Having a good budget management is crucial for any company. It is vital not only to overcome moments of crisis, but also to make operations more efficient, grow and generate profits. Spending policies are a relatively simple tool, but with a great impact on accounting and cost control, giving practical and operational support to budget management.
An expense policy is basically a set of rules, best practices and values that seek to govern and organize how expenses are carried out within a company. In other words, they are a series of rules that prescribe how each employee, department or team must make their payments, consumption, and professional expenses.
There is no single recipe or ideal spending policy for every business. Each company must analyze its needs, the characteristics of its business and its organizational culture to design an expense policy adjusted to its reality, applicable to its processes and accepted by the different departments and workers.
Spending policies work only if they are known to exist and the rules are understood. However, it is quite frequent that they are not fully mastered. This type of deficiency and lack of control often causes not only discomfort between the employees and the company itself, but also slowdown in processes, inefficiencies, bad practices, and fraud. In this sense, establishing a good spending policy is not enough. The defining will be the way of implementation and communication, so that it is put into practice effectively.
What should I consider designing a good expense policy?
When managing an expense, companies usually have a process like the following: an employee requests funds and a manager, or the Chief Financial Officer (CFO) approves the request. The employee then spends the approved funds and supports the transaction with an invoice or receipt. The administrative team then verifies the data and imports it into the accounting or ERP software. Finally, finance managers analyze all expenses incurred.
In general, these are the default steps. The difference will be in the design of the process and the tools used. Expense management can range from quasi-manual approval by a single person - the CEO or the financial manager -, through the mail chains with some associated tools, to ERPs, with the purchasing departments.
Quite often, companies focus on mere budget control. However, there are another series of objectives that we can support through a practical and effective spending policy:
Improve the efficiency
Making an expense report can take at least 20 minutes, depending on the process to be followed and the tools available. If you want to be more expeditious, the way will surely be automation and digitization.
However, establishing independent technology platforms can backfire, by improving one point in the chain, while complicating or slowing down another. The time saved in completing a report can end up being wasted having to learn how to use a new tool or try to integrate it with other systems.
The key will be to apply a comprehensive solution, which simultaneously facilitates the work of all involved and improves global efficiency.
Optimize budget control
