Summary: Lack of oversight, inefficient policy enforcement, not using data and analysis, and keeping processes manual are some reasons why expenses can be a drag on your organization’s finances.
Employee-initiated expenses though are very necessary for the functioning of the firm, can be a huge drag on the company’s finances. One of the major reasons this is allowed to happen is that organizations don’t give adequate importance to the function. They also follow some practices which let expenses drag profitability down. In this post, we will see some of these and how to remedy these:
Lack of policy and enforcement
Having a sound expense policy and enforcing it to the fullest are sure ways to make expense management efficient and productive. It will streamline all the tasks and ensure that processing is being done by the right people in the right timeframe. However, many organizations don’t even have a sound and comprehensive expense policy, let alone enforcement mechanism.
This is a sure recipe for disaster. Without a policy, many of the other tasks get delayed or even derailed. Policy is the glue that holds your expense management together. So ensure that your policy is in place and working.
Lack of oversight
Another reason expenses can become a drag on expenses is the lack of proper oversight mechanism. When employees are spending company money, someone has to account for all of it and someone has to approve the use of the money. Then there should be someone who ensures that everything that is happening is above board. Without oversight, there is no saying where money is being spent and how many bills are inflated. For example, your employee might claim $200 for a $50 meal with clients, but if you don’t have proper oversight, this will never come out and you will continue to lose money to undesirable practices.
Also, it is a good idea to have oversight in multiple levels so that there can be no corruption, which might happen if controls are centralized.
Data and analytics
If oversight helps in its own way, data analytics work together to improve the process and provide comprehensive insights into expense reporting so that the process can be improved. Taking the same example as above, if an employee spends more than he or she should, how will anyone know if data is not collected and analyzed? How will anyone know if yearly budgets are helping or being overrun if data is not available on spend? Therefore, you need to have the right data collection and analysis mechanisms in place.
Also, analytics need to be accessible to everyone or they will lose their use. Just analyzing processes without sharing results with the pertinent stakeholders amounts to nothing. Everyone needs to be aware of everything so that their jobs could become that much easier. Also, since expense management is dynamic and new things always come into the picture, it would be nice if employees can create their own analytics sets and perform their analyses. Expense software does all this and lets people make data-driven decisions.
Lastly, this is the age of digitization and automation. Still using manual processes or automation in places here and there is no use anymore. Your competitors will far outrun you by using automation themselves. Whether it is human resource management or expense management, automation can play a huge role in controlling costs and making processes effective and efficient for everyone. Therefore, switch from manual processes to software that helps you manage expenses. You will see the ROI in process efficiency and employee productivity.