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Why Small Businesses Need Spend Controls For Expenses

Why Small Businesses Need Spend Controls For Expenses

Alex Roha

15 Nov 2022
4 minute read

When deciding how employees access company funds, not every person needs the same set of privileges. By choosing a modern expense management solution, small businesses can enable spending controls that adapt alongside a company’s growth.

Admins can tailor these spend parameters based on role, expense category, business context, or other dimensions within custom policy builders. By benchmarking these spend controls, employees become empowered to make business expenses, and finance leaders maintain control in a less time-consuming manner.

Advantages of Spend Controls

In a 2021 Navan survey of small business leaders, results found that only:

  • 12% flag out-of-policy transactions
  • 10% flag misuse of corporate cards
  • 21% don’t automate anything in their entire spend management process

As a small business expands, policies must become more agile due to the increased volume of expenses, the complexity of the organization’s growth, the necessity of transparency, and an increasing number of remote employees requiring team travel.

Below are a just a few examples of how spending controls can give small businesses peace of mind when its time for reconciliation and reimbursement:

  • Automated, real-time policy compliance monitoring and enforcement
  • Spend limits based on merchant categories or time (month/day)
  • Custom policy groups by departments, teams, cost centers, and entities
  • Enforced receipt requirement based on the defined transaction amount
  • Automatic approval/rejection/flagging workflow based on policy rules
  • Employee recourse for out-of-policy/personal spend

Avoiding Overspend

Take, for instance, a senior sales representative out for business travel in a new destination. They are instructed to take their client out to dinner during their trip. They are vaguely told, “somewhere nice, but don’t overdo it.” Two weeks later, accounting sees a bill for over $1,000 from a single dinner, leading compliance, managers, and finance to get involved.

Because they were never given a set per diem for their spending, and no boundaries were incorporated on their corporate card, there was nothing that could have stopped the transaction from being approved.

For employees, corporate cards are a means of freedom when traveling. The new level of spend control provides access to product subscriptions, handles general office needs, and even steps up in emergencies. And for finance leaders scaling small businesses, being able to view employee spending at a granular level while keeping expenses in compliance will strike a successful balance for policy and growth.

Preventing Expense Fraud

As much as companies would like to trust their employees, unfortunately, expense fraud and compliance violations are relatively common. In a study of 600 financial leaders by accounting software provider Beanworks, 61% of respondents reported their department had witnessed employee expense abuse.

Expense fraud can take many forms, from charging for expenses solely for personal use to billing for travel expenses that never actually materialized to seeking reimbursement for items that were never purchased. Colluding can also occur among multiple employees that bill separately for travel expenses, even though they traveled together.

Fraud can often occur simply because employees are unaware of their policy standards. By setting up automated policies in a spend management solution, finance leaders and small business owners no longer need to double-check the legitimacy of a receipt or worry that their teams are spending company money on unapproved items.

How Navan Leverages Smart Policy Controls

Just like the unique needs of each small business, not all spend management solutions are created equal.

Patreon, an artist-driven membership platform, chose Navan in 2022 over its’ competitors because of the technology’s depth of policy control built-in for visibility both horizontally and vertically.

"We can customize policy by level and department, and it can be role-specific. There are so many ways that [we] can instill policy controls by certain designations, which is how we would want to enforce custom rules,” said Crsytel Ryu, Patreon’s Senior Director of Financial Operations.

With Navan Expense, small businesses can define spending in whatever configuration works best for their company’s growth. For growing businesses, it’s crucial to find a software solution that is intuitive and quick to integrate, all while being affordable. Whether for everyday needs around the office or to set parameters for travel, Liquid cards provide an instant view into every swipe—physically or virtually.

Navan Expense also leverages AI spend auditing technology and internal controls to monitor for any indications of suspicious transactions. Thanks to policy controls that finance leaders can tailor to a granular level, Navan found customers can achieve up to a 90% reduction in out-of-policy spending—and 100% peace of mind.

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