Best Practices for Expense Management
The two most important factors for companies to be successful with expense management are keeping a close eye on business expenses to determine where and how certain costs may be reduced, and the automation of expense tracking and reporting.
Tips for Controlling Expenses
When starting a new business, owners are well aware of every dollar being spent. However, as that business scales and grows, it becomes more challenging to monitor expenses and control costs. Below are some best practices to follow to help businesses manage spending more efficiently, and reduce costs where possible, all of which can positively impact any company's bottom line.
- Consolidate and Negotiate Better Pricing. Businesses work regularly with many different vendors for various services. Combining services and working directly through one vendor can help businesses negotiate better discounts. For instance, consolidate advertising and marketing services through one agency, instead of two separate agencies. Perhaps there is one vendor which provides all the office equipment and supplies your business needs, instead of working through multiple vendors.
- Review Vendor Contracts Regularly. Reviewing all vendors on a yearly or bi-yearly basis allows business owners and managers to put out requests for proposals (RFPs) for competing vendors to bid on your company’s business. If you are happy with your current vendor, alerting them that your company is accepting other bids as a standard practice, can encourage that vendor to provide better pricing for the next contract period. Also, regularly reviewing other bids and proposals provides a benchmark to compare against your current vendor contracts.
- Train Staff on Negotiation Techniques. Providing employees with negotiation training, or material on how to negotiate effectively, can significantly reduce variable expenses and increase cash flow. Some businesses even have an employee rewards program in place, which provides incentives for, recognizes, and compensates employees who are able to successfully negotiate discounts with vendors.
- Turn Fixed Expenses into Variable Expenses. Variable expenses allow for more flexibility and can be increased or decreased based on your company's needs and cash flow. Examples of switching a fixed cost to a variable expense include renting equipment instead of buying, incorporating performance-based compensation in place of fixed payments, and including an option to renew in all contracts on a short-term basis, instead of being locked into a contractual obligation for the long-term.
- Set an Example on Fiscal Responsibility. The manner in which business owners and senior executives spend company funds influences the fiscal culture of the business. While first-class travel and luxury company cars may sound appealing, it can send the wrong message to your employees. You want your staff to exercise fiscal responsibility with their expenses, so it’s essential for senior management to set a positive example with their spending.
- Little Costs Can Add Up. There are many small costs which when added together can quickly add up to big expenses. This is why it's important to consistently review small expenditures such as possible mistakes on invoices (overcharges, missing discounts, etc.), getting rid of unnecessary subscriptions, not using HVAC (heating & air conditioning) systems when the office is unoccupied, or not choosing overnight shipping and first class postage when it’s not necessary. It’s important to communicate these practices to your staff as well, so they can also be aware of how they can save the company a lot of money in the long run.
Automated Expense Tracking and Reporting
The manner in which companies track and record expenses plays a crucial role in expense management. Business owners and financial executives need to understand the company's past and current costs when planning for the future. Being able to gather expense data effectively and productively is a requirement to achieve successful growth and ultimately, increase the company’s bottom line.
Recording expenses by hand can be time-consuming and invite many opportunities for error. Receipts are challenging to read, get lost, double-entry is common, and employees will often file their expenses in an untimely manner. This why an automated expense system, which all of your employees have access to, can be the ideal solution for successful expense management.
Everlance is the #1 rated app for capturing receipts, car mileage and business expenses while offering easy-to-read data and reports when needed at the push of a button. Everlance Teams provides a specialized service which includes expense automation, including record-keeping & management for your entire staff. Businesses that implement an expense monitoring solution, such as Everlance, not only save their employees and finance department hundreds of hours of time, but it also ensures accuracy in expense reporting.
Benefits of Using an Expense Tracking App
Below are some of the top benefits of using an automated expense tracking tool for your employees.
- Improves Bottom Line. Having the ability to review expense data at any time, helps companies identify spending trends and it how effects profits. Recognizing where costs can be reduced is critical. For instance, if one of your sales staff is over-spending on a lower-profit client, it’s easy to see that a change in spending would be necessary in this case.
- Extremely Helpful if Audited. As employees can automatically enter expenses into the system and take digital images of receipts, it eliminates the guesswork, potential for errors, and messiness which often come with paper receipts and manual reporting. Everlance is 100% IRS-compliant so if you're using Everlance Teams to track mileage & other expenses for your entire team you have the peace of mind in knowing that your records are safe and accurate.
- Improves Reimbursement Efficiency. Streamlining employee expense reporting and reimbursements is more efficient when expenses are recorded electronically and in real time. As employees enter their expenses into the system, it can be integrated with the company’s payroll system so employees can receive their reimbursements quickly in their next paycheck, or as a separate direct deposit into their bank account.
- Employees Spend Their Time More Wisely. You want your employees to be spending time on what you hired them to do, whether they are working in the office or on the road. It’s a huge hassle for staff to manually keep track of car mileage and paper receipts, and then spend their time working on expense reports. The ability to conveniently upload expenses on their mobile phone and have mileage automatically recorded saves them the burden of admin work, which takes their time away from profit-producing tasks.
- Helps Employees Stay within Expense Limits. When employees are able to upload expenses as they go with access to expense data and reporting, it allows them to monitor total spend compared to any pre-set limits. This will enable them to foresee if they may go over an expense budget and can work with their supervisors to find a solution beforehand.
When companies make expense management a top priority, it helps ensure that every dollar is being spent wisely. The best ways to do this are by closely monitoring expenses – big and small - at all times to identify opportunities where money can be saved. Going hand-in-hand with this practice is to also implement an employee expense reporting tool, such as Everlance Teams, to ensure accurate and instant tracking and reporting of all expenses.