Thu, Jun 8, 2023

Unveiling Best Practices in Expense Reporting for Enhanced Financial Management

Generating revenue is typically the number one goal of any business. However, as the famous adage goes, “It costs money to make money.” To that end, any business knows that operating a company to generate revenue does not come without expense.

While expenses run the gamut from equipment replacement to supplier payments, one thing is certain: Businesses will incur expenses at the cost of generating revenue. Therefore, reporting said expenses is crucial to keeping overall business operations in check.

Expense reporting procedures can vary, but having a clear process and policies is essential to an organization’s financial health. In addition, by following expense reporting best practices, businesses can ensure they stay within their proper regulatory compliance parameters.

The Necessity of Expense Reporting

Expense reporting begins with understanding the importance of efficient business processes. Having proper frameworks in place helps businesses stay on task, ultimately increasing the consistency of outcomes and mitigating errors.

Following such frameworks makes specifics like managing a business’s cash flow easier. Expense reporting is one such process to ensure that a business stays functional.

Expense Reporting Policy

With plenty of gray areas and bulky processes and procedures sections to contend with, expense reporting might seem like a challenging feature. However, businesses can standardize expense reporting with the right policy in place.

A proper expense reporting policy helps businesses stay accurate on cash flow and remain consistent within the compliance frameworks set out by regulatory bodies like the SEC and the FDIC.

Expense reporting policies should be the first step for a company to reference what constitutes an approvable expense. They are the cornerstone of ensuring that accurate financial records are maintained.

Having a policy in place can help businesses to streamline overall items such as:

  • What should be included?
  • When should reports be submitted?
  • What items are reimbursable?
  • What type of documentation is necessary?

Identifying and providing instruction on the above will help a company mitigate risk further and eliminate future issues that may crop up. A formal expense report policy is necessary for any business to implement when providing clear guidance on expense limitations.

Expense Reporting Procedures

Following reporting procedures is made all the easier with a proper policy in place. Operational procedures will vary from company to company. However, expense reports will generally paint a financial picture that includes:

  • An itemized list of expenses
  • A company’s total expenditure
  • Overall cash flow
  • A calculation of company profits

At a very basic level, having expense reporting procedures helps companies properly track work-related expenses. In addition, adequate documentation ensures that businesses can take advantage of tax deductions and avoid unnecessary expense reimbursements.

Expense Reporting Processes

Building the proper reporting process will vary from organization to organization. The creation and submission process of any expense report will depend on what policy an organization has in place in relation to overall expense management.

A few process steps for expense reporting might include the following:

  • Creating expense templates
  • Documenting receipts
  • Processing reimbursements
  • Automating the process

Processes for many organizations don’t have to be needlessly difficult. Automation can be seen as a key practice when facilitating overall reporting.

In addition, some of the best practices for expense reporting begin with simply following the company’s policy.

Expense Reporting Risk Assessment

Expense reporting is simply one step in the overall expense management process. The organization necessary to ensure that companies maintain proper expense reporting procedures comes from properly implemented expense management overall.

The main focus of a company’s finance team is to adhere to financial planning and overall accurate record keeping. A natural part of financial planning is assessing overall risk under an expense management framework.

Expense reporting risk assessment goes hand in hand with the auditing process of expense reports. The financial team of any company understands the importance of operational requirements put in place to mitigate risk. Therefore, expense reporting must be appropriately implemented under the umbrella of a company’s risk assessment framework.

The overall requirements for identifying expense report risks are financial reporting and internal controls. A good expense report policy will include proper processes and procedures that will adequately align with risk mitigation.

Expense Reporting Best Practices

As Benjamin Franklin so succinctly said, “A small leak will sink a great ship.” The right expense reporting practices will help any business avoid those small leaks and accurately manage the financial reporting necessary to thrive.

Utilizing the right practices will help any company ensure that they are optimizing their time and financial resources to focus on the long-term picture. Implementing the right expense reporting system will help any business keep on top of its success. Best practices will vary depending on the risk appetite of a business. However, solutions that will adhere to risk mitigation will include some similarities.

Simple Fixes

For example, developing a clear policy at the outset will help any company stay on track with financial regulations. Simplifying the process as much as possible will help employees adhere to the policy, thus mitigating the risk of costly compliance errors.

One particular way to simplify the process overall is to automate it. The reporting framework for covering external and internal financial controls can be overly complex. Automation helps remove some of the natural errors that occur when handling a company’s expenditures.

Simplifying the process vis-à-vis automation can help companies create policies that ensure precision. Crafting a complete reporting policy in line with regulatory guidelines is done efficiently through an automated process.

Utilizing the right tools and practices in a highly regulated world means businesses can focus on generating revenue and serving their customers. In addition, automation simply leaves companies more time to focus on running the business with established consistency.

Simplified Reporting

At KnowledgeLeader, we aim to simplify your expense reporting framework. We provide a comprehensive set of resources, including our Vehicle Expense Reimbursement Policy, that is made specifically for business owners and leaders to uphold accuracy and adhere to best financial practices. Our tool provides your organization with a specific expense reporting system to optimize reporting and reimbursement practices.