How do I audit expenses in my business?
Businesses must routinely undertake an objective and comprehensive scrutiny of their expenses in order to identify any cash flow leaks which could weaken their position. A professional audit can cost upward of £30,000, which is far beyond the reach of many small businesses.
A self-audit of finances is thus essential for smaller businesses in ensuring the financial discipline required for growth. From excessively expensive insurance policies and corporate service plans to unused subscriptions, a self-audit will provide a list of expenses which could be renegotiated or eliminated; and could potentially save businesses thousands of pounds each year.
Step One: Timing
By conducting a self-audit during quieter periods in business, the task can be given undivided attention. Eliminating any cash leaks ensures that money can, instead, be spent on employee retention, marketing and development. Rather than looking for easy targets, brainstorm with your team as to how to improve efficiency and make changes where necessary.
Rather than leaving the task to an employee in the finance department, every team member should be acutely aware of a collective responsibility in keeping tight control of costs. Formalising monthly reviews of financial statements with your team and ensuring they are aware of the management of budgets is essential.
Step Two: Analyse Cash Flow
Evaluating your cash flow will allow the business to recognise trends and highlight any irregularities. For example, if this year’s company spending was £52,000 while last years was £50,000, you need to find out why. Comparing expenses over different periods and measuring year-on-year changes will highlight any irregularities and trends.
Step Three: Percentages
As you investigate company spending, identify each expense as a percentage of your total revenue. Consider all types of costs, such as service provider bills, insurance policies and employee expenditure. Carefully review each expense incurred by employees, especially credit cards.
There are limitations inherent in traditional company credit cards; there are no real-time updates and no spending limits. If a card is lost, it takes days to replace. In contrast, the prepaid cards provided by Soldo can be allocated to employees as desired, with limits and spending rules defined separately for each card. The Soldo dashboard tracks employee spending in real-time, wherein the administrator can quickly freeze a card if it is lost and order a replacement immediately.
Reimbursement policies must be clearly communicated, with specific guidelines on any contentious or borderline expense types.
Employee spending can quickly escalate, with management losing control. Overspending can put companies at serious risk. With the Soldo dashboard, administrators can implement limits and rules, specifying the exact amounts employees can spend. Administrators have exclusive access to real-time transaction updates, as they occur, together with top-up functionality for additional approved expenses.
Step Four: Review Expenses
It is vital to review all expenses thoroughly. There are three key areas in which businesses routinely overspend:
1. Shipping Costs: Some carriers offer B2B discounts. Enquire with your provider to ensure you are taking advantage of any promotions. If not, it may be worth shopping around for competitive rates.
2. Mobile Phones: Surprisingly few companies conduct audits on mobile phone bills, so overcharges and errors are not flagged. Again, shop around for competitive rates.
3. Service Contracts: In many cases, it may be cheaper to replace equipment, instead of paying out maintenance service contracts on obsolete or ageing items.
Additionally, it is worth reviewing payroll services, business insurance, IT providers and marketing providers. Email and web hosting, social accounts, and web analytics accounts should also be checked to determine whether there are cheaper providers elsewhere in the market.
Petty cash and cash advances are also challenging to manage and control. There are no limits for such expenses, and they are notoriously hard to keep track of. Our prepaid cards can be funded with the precise sums required, obviating the need for the majority of petty cash transactions.
The administration associated with expense submission is also reduced, freeing up valuable staff time. Soldo Business reports are automated, and by using our dashboard, data can be simply exported in a few clicks.
Thorough auditing of business expenses should be conducted at least annually, to save money and ensure that your business spends in the most efficient way. Success is directly related to the careful management of company cash flow.
Our spending management solution helps businesses save money and streamlines the auditing process. Through an admin dashboard, mobile app and prepaid business card, managing expenses is greatly simplified with Soldo. Budgets can be defined ahead of time for each employee and transactions easily overseen in real-time with the data providing valuable insight.
Why not visit us for more information.