The art of managing your employees’ expenses
What kind of discipline is “expense management” actually? Well, the term refers to the process of handling and controlling employee-initiated business expenses. If you check out Wikipedia, it’s also roughly how the term is explained here.
All types of businesses have these kinds of costs, obviously with variation in terms of volume and types of expenses. In other words, all businesses have a requirement, to a varying degree, for managing employee expenses. In addition, there are also a few basic legal principles related to bookkeeping and accounting that a business needs to comply with, if the costs are to be carried on to the debit side in the books. Obviously, I’m talking documentation requirements towards receipts that needs to be stored for the auditors.
Read on and get the overview as well as a couple of tips on how to get a proper grip around the expense process.
Types of expenses
Some employees hold very few business-related expenses during a year. Others, on the contrary, have numerous expenses on a weekly basis. This is typically applicable for employees with frequent travel activity or regular customer and client visits, where costs for transportation and food often emerge as a necessity for the employee to carry out his or her job. The classic large post is therefore often travel expenses.
However, often we also see that more stationary based employees, to an increased extent, hold expenses, that can benefit from being handled through a clearly defined process. This could for example apply to employees in the marketing department, who’s using credit cards to buy software, ads and content elements (like graphics and stock photos) on a subscription basis.
The above is just a few examples, because basically, the expense management discipline is about keeping track on and getting insight into ALL the expenses that your employees create when they do their daily jobs.
Process, process, process
Process and workflow are the two subjects that we constantly missionize at Acubiz. These make up the critical foundation that’s needed to get to the point, where you really master the expense management discipline. Process is about all the tasks involved from registering expenses to approval, controlling and accounting. Policies and rules around expenses, that your organization might or might not have defined, is also a part of the process.
If your ambition is to achieve the black belt in the discipline, then you need to start with the process. Map how you work today and draw up how you want to work tomorrow. It’s usually a good idea to get qualified input on this part.
Every organisation has some sort of process for managing employee-initiated expenses. It’s just a question whether the process is well defined and well implemented. It’s also a question whether it’s analogue and manual or digital and automated. At the same time, it isn’t unimportant what tools you’ve got in place to support the process. There are still many businesses that solve the tasks around expenses manually or pseudo-digital. Let me be clear, there’s several of challenges related to this.
Digitizing the process around employee expenses and the related tasks is a no-brainer. The process is highly fit for digitization. The most notable benefit is massive time savings, that will come in handy for both the employees/users, the managers/approvers, the finance department and the business in general. This creates a solid foundation for raising productivity. A digital travel expense solution will also provide increased control and insight into the spend patterns in your organisation. You will also secure a higher level of compliance towards company policies and rules related to expenses.
On the other hand, your business might already have digitized the process – either fully or partly. However, this doesn’t necessarily mean that your organization master the art of managing expenses to full extent. There are many tools out there that only provide limited functionality and isn’t founded in a solid process understanding. It can for example be tools supplied by credit card providers or tools that comes along with your enterprise resource planning – or salary system.
Make sure that you uncover the market thoroughly before you decide on a tool.
Why should you put an effort into the expense management process?
Sure, your business already has some sort of a process related to expenses. Then you think, “it works how we do things today…” or “it probably doesn’t yield that much if we do something about it…”. Sorry, but I must stop you here. Fact is that you can harvest significant benefits, if you lead your organization to be best in class in this discipline.
One thing is the time savings that both users and the finance department will achieve. Another thing is the data that will be at your disposal. It will help you gain much more insight into the organizations spending behaviour. In addition, it’ll also allow you to influence and change your employees spending patterns through effective control mechanisms.
Many suppliers within the dominant expense categories often work with dynamic price regulations to maximize profit. Look at a category like petrol and gasoline. A few days ago, at a gas station off the highway, I refuelled my car with diesel at DKK 8,72 per litre. Shortly thereafter I passed a gas station on the highway where the price was DKK 10,89 per litre. That’s almost a 25 % difference! Hotel rates is another example where big fluctuation is seen. Obviously, many organizations sign business agreements with vendors in these categories, but that doesn’t equal lowest prices compared to the daily rates across the market. At Acubiz, we praise the principle that goes like this, “spend company money the same way as if they were your own”. This means, that employees must have knowledge about the various agreements in
What if you could obtain such a deep insight into your business’ spend categories, that you easily can benchmark against actual price levels in the market? And what if you could steer your users according to this knowledge? Or maybe even better, what if you could bring this knowledge to the table, next time you or your procurement manager is negotiating fuel –, hotel – or other supplier agreements?
So, why should you invest in streamlining your employee expense process? Well it’s all about common sense!
Lars de Nully
CEO & Founder