Keys to optimizing company spending policy

Ensure a good business expense policy is one of the most ambitious challenges for a financial director.

This is a true performance factor. And its control and good optimization make it possible to limit profitability losses and identify the expenses that generate value for the company. Therefore, the digitalization of the financial department is also one of the important steps to take advantage of the full potential of optimizing expense management.

In this article, we'll look at the types of expenses and the challenges of managing them properly. Next, we'll show you the steps to optimize expense tracking.

What are business expenses?

Definition of business expenses

To operate at full capacity and generate volume of business, a company needs to make a whole series of expenses, more or less high and regular.

Within it, the financial director is usually responsible for managing the budget. Making long or short term forecasts, budgets and checking that everything is in order.

Types of expenses in companies

There are two types of expenses: fixed expenses and variable expenses.

This is a list with examples of fixed expenses:

• Employee salaries and associated contributions.
• Office rent and maintenance costs.
• Taxes and fees.
• Maintenance of machinery and work equipment.
• Catering expenses (company restaurant, food vouchers or packed lunches).
• Transportation expenses (company cars, public transport, etc.).

This is a list with examples of variable expenses:

• Purchases linked to customer demand (raw materials or finished products for resale).
• Operational costs related to production (electricity, water, gas...).
• The costs of transporting goods and logistics.
• Packaging costs.
• Variable salaries (temporary workers, trainees, work and service contracts, etc.).

🔹 Note: There are also mixed expenses, which contain a fixed part and a variable part. For example, the salary of a salesperson falls into this category, with one part of the salary being fixed, and the other variable depending on the sales made and the achievement of their objectives.

The challenges of good management of expenses in the company

Gain in financial strength

A company that knows and controls its expenses perfectly will be better equipped to face the dangers of the market and the economy in general.

This allows you to better anticipate accumulating cash reserves and with a good business expense policy to allow him to take control of the situation.

Optimize profitability

In these times of crisis, controlling expenses means above all maintaining control of your profitability.

By eliminating unnecessary expenses, you can either accumulate cash reserves or invest the saved costs in items of expenditure with greater added value.

Facilitate lending opportunities

Good expense management is a guarantee of seriousness for external partners, especially for banks or investors.

In addition, if you have a hard time acquiring a loan, you will have a better chance of obtaining it by showing serious and effective expense management, which will undoubtedly allow you to pay your debts.

Ensure employee satisfaction and well-being

Since part of the company's expenses are employee expenses, better management by the company will undoubtedly have an impact on them.

For example, they will be able to get their expenses reimbursed more quickly.

This will give them a good image of the company they work for, which will have a positive impact on their loyalty and productivity.

How can I ensure that expenses are properly controlled?

Take stock of expenses

Having a clear and accurate view of your spending is the first step toward good control.

This inventory has a very specific objective:

• Identify non-essential expenses.
• Identify the expenses that generate value.

Thanks to this identification, you can start a process of reducing costs, depending on the needs of your organization.

➡️ Here are some questions to ask yourself to reduce your expenses:

• Is your office space still adequate for your workforce? Can you rent a smaller space to save money?
• Do you use all the software you pay for each month? Is there a comprehensive tool to reduce costs or a competitor with better rates?
• Do employees need to sleep in 4* hotels, or are 3* hotels enough to travel? Is it possible to lower the ceiling on restaurant expenses while maintaining satisfaction?

Define a business expense policy

All the rules relating to the reimbursement of professional expenses constitute a comprehensive expense policy, but what is their purpose?

It harmonizes reimbursement processes, centralizes all data and facilitates subsequent analysis. It's a kind of guide to spending well in the company.

These are the types of rules that can be established:

• Assign a budget to each type of expense
• Set a limit for each type of expense
• Designing fluid and clear processes for everyone

Once written, make sure it's shared with everyone and that everyone understands it.

Replace expense reports with business bank cards

Managing expense reports, especially in paper format, can be a cumbersome and time-consuming task for both the company and the employees because:

• You have to advance your expenses, sometimes at a high cost
• Refund times can be long
• The risk of losing receipts may result in them not being reimbursed later
• The risk of accounting errors
• The risk of fraud with false expense reports

Business bank cards can overcome many of these problems. They are nominative cards, assigned to each employee.

The company maintains control of the budget since it can for each card:

• Set the days and times of use
• Set a maximum spending limit
• Control expenses more easily on a daily basis

As for employees, they gain autonomy, they no longer have to advance expenses and wait to be reimbursed

Digitize all expense management

“Companies with high digital maturity get 3 times more benefits and grow 4.5 times faster than others.”
OECD (2019)

La digital transformation of companies is very strategic, and it is even more so since the health crisis of 2020, which forced companies to telework 100% overnight.

Finance departments that were not yet digitized had to adapt quickly and well.

The digitalization of the Finance Department is achieved through several levers:

• Digitization of documents and invoices
• Process automation and accounting
• Using artificial intelligence to make more accurate forecasts

Digital tools

Take advantage of the use of digital tools and services to help you optimize your company's expenses.

There are several sections with which you can digitize and optimize these expenses. From more specific tools aimed at business travel management like Vyootrip, to other more generalists oriented to expense management Of all kinds like Okticket or Expensya.

Do your own research and see the potential that these tools can have to optimize your company's spending policy, and give you the mechanisms to facilitate all processes.

‍