3 ways to better manage your business expenses
Business expense management helps companies optimize, track, and monitor the purchases their employees make. Make it easier with the right process and software.
Managing expenses across hundreds (or even thousands) of employees is a full-time priority for a business. Every business, from small business owners and startups to large, established brands spend a considerable amount of time and money processing and tracking expenses. The average company processes 51,000 reports a year, and spends as much as 3,000 chasing down exceptions.
With business needs accelerating in the post-lockdown period, the need for better spend management has never been greater. Controlling travel management, remote business expenditures, and routine supply chain costs can positively impact revenue and growth over time.
Today we’ll look at the basics of business expense management, address ways for companies to meet rising need for better controls, and show how technology can streamline and optimize the process.
What is business expense management?
Business expense management is a system or process of controlling or guiding purchases initiated by company employees. Managing these costs refers to both facilitating the process of tracking and paying these expenses, as well as reducing their impact on revenue. Managing business expenses through corporate policy and auditing can improve cash efficiency for your business.
How business expense management can help you avoid maverick spend
Maverick spending refers to any expenditures that happen outside of a formal business process. While employee expense reports may happen ad hoc (for example, expenses incurred by field sales reps during business travel), they aren’t considered maverick spend unless they go unmonitored or unregulated.
Strong business expense management and overall budgetary controls can reduce or eliminate maverick spending through corporate cards or spending reimbursement.
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4 tips to better manage your employees’ business spending
Process and clarity are the most effective tools in curbing tail spend. By outlining and systematizing your expensing practices, you give staff the guidance they need to operate autonomously while reducing the manual data entry and investigative work required of your AP team. Here are three easy ways to manage business spending without adding more tasks or hours in the day:
Set and document guidelines
Setting reasonable and effective budgetary controls around expenses is the prime way to curb tail spend in your organization. By codifying the spending expectations for employee expenses, you provide necessary guidance for teams.
Common business expenses that benefit from documented expense policies include:
- Meal and incidental expense reimbursement.
- Airline and hotel travel expense.
- Spot buying limits for department heads.
- Software purchasing and approval process.
- Endpoint device costs and security.
- Currencies exchange and related expenses..
By providing a structured expense management process, you can also fine-tune budgeting for this spending category and monitor spending throughout the year.
Audit expenses regularly
Monitoring expenses regularly is the only way to catch issues like maverick spending and Ness categorized expense purchases.
These audits should occur for both corporate card use and reimbursable expense accounts. Though these audits take time, they can surface issues before they spiral out of control and result in unnecessary costs. Expense report software can automate the audit process and relieve the burdens on accounts payable for spend management.
Look at corporate card alternatives
Corporate cards are notoriously difficult to audit and control. While corporate cards have presented the best option for providing flexibility for decades, newer methods of administering expense programs have emerged.
For large-scale expense programs that involve dozens or hundreds of billing owners, consider an alternative such as expense tracking software, procurement cards, etc. Procurement cards offer the same flexibility as a corporate credit card while offering more dynamic budgetary controls and automated options. Expense management software can make it easier for your finance team to keep track of real-time spending
For indirect procurement expenses such as spot buys, supply ordering, for software implementations, consider using a marketplace tool or platform that provides curated access to negotiated vendors and options.
Automation — both in your expense management platform and your AP accounting software — reduces inefficiencies and closes the gaps where maverick and unregulated spending occurs. By providing the best expense functionality, you reduce overall tail spend while offering flexibility for billing owners.
Likewise, by automating the accounting processes around your business expenses, you can enforce expense guidelines and surface spending issues automatically without requiring manual audits that cost time and money for your AP teams.
For any automation you choose, be sure to look for a solution that offers intuitive, user-friendly UI with the ability to perform software integrations. The best platforms will “talk” to your other major platforms: Bookkeeping (e.g. Quickbooks), ERP, communications, etc. An expense tracker that offers receipt scanning is another plus for automating expenses with software solutions.
How better business expense management can improve your compliance program
Establishing better expense management protocols has a natural secondary benefit: lowered risk. By establishing good vendor management practices, working with a shortlist of high-quality suppliers, and automating the audit process, occurrences of procurement risk are greatly reduced.
Procurement management and third-party risk are a major concern for organizations of all sizes but are more likely to occur in larger organizations, especially those with insufficient regulatory controls. Since third-party risk and liability cost businesses billions of dollars — over $42B in 2020 before the surge in remote work — prioritizing expense data and supplier risk management is an important objective to meet.
3 tips for managing your software spend
Software is one of the biggest categories of business spending in most organizations. It’s also the most vulnerable to visibility challenges and waste. Here are three ways to ensure your software spending serves your staff without bloating the budget.
Establish strategic procurement
Strategic procurement in business refers to techniques and practices that improve the process and costs of getting supplies and software. Strategic procurement helps to control maverick spending practices and takes advantage of potential volume pricing and favorable contract terms. By negotiating effectively with a consolidated list of suppliers, organizations can build considerable cost savings that scale as they add more employees and licenses.
Negotiate for total cost
Sometimes, the bottom line savings on software isn’t the best metric for evaluating the success of a deal. Look at other factors in the cost of implementing and using the software. Consider factors of the deal such as:
- Usage limits or overage fees
- Early termination costs
- Volume discount parameters
- 3rd party integration needs (e.g. Zapier)
- Training requirements for onboarding
- Dedicated developer time and training
While the cost per license may be low, total cost and business impact for implementation should always be a priority when negotiating software.
Auto-renewing subscriptions can sneak up on even the most organized teams. You can create enough time to commit to thorough evaluation and negotiation by automating the renewal evaluation process. Automation also creates a workflow to eliminate approval workflow bottlenecks. This allows you to maintain your tech stack with only the software tools that serve best, without ending up with orphaned apps or underutilized licenses.
How Vendr helps manage your business expenses and improves your bottom line
By keeping a careful eye on the categories and processes that most impact your bottom line results, companies can realize cost savings while reducing the labor burden of managing employee expenses.
Vendr helps address one of the most critical spend categories, offering a next-generation expense management solution for purchasing software. By offering software management tools as part of their overall expense management system, we help clients save up to 25% when they buy SaaS software.
Looking for more? Learn how we help consolidate your tech stack, perform a free savings analysis, and identify buying process challenges all before you even become a customer with our self-guided tour of our SaaS buying approach.