When we hear the term ‘expense management,’, we often associate it with mega corporations. However, it is also important for small businesses to practise expense management from the beginning. Expense management helps to ensure that a business can face unforeseen challenges without the company closing down. In this article, we’ll share practical tips for small business owners to manage their expenses efficiently. But first, let’s clarify what expense management entails. Simply put, it’s the process of tracking, controlling, and reducing costs to keep your business financially healthy; there is more to it than just that. Let’s get a better understanding of expense management.
What is expense management?
Expensemanagement is the process of constantly monitoring your business cost via budgeting and spend tracking to boost business efficiency and profitability. At first glance, business expense management is about processing employee claims, which the financial department either approves or rejects, in order to reimburse them on time. However, expense management goes beyond that; expense management includes the creation of an expense policy that keeps the employee’s expenditure under control and instil a culture of spending consciously into. Consistent expense management gives you more control over daily, monthly, and yearly expenditures so you can ensure maximum return on each dollar that the company spends. By adopting these strategies early, small businesses can lay a strong foundation for long-term success. So, are you ready to learn how to manage your expenses like a pro? Let’s dive in!
Tips for effective expensemanagement for small businesses:
- Collect relevant expense information:
Having irrelevant or incorrect expense information will only increase your financial team’s workload. For example, suppose one of your employees makes a payment without submitting the required documents or information correctly. In that case, this will increase the workload of the finance department since it is now their responsibility to track down this employee and look for the necessary information. To do this, you must have a system in place that all employees must follow before they spend any money. Look into expensemanagement software that comes equipped with tools such as optical character recognition (OCR) and custom expense information categories that can help you to make sure relevant information is collected and stored correctly.
- Automate payment process:
Having an automatic payment process can be very beneficial to small businesses that want to stay on a budget. With an automatic payment process, you can control the amount an employee receives from the corporate card and set a limit on the card. Many expensemanagement systems offer automatic payment process features, too.
- Have a clear expense policy:
A clear expense policy is the backbone of expensemanagement. Without a clearly defined policy, it will be difficult to control the company’s expenditures.
- Establish accountability:
Building accountability amongst the employees is a good practice. If you want your employees to adhere to the expense policy, you need to ensure that they are held accountable. Begin with the managers and supervisors. Ensure they have a thorough knowledge of your policy. Give the managers and supervisors an easy way of tracking their team expenses so they, in turn, can hold their subordinates accountable. This will keep your company’s expenses in check.
- Process reimbursement on time:
Having an effective employee reimbursement system can help companies manage their cash flow better. Reimbursing your employees on time can be a win-win situation for both you and your employees. Once again, using an automatic business expensemanagement software that is equipped with features such as OCR, invoice processing, and auto-approval makes the reimbursement process so much easier. Such software can record, verify, and roll our reimbursements all on its own.
In conclusion, expensemanagement is a critical practice for small businesses aiming for long-term success. By collecting accurate expense data, automating payment processes, and establishing clear policies, you can streamline operations and avoid unnecessary costs. Additionally, fostering accountability within your team ensures that everyone adheres to the expense guidelines, further controlling expenditure. Timely reimbursement of employees not only boosts morale but also improves cash flow management. Investing in expense management software can greatly enhance efficiency by simplifying these processes. Start implementing these strategies now, and you’ll be better prepared to navigate financial challenges and grow your business sustainably.
