Chief Financial Officers are predominantly responsible for managing business expenses, but everyone is responsible for effective financial management. Everyone is accountable, from high-ranking executives down to employees that use something as simple as a fuel card. Unfortunately, expense management is a rocky ride in most small to mid-sized businesses and even within larger companies.To regulate finances, you may try to enforce expense management rules but micromanaging each department proves to be challenging. Here are some effective expense management tips that you can consider to optimize this business operations aspect.
Gather expense data
The key to most business operation dilemmas is gathering insights regarding potential or ongoing problems. If expense management is a potential or ongoing problem in your company, the starting point should be gathering data. Take a step back and assess what cost management policies and oversight hierarchy has been established. Find out which departments are the highest spenders and document the type of expenditure involved. For example, dynamic departments like I.T support might require off-property office space for remote employees to work. Gather those details since you can use this information to find more affordable office spaces in Washington DC or other convenient locations. As you gather the data, set up systems to autonomously collect insights as time goes on. In the long run, these systems will pay off by being helpful if expense management policies need to be reviewed in the future.
Improve expense reporting practices
Improving expense reporting and forecasting within each department will go a long way toward effective cost management. Employees that do not instantly report any expenses cause discrepancies that might need to be rectified after quarterly audits. If an employee goes on a work trip and does not submit expense reports, invoices, or receipts in due time, reporting will be inaccurate. Without financial documentation, those expenses might be questioned as fraudulent withdrawals or expenses. To mitigate problems emanating from poor reporting, make each manager, supervisor, and team lead accountable for accurate expense reports. Before closing a quarter, assign managers, supervisors, and team leaders the task of auditing all expenses from their workgroup. That could optimize expense management from the ground up to the highest levels of corporate governance.
Establish efficient expense management policies
To effectively optimize expense management, clear policies need to be established. The policies employees follow must be comprehensive and cover all expense-related matters. For example, the policy must detail how equipment is requisitioned, including the oversight approval process. Other points that you must clarify on this policy are the steps and forms that need to be filled out for work trips to be approved. Instead of giving free rein to all employees going on work trips, you must control the related costs. There are various other policies you might want to institute, depending on the organizational requirements of your company. Use the gathered data to see critical points that need addressing and document it on the expense management policies. Ensure that all accountable stakeholders fully understand these policies and enforce them amongst their subordinates.
Implement expense management tools
Expense management tools can improve how your company manages costs incurred. Some cost management tech tools allow companies to monitor and track recurring costs making it easier to forecast costs. Over the years, these software tools indicate how recurring costs have increased annually. The annual increment can give CFOs a rough idea of how much to forecast for the following annum or quarter. If the majority of expenses are from travel, there are budgeting, forecasting, and reporting tool that you can implement. Some tools have live flight prices and indicate discounted flights with documented quotations. Depending on the tool in use, you can integrate travel expense tools with budgeting and financial reporting applications. It is much more convenient to get expense management tools that integrate well with other finance software systems you are currently using.
Mitigate financial fraud
There are different types of expense fraud done by employees due to poor management policies. Without the proper oversight, policies, and accountability, employees might use company credit and fuel cards for personal benefit. Even worse, some employees might even fraudulently generate invoices to get reimbursements. Mitigate this type of financial fraud by implementing good internal controls within the company. For example, no one person should be able to file a requisition, approve it and disburse the funds. Instead, mitigate this type of fraud by having different people involved in expense disbursement, especially on large requisitions.