Expense Management Tips for CFOs

Expense Management Tips for CFOs

by Redpath and Company

August 17, 2021 - CFOs have always done more than crunch numbers to manage a company’s budget and protect its financial assets. As companies emerge from the pandemic, they are looking to their CFO for guidance on β€œstrategy and the future.” Forbes Senior Contributor Jeff Thompson says CFOs must be able to β€œcapture key performance indicators that provide insight and foresight that will inform the future course of the organization.”

But CFOs cannot look long-term and plan strategically without timely, accurate, and complete data. Since employee travel and entertainment (T&E) is the second-largest expense for most businesses (payroll and benefits are the first), employee expense management is now more critical than ever. Greta Menozzi, part of Redpath’s Outsourced CFO/Controller team, has some tips to help CFOs streamline corporate expense management to gain greater control and faster, more valuable data for analysis.

1. Review your accounting system’s organization

This is vital for all expenses, not just travel-related costs. First, is your chart of accounts appropriately organized?

Typically, accounting systems have pre-designated accounts, but these tend to be general and, therefore, not relevant to your specific company. For example, β€œtravel” could cover multiple expense types including airfare, rental cars, etc. CFOs need to know costs for each type of travel. So, your chart of accounts needs to be more granular, based on where expenses fit within your budget, to accommodate a more detailed analysis of specific expense types.

As a CFO, your accounting system should be organized by reporting units that reflect how you review your data (departments, locations, company products, etc.). The chart of accounts will be utilized for each reporting unit you designate. That way, you can see the whole picture of exactly how much is being spent.

2. Develop a budget that follows your accounting system organization

Greta notes that many companies don’t have a well-developed budget, making expense management much more difficult. Your budget in your accounting system should follow your organizational structure of reporting units and match the granular level in your chart of accounts. For example, if travel or meals and entertainment are broken out into sub-accounts, the budget should mirror that. This ensures consistent expense allocation and allows for detailed analysis.

Make budget development a group effort, Greta recommends, because this will foster inherent accountability. Involve managers of the reporting units affected (as noted above), and involve employees who will be doing the actual spending. By doing this, you can create a granular-level budget that truly reflects your organization’s reality. That not only supports accountability but it also makes it easier to see anything that may be off during the review process.

3. Establish a clear employee expense policy

Without clear spending and reporting policies, employees can easily make mistakes, forget to capture data, or even fraudulently work your system to boost reimbursement. Chaotic expense capture ensures inaccurate (and often delayed) reporting and analysis.

An expense policy should identify:

  • What expenses are acceptable (or not)
  • Spending thresholds
  • The expense report review and reimbursement process
  • Expected timeline for receipt submission and reimbursement

4. Use the technology available to you

Expense management used to require a blizzard of paper, but digital automation can now streamline this process, improving the experience for everyone from travelers to the CFO.

Technology platforms designed for corporate expense management make it easy and efficient to upload receipts right away, clear the way for faster reimbursement with built-in parameters that eliminate the need for most pre-approvals, and provide clear step-by-step instructions for users. Travelers can take pictures of receipts rather than collecting stacks of little papers and automatically organize them into an expense report that goes directly to the right person for approval and reimbursement.

A seamless automated system provides numerous advantages for CFOs:

  • Assured accuracy and completeness of data
  • Elimination of human error when it comes to the categorization of expenses
  • Timeliness β€” real-time syncing means account reconciliation, and monthly close processes can go much faster and more efficiently
  • Earlier, more thorough financial review
  • Enhanced quality control β€” built-in expense policies ensure all expenses meet company approval standards and have been reviewed
  • Shared stewardship of bookkeeping that includes employees who are generating the expenses
  • Automatic updates to relevant tax law changes (for meal deductions, for example), ensuring approvals are based on current rules

As technology advances across the board, it is key for you to have built-in review and compliance processes so that when an audit comes around, you can avoid write-ups for receipts that don’t comply with policies. To gain all of these advantages, however, it is critical that this technology be synced with your chart of accounts, just like your budget.  

Greta notes that platforms designed strictly for expensing (capture and upload of receipts for reimbursement) can be useful but are often too limited. As CFO, you need to track spending on hotels, rentals, and so on, but a platform that also addresses the logistical side of travel (bookings in particular) can help streamline and control employee spending end to end.

Greta’s tips for choosing the best technology for your company

  • Every business is different, so think through aspects of travel that are unique to your company first, then look for software platforms that allow customization to meet your specific needs. The top priority must be the ability to sync with your accounting system.
  • Take the time to review multiple options before making a decision. Try them out to get a true feel for how (or if) they might work for you. Most software companies allow you to test your own data in the system so see how it would work.
  • Thoroughly train everyone who will use the software (travelers, internal managers, and yourself as CFO) on using the platform. Otherwise, it won’t serve you well functionally or as a corporate expense management tool.

With an inclusive process for developing the budget, broader accountability for spending, and technology that supports timely, accurate, and comprehensive data gathering, CFOs can take control over corporate expense management and make wise decisions on future spending.

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Redpath and Company

Redpath and Company

Redpath and Company helps clients make more informed decisions that contribute to their financial well-being by providing proactive, innovative, and value-driven CPA and advisory services for closely-held businesses, private equity, government entities, and nonprofit organizations. Core commercial industries served include manufacturing and distribution; construction, real estate, and engineering; and technology. Areas of service expertise include audit and assurance; personal, business, and international tax; state and local tax; sales and use tax; and succession and estate planning. Redpath also guides clients throughout the entire business life cycle with performance optimization and process improvement; M&A advisory, including corporate and deal strategy, due diligence, financial modeling, and M&A integration; accounting and management outsourcing; and valuations. The firm was founded in 1971 and is 100% employee owned (ESOP). With offices located in St. Paul and White Bear Lake, Minnesota, the firm ranks as one of the top CPA and advisory firms in Minnesota. Redpath is a member of HLB International, a global network of independent advisory and accounting firms. For more information, visit www.redpathcpas.com.