This method used to be effective until computers didn't come into play. In the traditional method, all the documents are created manually on paper. There are multiple ways to manage the expenses of one company depending on the management and how they want to manage the expense. The finance department then will keep this report with themselves for future reference, and this report becomes important at the time of financial auditing and filing taxes. The claim is then sent to the finance team now they check the expense, and it is a complaint as per the company policies, then they pass the claim. Now that the department head will view the expense report, attach receipts, and pass it on if everything is fine as per the policies, or else the head will reject the claim. Let's say an employee or purchase department makes an expense now, they create the expense report, attach the bills or payment receipts with the expense, and submit it to their respective department. Now let's see how the expense management process works: This type of policy helps tighten the company's expenses and miscellaneous expenses. In this case, the employee gets reimbursed if the price is under ₹10,000. It is a type of term or you can policy added by the company. If the price goes above that, the claims get rejected. They had certain conditions to the policies and terms so that no employee or management could take advantage of expense policies.įor example, if an employee is meeting with a client in a restaurant for a certain deal, the restaurant bill can go up to a maximum of ₹10,000. It includes all the purchases, employee reimbursements, bills, and other expenses. How does Expense Management Work?įirst, the company management drafts the policies for the expenses that are relevant to the company. It helps to summarize all your expenses by creating the reports and focusing on where there is a scope for improvement. It also helps in maintaining the accounts and balanced set of the company. It becomes hard for employees and companies to reimburse the expense incurred. If expenses are not recorded properly, the organization will never know the improvement they need to work more efficiently and cost-effectively. Managing expenses for your company is important as it can make or break your business finances instantly. Periodic Expense - These are the expenses that the company has to pay occasionally, like repair of any machinery, patent fees, etc.Fixed Expense - Expenses with fixed costs, like rent, salaries, interest, etc., comes under fixed expense.Variable Expense - Those expenses where the cost changes every time, or you can say that it is not fixed-for example, electricity bills, daily expenses, or other utility bills.Earlier, this used to be done via spreadsheets and manually written on paper.Īnd mainly expense of any company is divided into three categories and are as follows: If discussed in today's scenario, most companies, whether small businesses or large enterprises, use expense management software to record and pay expenses. What is Expense Management?Įxpense management is a multi-step process, from creating expense and expense reports to verification, approvals, and payment or reimbursement of the expense are considered expense management.Įxpense management is not just restricted to the approvals and payments of the expense, but the company's expense policies, auditing expenses, employee expenses, and salary also come under expense management. It takes a lot of time and manual effort to manage the expense and get approval, as it has to be verified only under certain terms and policies. It has to go through various departments, checks, processes, and approvals to get the expense verified. Managing the expenses of a company is not as easy as one thinks.
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