Often, spending is heavily managed through credit cards in small businesses and startups. From software subscriptions to digital advertising, credit card expenses can quickly accumulate and become a nightmare for the person doing the reconciliation.
If your company is growing quickly or has an influx of cash, you may find yourself spending freely. But, keeping a close eye on these charges is important to maintain a healthy profit margin and manage cash flow.
If you notice unexpected charges or need to increase your credit limit, it may be time to reduce your credit card expenses and get spending under control. We’ve compiled some tips to conquer common business problems and control credit card spending.
Problem 1: Expenses vary widely and aren't tracked back to a budget
It’s difficult to control expenses if you don’t know what you should spend on or how much to spend.
Solution: Create a budget
Even if a budget isn’t officially necessary, drafting one for cash flow purposes is a good idea. Take your expected costs across all categories and jot those out across the months in the year, having your department managers fill in the gaps. (Here are tips for setting up a proper budget.)
Through this process, you may also create allowable limits for common expense types and communicate these limits company-wide. For common personal expenses, like travel costs, provide maximum per diems worked into the budget to anticipate the charges. For instance, the maximum meal allowance might be $25/person/meal.
Problem 2: Spending across the company is lumped together on one card
How often have you had to email several people asking who is responsible for a mystery charge missing a receipt?
It’s not uncommon for one or two cards to be the central payment source for the business’ various expenses. Frequent one-off charges across the business that result in having to chase people for invoices can create major headaches when it comes time for the monthly reconciliation.
Solution: Consider breaking out payment sources by team, vendor, or category.
A common example is Marketing. Typically, marketing has many monthly SaaS subscriptions and advertising expenses, so you may dedicate a credit card to which they are responsible for reconciling. This keeps all team expenses in one place and holds the manager accountable for all charges.
Problem 3: Difficulty allocating expenses to specific clients
If expenses can’t be easily mapped to clients, they also won’t be recovered from the client.
Solution: Set up a system to allocate invoices directly to clients.
A receipt tracking software like ReceiptBank might be a worthwhile investment. You can easily consolidate all charges relating to a single client and easily invoice them for the charges.
Problem 4: Employees are working remotely, so it's difficult to get physical receipts
If the company managed expenses by collecting and storing physical receipts prior to COVID-19, invoice and receipt tracking may be more difficult.
Solution: Use tools such as Receipt Bank or Expensify for digital receipt submission
Did you know that CRA accepts digital copies of physical receipts and invoices as official records? It’s time to leave the filing cabinets behind and convert your paper receipts into a digital format saved in secure, cloud-based storage. This eliminates the barrier of employees having to be in the office to submit receipts and allows for easy digital submissions.
Problem 5: Surprise employee reimbursement reports
If employees use their personal cards and submit months' worth of reimbursements in one report, this poses a problem. It’s hard to anticipate the cash outflow when you’re not expecting the expense to come up. It also makes it difficult to accurately close monthly books when charges continue to come up for months past.
Solution: Set time limits for reimbursements to be submitted
This ensures timely submission and reduction of high balances. For example, you can set a policy for all personal expense reports to be submitted by the end of the following month.
It also helps if expense reports are simple for employees. Cumbersome Excel sheets may be a reason why employees procrastinate. Make it easy for them by using an app-based solution, like Expensify, that allows employees to take a photo and submit it for reimbursement straight from their phone.
Another option is communal virtual or physical prepaid cards for team activities, coffee meetings, or recognition programs. These can be centrally managed and eliminate the added paperwork and reconciliation that reimbursements require.
Instill a new spending culture across the company
In addition to these tips, doing regular vendor reviews and getting competitive quotes before signing up are good practices for reducing your costs.
Setting approval limits based on role type may reduce unexpected or unapproved spending.
By instilling good spending and tracking habits throughout the company, you will reap the rewards of having spending under control.
If you need help with your credit card reconciliations or paying your bills on time, reach out to learn how we can help.