Businesses inherently incur sizable expenses in many areas of their operations – and while this is generally the case, they want to know that they’re optimizing the return on these investments (ROI). To do this, they need to keep track of where their money flows. Regarding both where you spend your money and how well you’re tracking your spending, expense management can significantly improve your ROI.
Expense management is essentially an organized method for processing expenses. It includes filing expense reports, issuing approvals, and reimbursing costs. Proper expense management goes beyond keeping records of employee and company expenses – it defines the policies and processes for managing and tracking spending at all times.
Below we look at some of the best practices for expense management that can lead to considerable improvements in your business ROI.
Automate Your Expense Management
Traditional paper-back expense reporting creates a ton of tedious, time-consuming work for employees and finance teams. Not only do employees spend hours filling out reports and gathering receipts, but managers also need to review and approve the requests, and the reimbursements need to be issued before they reach the employee’s accounts. And that is not considering any back-and-forth between the parties.
Implementing expense management software can simplify and speed up this process, turning days of processing time into just minutes. While such technology will require an initial investment, the return will outweigh the cost in many ways.
Manual expense management processes take valuable time out of your employees’ schedule, which they can use for finishing more pressing tasks. Repurposing this time can lead to boosts in productivity and increased earnings. The software will also define the scope for the entries and reject non-compliant claims, which means you will avoid paying for expensive errors and potentially fraudulent activities.
Clearly Define Your Expense Management Policy
Expense management software will typically require you to input the guidelines and limitations for expense reports, but even then – and especially without it – you should have a clear expense policy that informs and guides your employees in the process. If you expense your costs without having control over the nature and scope of those expenses, you might end up pouring money where there is no clear advantage or return.
An expense policy is an in-depth guide that should generally include the following details:
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Acceptable expenditures for reimbursement;
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Expense-related responsibilities;
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The process for filing expenses and reimbursement.
Clearly defining which expenses are allowed will require a spending strategy – which is ultimately the best way to ensure that you maximize your ROI. Depending on the nature of your business, you can determine what kind of expenditures are most likely to benefit your operations and make sure that your money is flowing in the right direction.
Adjust Your Policy in Favor of ROI
If you understand the value of certain expenses to your wider business goals, then you can think of applying a flexible expense policy that encourages business growth. While having a strictly defined expense policy can protect you against unintentional spending, adding a layer of flexibility can improve your ROI rates.
You can do this by having employees submit claims with the business purpose of their spending – such as client meetings, marketing events, or support visits. Managers and finance teams can then weigh the costs against the planned income associated with the expense. For example, higher travel costs in certain cases may exceed your standard accepted limit, but if the sales deal at stake will bring in higher gains, it may deliver excellent ROI.
Monitor Your Expenses Regularly
A solid expense management system will provide a detailed and conclusive overview of your spending and how the trends change over time. If you want to optimize your ROI, you should evaluate if your current spending patterns yield the intended results and how you can shift your spending to reflect a better outcome.
Companies constantly make decisions about how to best utilize their resources – including people and time management – and expenses should be no exception. If your strategy team determines that your current expenses don’t yield high enough returns, it’s time to switch up your spending plan.
Final Words
Businesses looking to optimize their operations and improve their ROI should start by accurately keeping track of their spending. If you want to implement an organized expense management system that will ultimately improve your business ROI, you should adopt the following practices:
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Automate your expense management;
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Clearly define your expense management policy;
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Adjust your policy in favor of ROI;
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Monitor your expenses regularly.
From the smallest startup to the largest corporation, implementing best practices when it comes to business expenses can have a tremendous effect on the productivity, revenue, and ultimately, success of the business.
