Business Expense Management: A Short Guide
Business expense management for businesses of all sizes is no easy feat. This is especially true for small-to-medium businesses (SMEs) that don’t always have sufficient administrative resources to perform this task.
Unlike large businesses, SME business owners don’t normally have financial teams to rely on. You’re often left to manage your own spreadsheets, receipts and invoices. On top of that, you also have to find ways to reduce expenses without compromising the quality of your product or service.
But even without big business funds at your disposal, there are still a number of ways you can streamline the small business expense management process.
What is Business Expense Management?
Business expense management refers to the process by which a business reimburses employees for money spent on work-related activities. Such expenses include travel, computer software, office supplies, equipment rental, education and training, and more.
Proper business expense management is vital. It allows you to carefully analyse spending and overhead and prepares you for tax time. It can also help you to identify unauthorised transactions and other fraudulent activity.
Why Managing Business Expenses is Important
In order to keep your business running smoothly, you need to make sure that it complies with government regulations and that your employees aren’t spending too much on non-work-related expenses.
Managing business expenses can help business owners improve their financial prospects over time and develop strong relationships with other business owners. Expense reporting can also keep tax bills down and improve the quality of future products by showing business owners where to redirect their spending, while at the same time helping them to maintain control of business operations.
Expenses that are improperly managed can severely damage your bottom line. To effectively manage expenses, you need to be clear about how much is being spent by whom and on what particular items. With no effective business expense management in place, your business risks becoming unsustainable.
If you want to stay on top of your budget and maintain healthy profit margins in the long term, then you need to be able to understand the costs involved when it comes to small business expense management.
The Business Expense Management Process
The process involves:
- Recording expenses: Employees show proof of purchase in order to claim reimbursement, including credit card statements, receipts and bills.
- Submitting expenses: Provide a report of total expenses incurred by the employee.
- Approval: Once an expense claim is submitted, it’s reviewed to ensure claims are true.
- Processing: Qualified expenses will be approved and forwarded to those responsible for financial matters within your team.
- Reimbursement: Once approved and credited to your business account, the reimbursement process begins.
- Bookkeeping: Expenses are then recorded for accounting and auditing once reimbursement is completed.
Business Expense Management Solutions
Traditionally, managing business expenses involved manual processes like sifting through paper receipts in a shoebox or desk drawer, or tracking expenses on a ledger or notepad, which could be time-consuming and left employers vulnerable to fraudulent activity.
But as technology has evolved over the past few decades, so, too, has business expense management. Now you can automate expense reports and simplify reimbursement processes through expense management software programs or apps.
Expense management software tools can eliminate the risk of human error, detect fraud, increase productivity in the workplace, easily integrate with other types of software, and provide a great amount of insight into your business finances.
Expense management software works by uploading invoice information to the system. Specifics are then extracted, and a report is generated within minutes, which is then verified for any inconsistencies. An expense management system keeps track of all employee business expenses through a database, and handles tasks by sending automated messages.
Bookkeeping programs with expense management features are commonly used by small businesses. Examples include Xero, Sage, Zoho, Intuit QuickBooks, MYOB and Reckon.
Cloud expense management software, in particular, helps small businesses who want a more affordable option when it comes to expense management software. Not only is cloud expense management software fast, intuitive and easy to learn, but it also offers better transparency, increased accessibility to data, allows colleagues to collaborate from any location, and is significantly more secure.
Expense management solutions are becoming more popular with fast-growing, tech-savvy businesses. A few examples include Elmo, Expensify and Dext.
Credit Card Expense Management
It can be difficult for business managers to control costs if expenses are spread across several different credit cards or bank accounts. By consolidating expense payments to a single company credit card, you can view your expenses on a single bank statement.
By developing different expense categories that suitably fit your small business and by recording and organising expenditures along the way, it’ll be easier to receive all the deductions your small business is entitled to and ease the workload for your accountant or bookkeeper.
However, having one business credit card has some pitfalls. Having separate cards for staff members improves tracking by knowing the expenses incurred by particular employees, and makes it easier for employees to purchase what they need.
With effective business credit card expense management, owners and authorised employees have properly categorised and tracked expenses. An effective business credit card expense management system will include individual credit card limits, expense monitoring and other tools to help track spending.
Corporate credit card expense management is often on a larger scale. Therefore, having corporate cards heightens the importance of having the right system in place to manage and track expenses.
Business travel and expense management can be challenging, especially for SMEs with limited accounting resources. However, having an effective business travel and expense management system can help you accurately determine your travel spend and the return on investment gained from business travel.
An innovative business credit card expense management solution
Archa business credit cards offer a simple solution for credit card expense management. By integrating with Xero, you can eliminate errors caused by manual data entry and save you time to focus on more important aspects of your business. One handy feature with Archa is the ability to easily capture and upload receipts into Xero on the go.
With Archa, you can easily issue employee cards to avoid reimbursements and card sharing. The Archa app makes it easy to set spending limits and gain real-time visibility of spending.