5 Expense Management Considerations for Small Business
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Small businesses will encounter financial trouble. It’s just how the business goes sometimes. Managing your expenses can get complicated quickly. Add managing the business on top of all that, and you can start feeling the pressure. You have to start considering strategies now rather than later.
Today, let us discuss a few ways you can manage your expenses. It doesn’t matter if you are running a brick & mortar store or an online business. Apply these tips to your business and you’ll find your business running smoother than before.
Create a Standardized Expense Policy
Before everything else, you need to have a standardized expense policy. This is to make sure expenses in your business adhere to strict guidelines. Auditing becomes easier. Overspending is now less likely. Knowing what to put in the policy varies for each business. Here are a few standard guidelines.
Make sure your employees submit their reports on time. Be strict and have them incur penalties if they do not have a good reason for missing reports. Review them thoroughly to see if they are complete.
Outline a specific process that every employee must go through. Make sure to do this before making any expense on the company’s behalf. This process ensures that you audit all your expenses.
Valid and Invalid Expenses
Make a comprehensive list of purchases covered by the company. Employees must send purchases outside the list to a corporate officer for approval. To prevent too many inquiries, make a list of purchases not covered by the company.
To avoid fraud, intentional or otherwise, review all expenses thoroughly. Look at reports for signs of:
- Repetitive reimbursements
- Overly large expenses
- Consistent policy violations
- Duplicate submissions
- Altered documentation
- Whether the money was used for the documented reason
When you encounter something suspicious, start an investigation. Investigating these issues early prevents problems later. Once you confront the culprit, ask them their reasons. If the reasons are invalid, incur the relevant penalties. In severe cases, you may need to terminate your contract with the employee.
Assign a Document for Everything
Expense policies need their documents. This makes auditing easier, in case you need to investigate an issue. Require documentation on all expenses. It may seem like extra work, but you will thank this when you need to resolve a dispute.
Put a Reimbursement Policy in Place
Reimbursement is a necessity for any business. You never know when you need to reimburse an employee. Make sure it goes by having a firm policy in place. Make a comprehensive list of reimbursable expenses. Vice versa, make a list of the expenses not covered by reimbursement. Be clear and concise in your policies to prevent issues. If your policy only covers a certain amount of cash, communicate that. Complicated wording can cause problems down the line.
Automate Your Expense Management Process
Expense management software has many benefits. All of the advice given in this article can easily be managed with software. This software keeps track of all financial activity. From automated payrolls to expense reports, the right software can do all of these things for you.
Expense management software is crucial to any modern business. Automation software can streamline the process faster and more efficiently than ever before. Manual processes that take hours can now be done in minutes. Automation software is a powerful tool. Learning how to use it correctly is key to your success. Hire an IT professional to assist you in implementing this software.
In addition to software, you can use workflows to improve efficiency. If an expense report needs to go to two parties, make sure it goes to both at the same time. An efficient workflow eliminates downtime. It makes sure reports go where they need to.
Corporate credits cards can have limits imposed on them. Now, you don’t need to worry about overspending. Review the card expenses to see why they hit their limits. Use these expense management solutions to make your business run smoothly.
Curate a List of Vendors
Curating a list of vendors can net you significant savings. Using random vendors for different expenses gets expensive. The lack of consistency among several vendors makes saving difficult. To prevent this, curate a list of reputable vendors you have collaborated with. That reduces the time needed to analyze each new vendor you buy from. Not to mention, it makes expenses easier to audit.
Analyze Your Expenses
Guidelines are helpful, but you still need to examine your expenses. Set aside time to analyze all our expenses. Regular analysis lets you know what to cut and what to fund. See which employees are spending a lot. Vice versa, see if any employees seem to have expensive items. Check if they are actually using the corporate card.
Besides, analyzing your expenses can let you know what ventures are succeeding. If a type of product is selling more than any other, take note of it. You can use this expense data to make your business better.