For successful and continued business growth, one of the most important factors to consider is effective spend management for yourself and your staff.
But how can you properly manage business expenses if you don’t truly understand what they are?
Can all expenses incurred in connection with a professional activity be considered legitimate? What can be classified as a business expense? How can expenses be optimized? And what are the most effective practices for controlling business expenses?
As a business manager, CFO, or project manager, you have probably regularly asked yourself these questions, especially if your teams are growing rapidly.
Indeed, the more the number of teams grows, the more a company’s expenses increase. As a result, the need to create an expense management process becomes paramount.
In this comprehensive guide to managing business expenses, we’ve got all your questions covered and much more.
What types of business expenses are there?
Business expenses can be classified within two main categories:
- Fixed expenses: Rent, office maintenance costs, personnel management costs, taxes and duties, transport costs (subscriptions to public transport), bank charges, etc.
- Variable costs: Logistics expenses, trainee and seasonal employee salaries, one-off and freelance service providers (subcontracting), purchase of stock (raw materials and others), etc.
How can financial management be improved within a company?
The effective management of business expenses is a key responsibility for CFOs within growing businesses.
Effective expense management is of prime importance, as is an ongoing interest in improving expense monitoring and control processes; both are a major challenge in terms of business survival.
Indeed, expense management based on well-defined levers will allow you to gain even more control over your budgets, scientifically evaluate your progress, avoid waste, and optimize both your own productivity and that of your teams.
Here are the steps to help you set up a tailor-made business expense management process.
Evaluate your expenses and reduce your business costs
When we talk of costs or charges, we use the word expenses. Business charges include:
- Rent and office maintenance costs
- Water and electricity charges
- Office supplies and computer equipment, and much more
In order to reduce your company expenses, try to identify those that can be eliminated.
For example: In recent times, due to the Covid-19 pandemic, remote working has become commonplace. If your productivity has increased, and your employees agree, you can consider switching to a permanent Work From Home model. This will eliminate rental charges completely.
Introduce an expense policy
A company expense policy covers the expense reimbursement regulations which must be adhered to.
The implementation of a business expense policy makes it possible to:
- Ensure that all employees follow the same process for managing their business expenses
- Collect data to develop accounting reports and analysis on business spending habits
- Centralize the expense management process and adjust regulations over time
Your expense policy should explicitly govern the terms and conditions for business expenses:
- What is the budget allocated to each type of business expense in accordance with the position of the employee incurring the expenses?
- What type of accommodation should be used (Airbnb, 5-star/3-star hotel, etc.)?
- What type of vehicles should be hired (BMW, Renault, etc.)?
- Who are your travel partners (agencies and other rental and accommodation establishments)? And so on…
Once you have finalized your expense policy, be sure to distribute it to all your employees. Collect their feedback and suggestions so that you can adapt it to their needs and make corrections if necessary.
It’s also important to enforce your expense policy once it has been implemented.
Opt for the dematerialization of your financial documents (paperless office)
This involves dematerializing documents such as invoices, receipts, financial reports, etc., and storing them in a virtual or digital format.
This results in space and cost savings as storage facilities will no longer be required.
Indeed, the dematerialization of your documents makes them much more accessible, which will make it easier for you to track expenses, as well as help you increase productivity.
Use professional payment cards
As part of their professional assignments, your employees will incur expenses.
Instead of asking them to cover these expenses with their own money, for subsequent reimbursement, you can use professional payment cards. These give employees predefined sums for business trips.
Today, professional payment cards, or corporate cards, have become the standard means for managing expenses within large companies.
It is advisable to provide a card to each employee on the road. This offers several advantages in terms of security and saving time:
- If one of the cards is lost or stolen, it can simply be blocked and replaced with the help of a spend management solution without affecting the work of other employees.
- It’s also much easier to track the expenses that each individual employee incurs on their card.
Why optimize business expense management?
Good financial management is reassuring in the face of market fluctuations and an unstable economy. This is especially true for small and medium-sized companies, which are most exposed to the fallout of economic crises. This is why it is very important to have control over your business expenses.
Regular monitoring of expenses means improved profitability
Regular and methodical monitoring of business expenses is not only crucial, but also favorable for your finances in the medium and long term.
Monthly or even daily monitoring of expenses will allow you to control your costs and ensure that you adhere to budget limits.
As a result, you could correct the gaps in your financial plans and adjust your spending habits so as not to exceed the pre-defined thresholds.
By having control over your expenses, you can even save money that could be allocated to other projects, departments, and investment funds.
By monitoring your expenses on a regular basis, you will be able to better manage the process of closing accounts at the end of the year, and reduce the stress associated with tax management.
Additionally, let’s not forget that continuous monitoring of business expenses will help you enormously in calculating your profitability.
Without effective organization and good management, you may end up with incomplete reports and lost receipts, which will make it even more difficult to calculate the profitability of your business.
It is very often underestimated just how time-consuming and sensitive the calculation of profitability is. Make your job easier by regularly monitoring your expenses and updating your balance sheets.
Ensure employee satisfaction
Employee expenses represent a large proportion of your company expenses.
And when your employees incur expenses while carrying out professional activities, it is imperative to:
- Track their expenditure to make sure they follow your expense policy.
- Pay them back as soon as possible.
This can only be accomplished if you track the expenses of your employees on a regular basis.
As you can see, tracking expenses is a very important process. It has a positive impact on workplace productivity and fulfillment, business profitability, and employee satisfaction.
Why Expensya is your go-to spend management software
We use automation and the latest technological advances, such as machine learning, artificial intelligence, and Cloud to make it possible to simplify the daily life of thousands of employees when it comes to their spend management. From expense reports to payment through business cards, to accounting, Expensya allows you to tailor the solution according to your specific needs and business activity while guaranteeing simplified, automated, and optimized end-to-end management.
About Expensya
Founded in 2014, Expensya is a solution that transforms spend management. Expensya users can manage and process any type of expense: online purchases, general costs, expense reports, remote work, Per Diems, mileage expenses, and more. Thanks to its across-the-board features and expertise, Expensya currently supports more than 5000 companies and provides a comprehensive solution to its users, for flawless end-to-end management of all business spends.
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