Managing employee expenses and expenditures can be complex, time-consuming, and tedious, posing significant challenges for your finance department. Fortunately, there are many ways to make this process less difficult. At its core, controlling employee expenses and expenditures is a strategic matter. When it comes to business expenses, you have three main needs:
Monitoring and controlling the company's operational costs.
Conducting analytical accounting of expenses.
Collecting all invoices and supporting documents.
Do these three things well, and you'll be on your way to a healthy spending culture.
So, what is the best way to monitor and control employee expenses and expenditures? How can you provide the flexibility employees need to go out into the world while ensuring the security and safety of company funds? Here's what you need to know in this article.
What is Expense and Employee Expenditure Management?
Expense and employee expenditure management is a systematic approach to processing, paying, and reviewing expenses initiated by employees. These expenses typically include costs for:
Travel
Uniforms/Clothing
Entertainment
Office Supplies
Education and Training
Meals
Other business-related employee expenses
The primary goal of expense and employee expenditure management is to control, monitor, and report company expenses efficiently and accurately.
Key Components of Expense and Employee Expenditure Management
Tracking:
Monitoring employee expenses and expenditures as they occur to ensure they are within company policy and budget.
Approval:
Reviewing and approving employee expenses to ensure their accuracy and business relevance.
Reimbursement:
Ensuring employees are promptly reimbursed for incidental expenses.
In managing expenses and employee expenditures, it's also important to be aware of the five different "personas" of expenses and how they affect your expense process.
These categories help design expense policies and monitoring systems to address specific types of spending, enhancing overall management.
Tips for Controlling Employee Expenses and Expenditures
Create Your Expense and Employee Expenditure Management Plan
The worst way to manage company spending is to handle it sporadically, which is typical for very small companies. Initially, it feels like you don't need a strategy because the amounts spent are so small, and the CEO or office manager handles all the money anyway.
However, how should employees spend, on what, and what is their spending limit? Controlling your company's expense policy requires:
Keeping it simple, clear, and concise.
Avoiding writing a legal or academic paper – make it friendly.
Including real-world examples of good and bad company spending.
Avoiding listing every possible expense; guidelines are better than long lists.
Considering ways to automate steps – more on this soon.
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Implement Clear Spending Processes
You can motivate employees to control their spending by following a systematic and comprehensive expense and employee expenditure management process. A clear and detailed process benefits employees as much as it does management.
Once your policy is ready, you need to address the processes. Business spending involves more than just budgeting and granting funds to your team. Modern expense management solutions guide your team members through the entire spending process – from approval to payment to receipt.
When implementing an expense and employee expenditure management process, ensure you look for ways to make it as quick and easy as possible for employees to follow. For example, you can provide employees with pre-filled forms, including automatic claims for necessary supporting documents.
Set Budgets for Each Employee Expense Category
One effective way to control employee expenses and expenditures is to implement a detailed expense policy. This includes setting a maximum budget limit for each expense category in advance: business trips, hotel stays, restaurant bills, equipment and supplies purchases, etc.
For all employee expenses, you should specify the amount each employee can incur and inform them that they will not be reimbursed beyond this limit. Some amounts or types of expenses may be pre-approved, while anything outside this requires explicit manager approval.
Provide Appropriate Payment Methods
To be truly effective in controlling employee expenses and expenditures, the best option is to give them a dedicated payment method, which is where business expense cards come in.
Using expense cards, you can preload them with a pre-determined amount for a wide range of incurred expenses: restaurants, fuel, hotels, etc.
The second option: virtual credit cards. This is the ideal solution for online expenses, such as booking a hotel room, renting a property or car, buying train or flight tickets, and is also perfect for software subscriptions and digital ads.
These cards combine flexibility and security. Employees can spend as if they have their company credit card, but managers and finance teams can set specific limits for each card and know exactly what the employee spent at any moment.
What’s not a good option? Using the company credit card every time an employee needs to make a payment. This not only poses a problem but also exposes your company to credit card fraud risk. Not great!
Digitize Receipt Retrieval
Using the company credit card every time an employee needs to make a payment is not only problematic but also exposes your company to the risk of credit card fraud.
Because no matter how diligent your employees are, they will forget or lose receipts from time to time. This means a lot of back-and-forth work with the finance team to explain themselves and find payment proofs.
When a team member pays for something, they need to keep the receipt, a straightforward concept, but it leads to endless problems for finance and accounting teams.
The simplest way is a receipt scanning application. Employees pay for something and immediately take a picture of their receipt upon receiving it.
Centralize Subscription Monitoring
There's no data entry for finance teams, and the number of lost receipts becomes negligible. Among paying for keywords on Google Adwords for the marketing department, Salesforce for sales, and Heroku or AWS for technical teams, monitoring employee subscriptions can be challenging.
Another spending issue causing problems is subscriptions. We love them because modern SaaS tools make life easier for everyone. But keeping track of every payment made by all your teams feels like a spinning wheel.
Among paying for keywords on Google Adwords for the marketing department, Salesforce for sales, and Heroku or AWS for technical teams, monitoring employee subscriptions can be challenging.
We mentioned virtual cards above, which are the perfect solution for your spending problems. These allow you to create a unique, recurring card that will be charged every month (or year).
Track Expense Report Fraud
It’s not pleasant to talk about, but the chances of expense report fraud are higher than you think. According to one report, 85% of employees admitted to lying about expense claims, and 10% falsify information "all the time."
These aren’t all malicious lies; sometimes, people fabricate details they believe are accurate because they no longer have the information they need.
It’s not pleasant to talk about, but the chances of expense report fraud are higher than you think. According to one report, 85% of employees admitted to lying about expense claims, and 10% falsify information "all the time."
These aren’t all malicious lies; sometimes, people fabricate details they believe are accurate because they no longer have the information they need.
Digitize and Automate Your Processes
Which of your processes takes the most time and is the least productive? Identify them, go digital, and dematerialize them. Instead, focus on efficient tools for receipt retrieval, purchase request management, or even real-time expense processing.
Automating and digitizing your processes will help you see better results, allow your team to work faster, and save time for more important tasks.
Managing employee expenses and expenditures is about finding the right balance between control and agility so everyone’s interests can be served. Employees should be able to perform their work flexibly and comfortably, while you should have clear and detailed control over company spending.
Consider the eight key tips above and think about which options might be suitable for you and your team.
How DocSuite HR System Plays a Role
The DocSuite HR system plays a crucial role in controlling employee expenses and expenditures by providing a means to manage HR operations comprehensively. It can effectively and accurately track expenses related to employees such as salaries, allowances, bonuses, medical expenses, travel, training, and more. This system also facilitates expense approval and verification processes, offering comprehensive reports that aid in making appropriate administrative decisions regarding expenses.
Key Features of the System:
Expense Tracking:
DocSuite HR allows tracking of all employee-related expenses, including salaries, allowances, bonuses, medical expenses, travel, and training.
Operations Management:
The system provides an integrated means of managing HR operations effectively and accurately.
Approval and Verification:
The system simplifies approval and verification processes for various expenses, ensuring compliance and transparency.
Comprehensive Reports:
The system offers comprehensive reports that help in making appropriate administrative decisions regarding expenses and expenditures based on available data.