If you are running a business then you will be aware of expense management. Many organizations get a great loss in their business due to the lack of expense management because they do not consider it a significant factor in running a business efficiently. However, the fact is that managing expenses is one of the most significant things that businesses cannot ignore if they want to be successful.
What is expense management?Â
Companies have many things to manage. One of the basic things that should be managed properly is the expense. Expense management is the system of tracking, reporting, submitting, and processing the reimbursement of employees.
Employees may encounter some expenses, pay for them, and later claim reimbursement from the organization. These expenses include travel, software, service, customer support, office supplies, and all type of expenses related to the business. Expenses may vary depending on business but whether you have little expenses or many expenses, you need to record them if you want to be reimbursed.
Why expense management is significant for organizations?
Businesses need to manage their expense efficiently to run the business efficiently. Expense management enables the business to track their employee’s expenses and categorize them, which makes the reimbursement process easy and rapid.
It gives a system for maintaining and monitoring employees’ spending and eliminating the chance of fraudulent reimbursement claims. They help companies to access their cost and stock management efficiently. It is significant because it gives insights into overall financial health of an organization, highlights the level of the cost they need to generate revenue, which is the major objective of the company.
How companies can efficiently do expense management?Â
An organization can manage business expenses efficiently by following the way mentioned below:
- Establish expense management policyÂ
All the companies set their expense management policy and ensure to implement them for everyone in the company. By establishing the policy, you can set the limit of expenses that organizations or sub-organizations can use in a limited time.
- Making the expense management processÂ
You need to make an efficient expense management process such as set rules and regulations for expense reporting and reimbursement claims. You can use expense management to manage your company’s expenses efficiently.
- Report expense for reimbursementÂ
If any employee Claim expense reimbursement, they should be reported expenses. Employees should report expenses, attach all the receipts with the expense report, and give detail about where they spend their money.
- Issue corporate credit cards for routine purchasesÂ
If you want to manage the expense of your organization efficiently then you should issue corporate credit cards to employees for purchases. It helps you to record every transaction that they do for business purposes. It helps you to track where, how much your employee spends money
- Control expensesÂ
You should control your organization’s expenses to make good revenue. You should set a limit on the expense for the organization and set time. Set how much money an organization can spend for a specific time.
- Avoid unnecessary expensesÂ
If you want to generate revenue, then you should avoid unnecessary expenses, do not spend money on unnecessary things.
- Making a reimbursement systemÂ
You should have an automated system to check the legitimacy of reimbursement claims. Only make payment for reimbursement for approved expenses.
What type of expenses does an organization have to manage?Â
Following are the type of expenses that organizations need to manage:
- Travel and ExpenseÂ
In a globalized business, traveling is a traditional thing. Therefore, travel and expense (T&E) are crucial things to manage for an organization. If your employees spend their money on business travel, they need to submit a claim for reimbursement. Therefore, organizations should have a system to deal with reimbursement claims.
- Petty cashÂ
Sometimes, organizations and employees will experience expenses that are small enough to pay with cash such as office supplies, arranging a lunch for customers, giving change to a customer, arranging a party for staff, and other expenses. The organization set a specific amount as petty cash that should be managed correctly. All the transactions should be recorded.
- Periodic expenseÂ
This is the type of expense that does not occur regularly such as repair equipment, buying furniture and equipment for organization, license renewal, and other tech-related expenses. Such expenses should also be recorded for better expense management.
