As an entrepreneur, you must keep a sharp eye on expenses. After all, every buck you spend is one less buck you must reinvest in your company. However, controlling business expenses can be challenging, especially as your company grows.
There are clever ways to handle business expenses effectively and efficiently. Here are five steps to help you streamline your expense management process:
1. Implement A Cardless Payment System
Monthly payments are a massive part of business expenses. Whether you’re paying for utility bills, office supplies, or employee salaries, it all comes down to payments. These outgoing payments can significantly drain your cash flow if you’re not careful.
It’s no secret that cards are cumbersome and time-consuming to keep track of. They also require trips to the bank to withdraw cash, eating into valuable work time. On the other hand, cheques are easily lost and take days to clear. And if an employee misplaces one, you’ll have to issue a stop payment and wait for a new cheque to clear.
One way to streamline your payments is by implementing a cardless payment system like a virtual debit card. This digital payment method allows you to load funds onto a card and use them to make payments online or in-app. You can also set spending limits and track expenses in real-time, so you always know where your money is going. When the funds are depleted, you simply reload the card.
You can find virtual card providers like Airwallex that offer corporate cards with no monthly fees. These companies also offer expense management tools to help you track and categorize your expenses. This platform is beneficial, especially if you have staff from different countries making expenses in foreign currencies. As a result, you can manage your business’s expenditures all in one central place while getting real-time insights into cash flow.
2. Define What Expenses Are Eligible For Reimbursement
Since you’re footing the bill for business expenses, it’s essential to set clear guidelines on what is and isn’t eligible for reimbursement. This approach will help you avoid any surprises down the road and keep your employees accountable.
As mentioned, business expenses are any costs incurred in running your company. This includes things like travel, marketing materials, and team professional development. But there may be some specific expenses specific to your industry or company. For example, you may want to reimburse your staff for the cost of their meals if you’re a restaurant owner.
Once you’ve determined what expenses are eligible for reimbursement, put it in writing and ensure all your team members have access to the policy. That way, there’s no confusion about what’s covered and what isn’t, leading to fewer disputes in the long run.
3. Set Up Clear Policy
To effectively manage expenses, it’s best to set up a clear policy and procedure. This approach will help you in staying organized and avoid any surprises down the road.
Some things you may want to consider are:
- How will expenses be reported?
- Will employees submit paper receipts or track expenses electronically?
- Who is responsible for approving expenses?
- What are spending limits in place?
- What expenses are eligible for reimbursement?
- How will employees be reimbursed?
- When are expenses due?
Answering these questions will help you in developing a system that works for your business. It’s also good to review your policies periodically to ensure they’re still relevant. There’s nothing worse than dealing with inaccurate expense reports because your policies are out of date.
4. Create A Budget
Budgeting is essential in any business, but it’s especially critical for expenses. That’s because it can quickly get out of control if not managed properly.
When creating a budget for expenses, start by identifying your fixed and variable costs. Fixed costs are things like rent and salaries, which remain constant from month to month. However, variable costs fluctuate based on travel and marketing campaigns.
Once you know your fixed and variable costs, you can start to allocate your budget. This strategy will help you not overspend in any one area. It’s also best to build some flexibility or leeway into your budget. This method will give you room to adjust if unexpected expenses come up.
5. Establish Regular Audits And Controls
Even with a realistic budget and clear policies, expenses can still get out of control if not properly monitored. That’s why it’s crucial to establish regular audits and controls. This system will help you keep track and monitor spending and identify any areas where improvements can be made.
There are several ways to audit expenses. One option is to have an accounting expert on your team review the company’s expenditures regularly. This professional can identify discrepancies or questionable charges and flag them for further review and analysis. Another option is to utilize software that automatically flags unusual activity, which can be helpful if you don’t have the resources to do manual audits.
Automating some of your business processes will help you save time and prevent human errors.
Whichever method you use, make sure you establish a quick solution for resolving any issues that may arise. This way, you can take care of problems as they come up and avoid any major setbacks.
No doubt, managing expenses can be a challenge. It’s one of the things that’s easy to let slip through the cracks if you’re not careful.
By following the steps mentioned here, you’ll be well on your way to streamlining your process and keeping expenses under control.