One of the quickest ways a business can lose track of its financial health is not paying attention to expenses. When employees fail to track expenses properly, they may take more than their due or lose their rightfully-owed reimbursement. Luckily, many expense management mistakes are avoidable with the right policy.
Here are seven expense management mistakes you can sidestep on your next fiscal report.
Overlooking the benefits of expense management software
There’s scarcely a business problem out there that software doesn’t endeavor to fix, and expense management is no exception to the rule.
An expense management system increases levels of compliance, provides streamlined and customizable reports, allows employees to scan receipts for quicker turnaround, and much more.
Losing receipts is more difficult in the age of electronic commerce. However, if an employee fails to request a digital receipt, then the chance of them not filing it for reimbursement grows. Worse, a lost receipt can be forgotten, which leads to smaller budgets where the employee foots the bill.
Fail to get a receipt for a cash outlay
Cash is traceless for the most part. If an employee uses cash to pay for something, it can be challenging to nail down the exact dollar amount, particularly if there’s no transaction receipt. When that happens, the employee often loses out on proper reimbursement. It also means expenses that should be allocated to a client are not.
Mixing business with pleasure expenses
If you travel a lot for business, you likely have had to pay for a business expense personally. It might be best overlooked if it were just a few dollars. However, it’s harder to skip over if the cost is sizable, like buying dinner for a client.
On the other hand, misuse of the company credit card is also an issue where the business picks up the tab for personal items. Those kinds of expenditures are always a source of questioning during an audit.
Forget to note an expense
It is easy to find yourself sidetracked and forget to document a receipt during a busy day. While once or twice is nothing earth-shattering, that figure can grow quite large if it is a trend rather than a one-off incident. If it is pervasive throughout the company, it can become part of the corporate culture.
Mislabelling expenses is usually not an intentional act against the business. Nevertheless, this mistake can happen if the employee is busy. A labeling error will almost always show up in an audit.
When an employee fails to update a budget, decisions made from that point on until the error is caught and fixed are based on erroneous information. If the expenditure is large enough, it could hamstring a small business. It also can be a PR nightmare if the guilty party used public funds or the executive management didn’t know it was happening.
The only way to fight this neglect is constant diligence. Expense reports should be examined and compared to budget projections at least once a week. Reconciliation should occur at least once a month.
Business expenses are vital to helping a business grow, but if those expenses are mishandled, it can lead to dire financial consequences. A company should always insist on solid expense management and comprehensive documentation.