Tips for Effective Business Expense Management
Effective expense management is a foundational business practice. Between gathering and filing receipts, setting budgets, and auditing employee spending, tracking expenses can sometimes feel overwhelming, though.
1. Have a financial plan
Sound expense management starts with a budget. What will you and your employees spend money on this year? Will you travel to meet clients or entertain prospects? Are you tasking employees with buying tools or office supplies? Will your company grow, adding new employees and additional costs?
Answering questions like these will help you allocate and track against employee expense budgets. Without a plan, you won’t know if you’re spending too much or too little.
2. Track spending actively and use the right tools
Tracking expenses is work worth doing. Keeping tabs on employee expenses not only allows you to plan effectively and keep costs in check—diligent tracking also helps prevent fraud in your business.
Pen and paper expense reporting can be a hassle, though, and even the most fastidious manual bookkeepers may let expenses slip through the cracks. Thankfully, technology offers powerful expense management solutions. Business prepaid debit cards, for example, make allocating budgets and tracking spending simple. These corporate cards often come with software that allows you to allot money to specific employees or departments, easily turn cards on or off, track expenses with assigned categories, and analyze expenditures—all from cloud-based software on your computer or phone.
3. Separate corporate and personal finances
While it’s rarely an issue in large organizations, small businesses often struggle to separate business and personal expenses. Be sure to tag expenses as either when tracking and analyzing your spending. By keeping organized, your business has the opportunity to avoid hidden costs and optimize overall expenses.
4. Establish spending benchmarks
Historical expense records are only helpful if you use them. Take the time to analyze past expenditures, comparing them against current costs and budgets. This will help you create benchmarks and see how you stack up—are you spending less or more? Are there any outliers or employees that need expectations reset?
5. Audit fixed and recurring costs
It’s easy to become complacent about recurring expenses like software licenses or phone plans. Still, with fixed expenses, there are usually opportunities to save money by finding a better deal.
Audit fixed expenses periodically, testing the market or negotiating with current vendors for a better deal. Doing so either helps cut expenses, sends the message that you’re always watching supplier costs, or gives you peace of mind knowing you’re getting a square deal.
6. Make someone accountable
A dedicated employee should be responsible for tracking and managing expenditures. In small businesses, that might mean the owner. But as spending increases and becomes fragmented throughout the company, even small businesses may find expenses hard to keep up with.
Whether you hire a bookkeeper or empower a current employee with expense tracking software, it’s critical that someone is accountable for what gets spend in your organization.
7. Reward employee-driven cost reduction
Your employees are your front line against high expenses. Rewarding them for finding ways to reduce costs (their own expenses or otherwise) creates a zero-waste business culture. Just remember to keep rewards appropriate so they don’t exceed the spending saved.
Are you looking to improve how your company tracks and manages employee spending? Apply for or contact a Brink’s Business Expense representative today!