Cash Control: Setting an Expense Policy


Companies and their employees thrive on structure. When they know their boundaries, they can operate more freely within them. That's why your employees need an expense policy.

Without a clearly written policy, your employees have to rely on guesswork and long approval processes. In short, they can't do their jobs quickly, efficiently, or consistently. Worse, you might find your business in a financial pickle when the expense reports start trickling in.

Create Per-Diem Boundaries
How much money should your employees spend per day? If you don't know, then your employees don’t know either. Communicate boundaries with a written expense policy that clearly outlines what expenses are acceptable and which aren’t. 

Your expense policy can not only set limits on overall spending, but also prevents spending on unauthorized items. Curtailing spend to specific vendors and establishments allows business owners to leverage relationships and get better pricing for the company.

A per-diem budget a perk universal to almost every organization, and the amount of the employees’ paychecks is irrelevant. MLB players draw average salaries that approach the $4 million mark, but they’re also famous for receiving $100.50 to spend on meals on days that they travel to play in other ballparks. 

Take Advantage of Controllable Costs
No business owner wants to hemorrhage money. The best way to prevent it is to focus your efforts on controllable costs. Employee expenses is just one significant example.

You know your business' budget and the constraints it places on operations. If employers allow employees to exceed their daily “allowances,” be prepared for the nasty reality when the expense reports start rolling in at the end of the month. There’s no quicker route to bankruptcy than negative cash flow.

Make Enforcement a Priority
If you don't have an expense policy now, you might face pushback (or blind indifference) after one is implemented. To get through this adjustment period, focus on enforcement. Don't just monitor employee spending — the employee perk of never having to dip into their personal finances again should smooth out a few wrinkles.

When you monitor employee spending in real time, you'll face fewer hurdles in the long run. Finance managers can call out mistakes and issues as they occur, which will encourage employees to spend more mindfully.

Build a Solid Foundation
The best expense policies are scalable and forward-thinking. For instance, you might create travel policies that require staying at particular hotels and using specific airlines so you and your employees can build rewards points. Similarly, you should use expense-reporting strategies that integrate with accounting software programs so you can manage the paperwork more easily.

Don't leave your business rooted in the Dark Ages. Plan for the future and use technology to your advantage. If your expense policy includes the use of tools like prepaid cards and digital expense reporting, you'll build a streamlined process that saves time instead of consuming it.

Write a detailed expense policy, and enforce it consistently. You'll see a decrease in expense abuse – companies report a savings of 25% — and fraud as well as improved cash-flow management. Plus, your workers will all play by the same rules, which means you can forecast cash flow more accurately.

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