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How to Control Employee Expenses




Managing employee expenses can be time-consuming, tedious and hassling for your finance department. Many start-ups and smaller companies are under the impression that their CFO or CEO can manually check each expense and continue to do so as the company grows. Of course, this is folly.


For one, it would take too much time. Financial teams are already swamped with work such as reconciliation, which is made even more wearisome without powerful reconciliation automation solutions such as CrushErrors. Furthermore, employees would have to wait too long for their spendings to be processed.


Even larger companies don’t always adequately control employee expenses. Employees lose receipts or don’t know which expenses are permitted or what the budget even is.


To help companies remain on top of things, we’ve compiled 4 key steps to controlling staff expenses.


How to Control Employee Spending


At its core, controlling spending is about more than setting allowable expenses for employees. It is a matter of strategy. When it comes to how to control business expenses, you have three main objectives:


  • Collecting invoices & supporting documents

  • Monitoring & controlling operational costs

  • Conducting analytical accounting of expenses

Once you start doing these three, you’ll be well on your way to a healthy employee spending culture.



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1. Set Clear Policies


There’s a reason “Failing to plan is planning to fail” is a cliché.


Many small companies and start-ups, especially during early stages, do not attempt to properly manage company spending, let alone employee spending. They can feel like the amounts to spend are too small to bother with.


However, at some point, all those lost invoices will add up, and your team will grow, and you’ll be scrabbling for a way to manage expenses.


Any well-formed expense policy will clearly state what employees are allowed to spend on, how much they are allowed to spend, and how they are allowed to spend.


With clear guidelines, employees will understand that they may not be reimbursed if they go beyond what they are permitted.


Your expense policy should specify:


  • The kinds of expenses employees are permitted to claim

  • Spending limits for expense categories

  • Circumstances that disqualify or qualify claims

While you should remind your employees that they will be held accountable to their expenses, do bear in mind that spending limits should be practical and flexible (within reason) as the situation calls for.


Overly strict budgets can be stressful for employees to stick to and can even distract them from more important things.


Here are a few do’s and don’ts for your employee spending policy:


  • Do keep it simple, concise and clear

  • Don’t list every possible expense – instead, use guidelines

  • Do include other teams in the process – a good spending policy will make sense to everyone, not just the CFO or controller

  • Do keep it friendly – writing a legal paper will do you little good

  • Do include real-world examples of appropriate employee spending

  • Do automate your steps

2. Automate & Digitize the Expense Process


Automating and digitizing your expense process basically means getting rid of paper receipts and Excel sheets.


For example, when an employee gets an invoice or receipt for office supplies, they can take a photo of it and upload it to the relevant platform.


Data extraction technology can automatically recognize the document’s information and send it to the dashboard, where it can be approved by a manager.


After approval, the data is sent to the accounting software of the company, where the transaction can be managed.


If you find this method to be particularly useful, you might also want to read about streamlining the credit card reconciliation process.


3. Tracking Expense Report Fraud


Unfortunately, many employees lie on expense claims. Some even submit false information frequently.


It is important to remember that these are not all malicious falsehoods. For instance, some employees may fabricate details that they believe are true, because they no longer have access to the information they require.


However, fraud should be a concern, particularly for controllers and their teams. An effective way to prevent fraud is to rid yourself of expense reports. They are easy to falsify and time consuming. Instead, consider opting for agile and flexible payment solutions.


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4. Centralized Subscription Monitoring


Subscriptions can be a truly headache-inducing spending problem. Oh, they are useful – there’s a reason everyone uses them.


However, between paying for AWS, Google AdWords, Salesforce, and more, it can become increasingly difficult to monitor subscriptions. Virtual cards can be a good antidote to subscription spending woes. They let you create a recurring card that is drawn from every month or year.


Every payment has a listed reason, the correct accounting code, and the manager’s details. Reconciliation these payments is virtually automatic.


It’s important to centralize all this. You should ensure that every team uses the same payment method and process for their subscriptions.


Conclusion


Managing employee spending is all about finding the right balance between agility and control to best serve the interests of the company. You need to provide a clear and concise spending policy, and your employees need to be able to work with convenience and flexibility.


With the tips above, you will be able to better control employee expenses. And of course, part of managing expenses is reconciliation and anti-fraud assurance.


NextGen Accounting offers credit card reconciliation services, bank reconciliation services, reconciliation automation, financial consulting, financial reporting, and audit and anti-fraud assurance. Our services are specially tailored to firms with vast amounts of data that are extremely difficult to reconcile.


To give you the fastest and most accurate reconciliation, we use our patented software CrushErrors, which you can also obtain as a product if you’d rather conduct reconciliations in-house.


NextGen Accounting’s management team has decades of experience and includes former executives of Barclays Bank, Bank of America, and ICBC. Contact us today for reconciliation solutions or book a free demo if you’d like to get CrushErrors!

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