There’s an old saying, “you have to spend money to make money,” and every small business knows this. However, what the old saying leaves out is you also need to keep track of the money spent; a task some entrepreneurs and their staff can find daunting. But with a well-made, comprehensive expense management process, keeping track of your business expenses can be a no-hassle part of your company’s everyday routine.
What is an Expense Management Process and Why should I Make One?
An expense management process, like the name suggests, is a system designed to organize how you and your employees process expense reports, expense approvals and employee reimbursements. The process can help track the financial health of your business, identify ways you can save money, and spot risks. The process can also help improve employee trust and satisfaction by reducing the time it takes to get paid and reimburse them for out-of-pocket expenses, such as those incurred during business trips. It also helps you keep detailed expense records; a must for anyone looking for tax benefits.
The Basics, The Challenges, The Options
The general outline many businesses use for an employee expense management process is as follows:
- Employees submit reports of their business expenses.
- Managers (or designated recipients) review the reports, verifying they’re for legitimate expenses that can be reimbursed and validate them.
- Employee expense reimbursements are processed and then distributed.
- Expense records and receipts are filed and stored for any future review or external audits.
While this process sounds straightforward, like many things in life, details are essential. Your business needs a clear travel and expense policy, or employees may have a hard time knowing what they should and shouldn’t put on their expense reports. If your approval workflow is inefficient, it may take longer to validate a report. Reimbursements may get delayed, which may frustrate employees waiting to get reimbursement.
Traditionally, expense records and receipts are kept on paper or spreadsheets like Excel. However, this traditional method requires manually entering and verifying all the information, a time consuming, laborious process that runs the risk of accounting errors and even fraud. Many companies now use automated expense software to reduce the risks of miscalculating expenses and fraudulent reports. They’re also useful for streamlining receipt tracking, speeding up reimbursement, customizing report approval workflows, enforcing expense policies and storing receipts on a cloud server.
5 Tips for Managing Employee Expenses
Whatever method you decide to use, there are several ways to ensure your business quickly and efficiently manages its expenses:
- When creating an expense management policy, make sure it outlines for your employees what is and isn’t an approved business expense.
- Provide your employees with an easy way to submit expense reports, such as the automated software mentioned above.
- Have your managers review and provide feedback on expense reports or provide feedback yourself.
- Set clear timeframes for submitting expense reports, validating reports and distributing reimbursement.
- Regularly audit your process for efficiency and risks of errors and fraud.
Let Payroll Vault Help You with Your Employee Expenses
As a payroll service provider, Payroll Vault has HR solutions which can help businesses like yours create the best expense management process for its needs. Payroll Vault offers a policy library to help you write your expense policy. Its document customizing can help make expense reporting easier for employees and ensure you get all the critical information you need for auditing. Payroll Vault’s employee handbook tools can also help create instructions for employees on how and when to submit their expense reports.
Find out more about how Payroll Vault Lakewood can help you with your employee business expenses by getting a quote today or call us for more information at this number (303) 763-1857.