In this post, we'll explore why ProSpend is a comprehensive alternative to FlexiPurchase and how it helps elevate your expense management practices.
7 Best Practices in Expense Management
Expense management best practices can enhance efficiency, reduce fraud and streamline processes. Check out these 7 best practices that we recommend.
It’s one thing to be able to do something; it’s another thing to be able to do it in the best way. In this blog, we discuss the best practices you can apply to your expense management to make it more productive.
Best Practices in Expense Management
Expense management is not just about following a specific set of processes; it’s also about following expense management best practices that make the job more efficient.
1. Have a policy with clear guidelines
It’s difficult to accomplish something when not everyone is on the same page. This is why you should implement an expense management policy for the whole organisation. Be sure that the policy outlines the following:
- Approvable expenses — What expenses are allowed and/or can be claimed for approval based on the government’s regulations and your company’s culture and budget?
- Unacceptable expenses — What are the expenses that the organisation won’t pay for? What’s not allowed should be just as clear as what’s allowed.
- Process — What are the step-by-step instructions for submitting expense claims?
- Deadlines — How soon should employees submit expenses?
Remember that both stakeholders and employees must be aligned with the policies to keep everyone on board.
2. Ensure timely submissions, approvals and reimbursements
In the world of finance, following accurate timelines is non-negotiable. Establish timeframes that both the company and the employees can agree on, and be sure that everyone strictly follows those timelines.
For example, employees must submit their expense claims on a certain day of the month (e.g., the 15th day of the month, the first Friday of the month, etc.) with complete information, receipts, notes, etc. Managers, on the other hand, must also review and approve reports promptly within a set timeline
That way, everyone follows the process and deadlines stated in the expense management policy.
3. Remember that accountability is key
Accountability is something we always hear in the finance industry—and for good reason! Your established policy and processes will only work when people are responsible and accountable for what they do.
For example, managers must know (and practise) the company’s expense policies and supervise their teams to ensure that everyone is following them.
4. Audit regularly
Timely and regular audits are the best way to avoid fraud. When you conduct expense management audits, you identify areas that need improvement and spot discrepancies that need your attention. Audits can also help you identify which items may be unnecessarily increasing costs.
You want to spot issues as early as possible, so we recommend doing regular audits instead of reviewing only at the end of the year.
5. Make the process simple
Expense management doesn’t have to be complicated. Make the process simple by streamlining it with a clear policy and expense management software that will make the work easier, quicker and more efficient for you.
6. Use company-issued cards instead of personal ones
When you issue company cards to your employees for work-related travel and other business expenses, you get to impose spending limits. This lets you know the exact amount of the refunds that will be processed while the employees are out for business.
We recommend using virtual cards for a more convenient process for both the employer and the employees.
7. Use an automated expense management software
An expense management software can speed up processes, flag any issues and generate reports without the hassle. It plays a pivotal role in digitally transforming your business spend management practices, allowing you to be more efficient and proactive.
Finance Issues That Can Be Solved by Implementing Expense Management Best Practices
The expense management tips and practices we mentioned above don’t just simplify your work; but also solve some finance issues that otherwise may be overlooked, missed or inaccurately recorded. These issues may include the following:
The lack of a clear policy leads to miscommunication between employees and employers. For example, if you don’t have a clear policy that outlines the unacceptable expenses, the employee may argue that it should be allowed, causing issues and unnecessary back and forth between the two parties.
2. Losses caused by human errors
Old-school expense management, which involves manual expense reporting, can lead to human errors that inevitably lead to losses. Examples of human errors include missing to hit that final zero in the figure that you’re typing or losing a business expense receipt!
With automation, you can be confident that data is properly recorded and analysed, and errors, if any, are properly flagged.
Expense management best practices such as the issuance of corporate cards, a clear expense policy and automated reports can increase visibility and promote a transparent culture within the company, thus reducing the risk of fraud.
The Role of CFOs in Driving Effective Expense Management Strategies
While both the employees and finance teams play an important role in expense management, CFOs, in particular, play a key role in digitally transforming expense management practices to drive better results. The CFO must establish the need and emphasise the benefits, which include:
1. Minimising fraud
With the right expense management solutions and practices, organisations can minimise fraud such as overstating business expenses, processing fraudulent records and other issues that can be avoided through proper policies and supervision.
2. Managing expenditures
Expense management best practices can manage cash flow efficiently and effectively because you get to see who spends on what and how much. You get to proactively control expenses to avoid any abuse of the system.
3. Developing more accurate forecasting
Proper processing and auditing can help the organisation accurately budget and forecast for the future, which is a helpful element both now and in the long run.
These expense management best practices improve not just internal processes and reports, but also external operations and the way your business deals with expenses.