Financial departments are the backbone of a running business. The more efficiently they are handled, the better the business operates. And even though it can be a time-consuming, complicated, taxing job if implemented with correct procedures expense management can drastically increase your company’s productivity and grant you complete control over the expenses incurred.
What Is Expense Management?
Expense management is a detailed process adopted by an organization that enables them to keep track of their company’s expenses, funds, approvals, and reimbursements to employees. Expenses generated within a company are extremely varied and can be summarized into the following categories;
1. Fixed Expenses: Fixed Expenses do not change throughout the entirety of the year and remain constant at a specifically designated cost. These types of expenses include salaries, insurance, and cost of rent.
2. Variable Expenses: These expenses are the complete opposite of fixed expenses and vary each month such as utility bills like water, electricity, and fuel for vehicular usage.
3. Intermittent Expenses: Intermittent expenses do not regularly incur and generate once every specific period of time often in large amounts. These expenses include repair costs, traveling to certain locations on business assignments, and software purchasing.
4. Discretionary Expenses: Discretionary expenses are costs that the company can survive without and aren’t as integral to the company’s performance. These expenses refer to financial company rewards for outstanding employee behavior, company lunches, and so on.
Manual vs Automated Methods of Expense Management
Expense management also establishes company policies and guidelines on the specifics of what and how much a company can spend in order to eliminate the threats of unauthorized payments and data errors. Expense management can either be accomplished via manual or automated methods.
The first method is the traditional process of a step-by-step procedure that involves the employee asking for approval on certain funds from a finance team or being reimbursed for certain expenses incurred from business assignments such as traveling to different locations or simple entertainment expenses. This method also involves a heavy amount of paperwork, receipts, and spreadsheets to keep track of and report company expenses.
The automated process, however, is a completely digital procedure that enables a much more efficient and quicker method of accumulating, submitting, and approving expense reports and reimbursing employees within far less time in comparison to manual expense management. The automated process ensures that a company is overseeing the expense management process at a flexible rate.
Why You Need Expense Management
A well-established expense management ensures your company visibly keeps track of expense reporting and avoids the risk of overspending. One of the core reasons behind a company’s bankruptcy is not being able to systematically oversee how much is being spent and running the risk of exceeding the given budget line. Through expense management, you can easily decrease if not entirely eliminate extreme cash outflows. You can also increase employee morale by reimbursing them in a timely manner which further increases the productivity of your company. You can also reduce the risk of fraud by applying automated methods of expense management which can easily detect false entries by notifying the finance team. This heavily reduces fraudulent entries made by employees trying to exploit the company’s finances.
At this point, you realize how important and crucial it is to establish a multilayered expense management system and Happay is just the right company to provide you with a flexible and versatile process needed to manage a company’s expenses and reduce financial threats to the day-to-day running operations of a business.