How to Recession-Proof Your Expense Policy
In times of economic prosperity, companies are focused on market growth, product roadmap expansions, and sales. However, when the economy slows, corporate leadership often turns their attention to business operations and how to safeguard the company. More often than not, expense policies and spending fall under scrutiny.
Regardless of what stage of the economic cycle we are in, keeping tabs on expenses and cash flow is essential. One of the best ways to understand and monitor business spending habits is to leverage expense management software.
Focus on Your Finances with Expense Management Software
Expense management software improves visibility into business spending by providing easy-to-use expense capture, seamless reports, automated approval flows, and timely insights.
As you likely realize, business expenses go far beyond costs related to corporate travel. For instance, if all or some of your team is remote, you will likely be reimbursing for basic office supplies, equipment to support business operations such as laptops, telecom equipment, and printers. In addition, many companies offer remote workers a monthly reimbursement to cover a portion of internet and telephone bills.
With an expense management tool, all of the items above can be accurately tracked through the use of billing codes—making analytics and reporting a breeze for accounting teams and actionable insights clear for leadership.
By monitoring your spend, you will also gain a much better understanding of non-payroll costs and ways you can cut needless expenses without impacting profits.
Adjusting Your Expense Policy in the Wake of a Recession
As companies tighten their purse strings, expense policies are also being adjusted. Non-payroll spending will typically fall into a few buckets — business operations (like cell phone bills or office supplies), food, beverage and entertainment, and program costs.
When it comes to employee spending, there are several ways to adjust your expense policy that will ensure efficient business operations while also making cost-conscious decisions. For instance, you can share a list of approved office items and set limits on certain types of purchases. Is there a $300 printer/copier on the market that offers the same features and functionality as the $750 version? Most likely, the answer is yes.
If your employees have a high food, beverage, and entertainment spend, you could implement guidelines that cap the price per person for catering. These adjustments will save your company a significant amount of money over time. If there is an upcoming business meeting or event that requires additional budget, make it a policy that the employee has to get it approved in advance. We have found that if an employee can spend under a certain (reasonable) amount and avoid approval cycles, they will often opt for the less expensive option.
Program costs are fees associated with campaign or initiative execution. As you take an introspective look at your business spend, you could set clear guidelines as to who is permitted to purchase goods and services, the level of signing authority managers have, and at what dollar amount additional approval is required. You may also set limits on the amount that is billed to corporate credit cards versus what items require a purchase order and more formal review policy.
Scrutinizing expenses and the associated policies is a great way to cut costs in a way that won’t hurt your business operations. Additionally, as you gain a firm grasp on non-payroll expenses, you will be able to identify and curb unnecessary spending while also having the funds available to pay for necessary expenses.
Adjusting Expense Policies to Support Remote Employees
Chances are that all, or at least some of your workforce is remote. If that is the case, it is important to understand trends and benchmarks related to spending policies for distributed workers—as there is a slightly different set of expenses that will come into play.
Above, we touched on items required to support daily business operations. An alternative to setting purchase limits for key items, another way to know exactly what is being spent to get employees up-and-running from home is to have go-to items that are sent to the employee based on their level and job description. Outside of laptops and printers, this could also include docking stations, and monitors.
However, many organizations today are upping the ante when it comes to reimbursable expenses. For instance, we’ve seen policies that reimburse for a certain dollar amount per month for gym memberships, stipends to cover internet and phone bills, and even a budgeted amount to cover home cleaning services. There is no right or wrong answer as to what you allow your employees to expense—it is ultimately based on your budget and the culture of your organization.
Communicating Expense Policy Changes to Employees
To achieve expense policy compliance you need to ensure changes are communicated to employees clearly and documented in an accessible location. As new employees are onboarded, determine if they will need a company credit card. If the answer is yes, require that they read and agree to usage guidelines and determine whether your expense management software can store the company card in their payment options to cut down on physical cards issued.
From an expense reporting perspective, be clear about what employees are permitted to spend money on and how it is to be billed (i.e. will you require an invoice, can the employee pay out of pocket and be reimbursed, or should it be charged to their company credit card).
Document changes to expense policies and send your team regular updates about the amendments. An expense policy wiki page is also a fantastic resource for your team to access. If you do a major overhaul, we suggest hosting a lunch and learn or company breakfast—virtually or in person—to share the changes and how it will impact employees. As part of the roll-out, consider including a Q&A session or an avenue for employees to seek additional clarification.
We truly believe that expense policy compliance is achievable, provided that the policy isn’t too rigid and leadership teams are open to making adjustments.
Gain Control of Your Company Spend
Tightening up your corporate spending policies and leveraging a business expense management software will help prepare your business to weather the ever-changing economy. If you lack insights into how budgets are being spent or are frustrated with volumes of static reports, it is time to consider expense management software. In addition to streamlining processes and improving compliance for employees, your accounting department and leadership team will enhance business operations and gain efficiency.
When you have an understanding of where your money is going, it is easier to make informed decisions for your business. We hope you found this post helpful. If you have questions about how to automate expense management, please let us know. The TravelBank team is on standby to help.