate Better Expenses, Particularly Related To Travel
When employees make bookings, double-check to ascertain whether or not the rates they’ve got are the best. If you call the hotel directly, you could negotiate better rates, especially for extended stays and more rooms needed. The same holds for airline fares. Is there an efficient way to travel at a different hour of the day, where the price is significantly lower?
It seems like an extra step to do, but it does wonders in keeping expenses under control. Even the slightest difference in the airfare matters, mainly if you must purchase tickets for several employees. Take advantage of any way you can get a better deal.
8. Open A Separate Account Solely For Employee Expenses
Because employee expenses aren’t regular and fixed costs, having a separate bank account for them is a good idea. It makes it even easier to account for those expenses when they do occur. With a separate bank account for it, you don’t risk mixing those expenses with other regular and fixed operational business expenses.
The goal should be to streamline the business tracking process and prevent fraudulent transactions from falling through the cracks. Don’t use that travel expense bank account for other business expenses, and vice versa.
The Bottomline
At one point or another, you might have employees who need to use company funds for business-related expenses. When such situations arise, your business must be on top of record-keeping to ensure that whatever is requested is necessary. You’re no stranger to the many stories of employees defrauding companies with inaccurate records and transactions for reimbursements. The effects on the business are dire, even if it is only with one team member. It’s even more so if your company has been consistently amiss with management and tracking that the errors and fraudulent records are much more significant. Taking proactive measures starts today with the suggestions above.
Author Bio: Randall Hudson is a retired business consultant. He still likes to dole out advice once in a while, so he writes guest posts and blog articles to share his expertise in business management. When he’s not writing, he’s in his garden, having discovered after retirement that he has a green thumb.
Taking Control of Your Business Finances with Bookkeeping Services
Taking Control of Your Business Finances with Bookkeeping Services