10 Best Practices for Business Expense Management

Effective business expense management is essential for maintaining financial stability in any business environment. By implementing these best practices, organizations can optimize the use of resources, boost compliance, and improve their overall financial health. 

Let’s delve into 10 best practices that can help streamline your expense management process.

1. Automate Business Expense Management Processes

Automation is a key driver of efficiency in managing expenses. Automating processes can streamline reporting, reduce errors, and save valuable time for both employees and finance teams.

Tools such as expense management software and mobile apps allow for real-time expense tracking and automated receipt capture, which improves accuracy and speeds up the process overall.

2. Develop a Comprehensive Expense Policy

A well-defined expense policy is critical for guiding employee spending and maintaining alignment with the organization’s financial objectives. Your policy should be clear, easy to understand, and include specific guidelines on approvals, spending limits, and out-of-policy spending.

These policies help finance and accounting teams maintain control over spend while fostering a culture of financial responsibility among employees. To keep them relevant, the policies should be regularly reviewed and updated.

3. Emphasize Transparency and Accountability

Transparency in expense management is vital for building trust within an organization. Encouraging an open culture helps establish adherence to business expense policies and practices.

Fostering accountability at all levels can significantly reduce the risk of fraudulent activities. When employees understand the importance of transparency, they are more likely to act responsibly.

By incorporating an automated expense management platform in your organization, you can enhance transparency with real-time expense tracking. For example, the platform can automatically capture employees’ receipts — either by scanning physical receipts or pulling transaction details once the credit card is charged. This visibility into transactions cultivates a culture of accountability since every financial footprint is documented. 

4. Implement a User-Centric Expense Management Platform

Adopting a business expense management platform that focuses on the user experience is crucial for streamlining processes and enhancing the work of finance and accounting teams. 

Solutions like Navan prioritize intuitive design, which makes it easy for employees to submit expenses and for finance teams to manage approvals and tracking. 

A user-friendly interface reduces errors and improves compliance, as employees are more likely to engage with tools they find accessible and efficient. This approach fosters a seamless expense management experience, which ultimately benefits the entire organization.

5. Choose the Right Corporate Card

Corporate cards are a practical solution for managing employee spend, eliminating the need for out-of-pocket costs and lengthy reimbursement processes. However, not all corporate cards are created equal, and it can be challenging for companies to find the right solution.

To improve cash flow and employee adoption, companies should choose a corporate card that syncs seamlessly with an expense management system. The right corporate card can:

• Automatically categorize expenses
• Streamline the approval and expense reconciliation processes
• Provide visibility into spend
• Help enforce company policies

However, a common problem arises when companies want to adopt an expense management platform only to find they must also adopt the platform’s corporate card. 

6. Set Clear Reimbursement Timelines

Establishing and enforcing clear reimbursement timelines is critical for maintaining employee satisfaction and maintaining smooth financial operations. 

By defining deadlines for submitting expenses and processing reimbursements, you can minimize delays and avoid cash flow disruptions for employees.

Implementing a structured timeline also allows finance teams to plan more effectively and verify that the expenses are accounted for in a timely manner. 

Additionally, automation tools to send reminders and track submission dates can streamline this process, keeping employees and the finance department aligned.

7. Regularly Review and Analyze Expenses

Regular expense analysis is crucial for identifying trends and uncovering spending issues. By consistently reviewing expenses, organizations can detect anomalies, assess the effectiveness of their policies, and make necessary adjustments.

This continual review not only helps optimize resource allocation but also improves financial planning, keeping your organization agile and responsive.

With the right tracking and insight tools, you can access valuable information, such as spend data by category or department. These insights enable data-driven decision-making.

8. Implement Technology for Real-Time Expense Tracking

The rise of mobile apps and digital tools has transformed business expense management. In 2021, mobile apps accounted for 54% of expense report submissions, highlighting their importance in managing expenses on the go. 

Adopting real-time expense tracking technology improves accuracy and the user experience by helping companies:

• Gain a comprehensive view of transactions made with company funds, enabling enhanced financial forecasting
• Measure rates of compliance with company policies
• Monitor reimbursement processes in real time
• Understand employee spending patterns

For finance and accounting teams, simplifying the tracking process helps:

• Consolidate financial data more efficiently
• Prevent human errors due to manual tracking
• Expedite approval processes to maintain a streamlined workflow

9. Maintain Compliance with Tax Regulations

Compliance with tax regulations is a critical aspect of expense management. Organizations must make sure that all reimbursed expenses are tax-deductible and adhere to relevant regulatory requirements.

This process involves maintaining accurate records, implementing clear policies, and utilizing automation tools to streamline compliance processes. By doing so, your business will have the capability to reduce the risk of financial penalties and achieve better overall financial health.

Expense management solutions for businesses, such as Navan, allow for the capturing, tracking, and reporting of VAT, which creates an optimized opportunity for reclaiming up to 25% of business expenses. 

10. Foster a Culture of Financial Responsibility

Creating a culture of financial responsibility is essential for effective business expense management. By prioritizing expense management across the organization, from top executives to new employees, you can build a financially responsible workforce.

Encouraging transparency and accountability fosters trust and boosts compliance with company policies. When employees understand the impact of their spending on the organization, they are more likely to make thoughtful financial decisions.

Final Thoughts

Implementing these 10 best practices for business expense management can significantly improve your organization’s financial health and operational efficiency.

By leveraging technology, promoting transparency, and developing comprehensive policies, businesses can optimize resource utilization, reduce costs, and maintain compliance with regulatory requirements.

Staying current on emerging trends and adapting to new technologies is key to maintaining effective expense management practices. Embrace these strategies to navigate the complexities of modern finance successfully.

Ready to boost the way your business performs financially? Uncover the next generation of expense management tools with Navan. Request a demo now.