Tracking your business expenses is not deemed to be the most glamorous of tasks but is undoubtedly one of the most important. To squeeze the most out of every $ spent, your business should create a formalised business expense policy, transparent for all, and combine it with a robust, purpose built, expense management platform. This article will provide guidance for businesses looking to tighten up their policies to improve cash management and ensure that no colleague ever winces at the mention of “expenses” ever again.
The concept of formal expense management has been around since at least the 1400’s, when the Father of Modern Accounting, Luca Pacioli first described the system of double-entry bookkeeping.
The world’s oldest business was Kongo Gumi, a Japanese construction firm established in 578AD and liquidated in 2006. It’s safe to say that the concept of exchanging goods and services for a cost and the tracking of such costs, predates the 6th century. Given the protracted and rich history of expense management, it is no surprise the archaic residue of relics of the past are still present in today’s ‘modern’ world.
The first step in bringing your business expenses process into the 21st century, is to understand what is already in place and what the key pain points are. Using post-it notes to map out the steps in the existing expense process is helpful for visualising areas for reducing friction. Take some time to speak to colleagues who engage in processing business expenses regularly; if they could wave a magic wand and change one thing, what would it be? Often the answer to seemingly complex problems lies with the people you are least likely to ask.
The first step in effectively tracking business expenses is to design a policy that is simple, covers all bases and is relevant to your current company size and culture. The intentional fusion of clear expense policies with a business credit card or business charge card positively influences how your employees spend. You gain control while spenders have the flexibility to operate within their parameters. All staff are aware of what they can spend and there is fairness for all.
To set expectations and eliminate grey areas, it is best to have an easily accessible guide that is only ever a few clicks away. Below is a starting point for those who are looking to formalise business expense tracking for the first time.
The market is awash with expense management systems and it can be a daunting task to find the right solution. Make note of your must haves and nice to haves and use that to steer your decision. Here are some factors you should consider.
Now that you have determined the policies surrounding company spending, it would make sense to choose a software that enforces those business expenses policies for you, even when you’re not there. Prioritise systems that allow you to set limits, choose merchants, and allocate budgets to certain employees, teams or projects.
In the age of global business, few businesses have the luxury of operating in their native currency alone. It’s important to ensure there are no hidden foreign transaction fees associated with the card you choose.
The biggest pro of a virtual card is that it simply can’t be stolen. You can issue unlimited cards to your colleagues that expire after one use which means that you are less susceptible to fraud. You no longer have to wait 5-7 business days for a card, you can issue cards on the spot.
The ability to automatically categorise and match particular merchants will mean that your month end will be a breeze. You will spend less time on transactional bookkeeping and more time on high value tasks.
When employees are paying out of pocket, you forgo the merchant benefits associated with some expense management platforms. Familiarise yourself with the rewards partners offered by the expense management solutions. You could potentially save thousands of dollars on subscription costs.
Once you have designed the policy and implemented a system to enforce that policy, the hard work is done. Expense policies will transform over time and they should be constantly reviewed and adapted to suit your firm’s needs.