If you want to save money for a new car, you don't create a budget after you've spend the money. Instead, you carefully plan out exactly how much money you’ll need to allocate towards your monthly nut, and how much you can afford to put away for your new ride.
Employers don't think they have many options to traditional expense reporting process. For decades, employees have fronted business related costs, saved receipts, and turned in their expense reports. Consequently, employers can't retroactively change the amount owed and the business has to swallow the cost. This can lead to serious cash flow distress.
Nix the Reimbursements
You can't control, track or forecast budgets in without a clear expense policy. Cohesive, well run companies anticipate spend in advance, and prepare their employees with the ability to make purchases without chasing approvals. A prepaid expense debit card eliminates reimbursements, as employees never have to lay out their own money to purchase a business related expense. Also, since company administrators are pre-loading the card, there are no surprises.
Identifying trends in the way employees spend money allows corporations to anticipate expenses by the month, quarter, or year. When finance managers don't have to micro-manage expense reports and spend hours logging reimbursements, he or she has time to analyze the data, and recommend spend that will grow the company. Reimbursements are counterintuitive to scaling a business simply because there is less time to do so.
The owner of an events company, for example, might implement a proactive expense reporting system that adheres to an enforced expense policy. As part of this system, specific vendors are pre-authorized, and the planners in that company can only hire from this select group. Purchases can be made on the spot, without having to first get approval, saving time and respecting deadlines. Company cash flow is protected and employees are enabled to spend, offering peace of mind.
Since our hypothetical events company uses so many vendors and outsourced talent, an updated expense reporting system will allow business owners to compare how much they are spending between vendors in a specific category, such as caterers. While there are many variables, a web-based expense reporting platform easily allows finance managers to gain corporate learning on their business expenses.
Identify Problem Areas
Each month your employees put in a reimbursement form for their cellphone bill. As a typical business expense, the company pays it. However, you may eventually notice that some of your employees' cell phone bills are twice as high as others. In a proactive environment, a finance manager would make a recommendation to standardize a specific carrier across the entire company, taking advantage of corporate discounts.
You might also find that some employees spend too much on meals, travel, or client entertainment. An enforced expense policy would set a company-wide expectation on how much money is permissible to be spent for these necessary business expenditures.
If you wait until the end of the quarter to review expense reports for your company, you can't make changes to accommodate the budget. Instead, you're chasing cash around until the end of the year.
A better option is to track spending in real time. Which stores, vendors, and suppliers do your employees use? Armed with that information, you can make adjustments in advance of future spending. Are there regular expenses that you can anticipate and auto-fill cards each day, week or month to meet that charge? Plan ahead and anticipate the charge.
Reactive, reimbursement-based expense systems are antiquated systems that don’t provide any added value to your business. Expense management tools keep control over employee expenses and ensure your business stays in the black.
To learn more about the pros and cons of different expense management solutions, please download our Expense Management Guide.
The PEX Visa Prepaid Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The Bancorp Bank; Member FDIC.