Putting good expense reporting procedures in place is crucial for businesses of all sizes and at all stages of the business life cycle. Runaway costs can crush a business, and unpaid employee expenses can leave a bad taste in the mouths of workers, with easily avoidable, negative downstream effects. There are plenty of things you can do right now to make sure 2021 is the year you get a tighter handle on your costs. With that in mind, below is an expense reporting guide for your business to follow this year.
Invest in a Software
Expense reporting software is becoming increasingly common at businesses of all sizes as companies seek to streamline their expense management processes. From receipt scanning to expense revision and payment processing, digital expense management software helps companies stay on top of where and how people are spending money. It also provides employees with increased transparency with respect to how their claims are processed.
Another good reason to incorporate this software into your expense reporting is that it eliminates the need for employees to carry around and manage all of the various receipts they need to file. Receipts are easily lost or misplaced, and being able to upload expenses in real-time, on the go, makes life easier for those filing the expenses and those managing and paying them.
Set A Policy
Your expense reporting policy will make or break the ROI you see on your expenditures, so it is important to iron it out from the beginning and make sure all employees are aware of how it functions. Your policy should be easy to understand and unequivocal so people are not wondering what they can and can’t spend on while travelling, with clients or making improvements to how they do business and make the firm money. Make sure everyone has a copy of the policy, give people an opportunity to ask clarifying questions, have it available through a number of communication channels–including, perhaps, a mobile app–and you will dramatically cut down on disputes over expenses and time wasted sorting them out.
Clearly Define Acceptable Expenses
Business expenses have to be clearly defined to avoid arguments and runaway costs and the most effective way to minimize friction and control costs is to provide examples to people. These examples outline the behaviours and choices that you deem acceptable as well as ones you don’t. These could include the kinds of accommodations that are acceptable business expenses, entertainment options, restaurants, airlines and suppliers. If you see a lot of corporate travel–one of the most significant business expenses–it might be a good idea to utilize a corporate travel planner and exclusively book through them. There are also automated corporate travel tools that do the same thing.
It is important for employees to know that once they have logged an expense, it will be paid out in a timely fashion. Mobile applications and expense reporting software are great for this because claims can be reviewed and approved very quickly. These methods make even more sense in the new era of remote work, where people may be in different time zones or working in hybrid or remote arrangements that can make it difficult to coordinate expense management with payroll. Low-value approvals can also be automated, which can go a long way to creating a positive employee experience and mitigating bad blood.
Keep Track of ROI
As with any business-related expenses, the goal is to have each dollar spent making more than that one dollar. Making sure your expenses management policies and methods align with return on investment objectives is key. Here it is also important to consider the role of flexibility in expense management. Having too rigid an expense policy can be detrimental to an agile business. The kinds of expenses that must be incurred in order to grow a business can change based on a number of external and internal factors, so having a policy that can be amended when necessary is important too.
Keeping track of ROI ensures that your spending is always linked to profitability. It might make sense, for instance, to have hard caps on long-haul travel but to be more lenient, or at least allow for discussions to take place when it comes to expenses incurred in pursuit of high-value contracts.
Having good expense reporting measures in place is part of sound financial planning. Costs can quickly get out of control if you let everything under the sun be claimed as a business expense. Conversely, too much inflexibility can hamper your ability to increase costs in certain areas if something major is on the line. Keep the above expense reporting best practices in mind throughout the rest of 2021 and make sure every dollar spent is accounted for and is a strategic means to the ultimate end of increased growth and prosperity.