In today’s fast-paced, both virtual and real world, starting and managing an organization remains a challenging task. Businesses can open bank accounts and complete company forms online, but daily activities are not supported. When it comes to invoicing, payroll, and bookkeeping, small business owners wear many hats. Online transactions are convenient, but managing and tracking financial flow is challenging.
5 expense management strategies for every CFO
1. Evaluate your fixed expense policy and adopt a more flexible strategy
Simply because that’s how it’s always been done, several organizations adopt minutely comprehensive spending management rules that cover hundreds of pages and specify what is and isn’t permissible. In contrast, this inflexible structure may be detrimental in actual commercial situations. Depending on the circumstances of the travel, dynamic cost management strategies, which evaluate the need for spending in the first place, allow for more flexibility. For instance, a meal at a pricey restaurant could seem extravagant, but it might be justified if the meeting is with a high-revenue client and results in a profitable outcome for your company.
Latest Read: A Closer Look At Integrated Document Management And Accounts Payable Software
2. Ask “why” instead than “how much?”
Because of a constant focus on cost reduction without taking into account the impact on revenue potential, expenses management initiatives frequently lose their effectiveness. When this cost-saving suggestion is passed on to line managers, things often go wrong. The general consensus is that managers, who have a deeper grasp of their employees’ spending motivations, will make the best choices for cost containment. While somewhat true, moving decision-making down the chain of command can frequently result in less-than-ideal outcomes, such as poor decision-making or the postponement of crucial investments.
3. Integrating cost and travel management
Business travel is one of a company’s most expensive spending charges. That significantly adds to the issue encountered by CFOs without full visibility into their workers’ travel intentions. For finance teams, processing endless expenditure claims takes time, and employing paper-based procedures gives lots of opportunities for oversight and error. Moreover, it enables the seamless linking of previously isolated accounting, human resources, and revenue data with travel and spending data. Real-time information on trip cost vs. income helps CFOs who already use these cutting-edge solutions make better decisions across the board.
4. Make sure the data inputs are high-quality and enhance business.
Making timely judgements about strategic spending management will always be challenging due to a lack of proper data gathering and, consequently, visibility of spend. There is no substitute for data when it comes to managing spending across your entire company. Fundamentally, rather than only resolving the past, CFOs must be able to forecast and shape future behaviors and patterns. Also, they will be able to gain this useful knowledge that can improve their company’s performance with access to the appropriate data in real-time. CFOs may estimate expense management costs by switching to a real-time strategy, which prevents them from being hit with a large number of expense claims at the end of the fiscal year and, as a result, enables better budgeting up front.
5. Integrate continuous learning with on-demand data.
Management of expenses is an ongoing process. It should always be checked and refreshed. You need real-time spend analytics to accomplish this. How can you take corrective action, if necessary, if you can’t see what expenditures have already occurred, will occur, or are anticipated to be incurred?
Latest Read: 10 Of The Best Stock Market Podcasts
Leading Fintech Companies in Spend/Expense Management
In the past 5-7 years, there has been an increase in the number of businesses implementing programs in this specialized area of business banking. The expansion of software companies into the banking industry (like Emburse) on the one hand, and the addition of expense management features by banking providers on the other (e.g. Brex launching Empower). The magnitude of the B2B payments market (at roughly $25T in the U.S.), of which company spends cards comprise nearly 5%, can be partly blamed for this behavior.
Fintechs within the industry is competing for different market niches (ranging from solopreneurs to mid-market and enterprise firms). Another distinguishing feature is that some providers work in tandem with banks and other financial institutions rather than going head-to-head with them. This can be advantageous when it comes to lending relationships (in which licensing and capital are needed). Following is a short list of prominent figures in this field:
Airbase — provides several bank, ledger, and workflow connections;
Zact — The platform is divided into numerous applications that offer stand-alone goods/features (like bill payment) or travel services;
Emburse — With more than 12 million users in 120+ nations, this fintech company offers solution sets for businesses of all sizes, from microbusinesses to enterprises;
TripActions, which was founded in 2015 and serves more than 8K businesses, offers a range of products that address spending, leisure, and business travel;
What is the 50/20/30 rule for the budget?
Spending 50% of your money on requirements, 30% on wants and 20% on savings is a general principle. Find out more about the 50/30/20 budget rule and decide if it applies to you.
