Expense management plays an integral role in the successful running of a business, as not only does it save time on financial reporting, it also helps businesses keep track of their costs. Managing expenses can be difficult for the average growing business – especially if the business has not implemented expense management strategy previously.
Below are a few expense management best practices to help businesses stay on track when it comes to sorting out their internal and external finances.
Issue Corporate Cards
Businesses with a large number of employees, or employees who need to be making purchases in the name of the business often may consider issuing credit or debit cards to employees for corporate purposes. This will help keep track of all employee expenses while also saving the hassle of filing for employee reimbursements. Corporate cards can be issued by banks or by independent fintech organisations which specialise in expense management, such as DiviPay.
In modern times, corporate cards are also transitioning into their virtual forms, and live in employees’ phones instead of their wallet. Virtual corporate cards may be more convenient for businesses to use, and can connect directly with expense management applications and software for easy access.
Create an Expense Policy
Businesses also need to regulate employee spending by implementing an expense and spending policy that everyone in the organisation has to follow. An expense policy should reflect a business’ budget and financial reality, and should also establish whether or not certain spendings are reimbursable for employees. The policy should also include when employees can apply for reimbursement, and how businesses can accept or reject their applications.
An expense policy should also dictate the responsibilities of an employee when making expenses. These include procedures surrounding how employees use corporate cards or accounts, and how they should record their expense transactions. Outlining these responsibilities in an expense policy is essential to ensuring your organisation remains uniform in how employees contribute to expense management.
Conduct Regular Audits for Fraud
Unfortunately, expense frauds – particularly fraudulent expense reimbursements – are a common occurrence in small sized to medium sized businesses. According to the Association of Certified Fraud Examiners, fraudulent expense reimbursements make up 20% of fraud reports in small businesses (businesses with under 100 employees) and 13% in larger businesses.
The most common fraudulent expense reimbursement activities businesses should look out for include:
- Overstated expenses
- Fictitious (made-up) expenses
- Multiple reimbursements for one expense
- Miscategorised expenses
The audit process can help businesses uncover expense frauds. Automated systems can flag any anomalies when analysing expense records and can help businesses crack down on fraudulent claims.
Expense management can be incredibly essential to guaranteeing the success of a business – however only if done right. As such, it is also important that businesses understand the best practises associated with expense management and implement them correctly into their own internal expense management systems. Using corporate cards, creating an expense policy, and conducting regular audits for fraud are three of the top best practises when it comes to expense management.
