Recently, we looked at how careful monitoring of your business expenses can help you to better manage your finances, make smarter decisions about where your money goes and why it’s going there. Interestingly, these are not the only benefits.
In this blog, we’ll take a look at how good financial practice can also make for a happier and more successful workplace on a daily basis. Yes it’s true! Money management matters - and not only because it has a knock-on effect on your physical and mental wellbeing. If you use modern technologies and tools, as well as simply acknowledging the important role good expenses management plays in an organisation, you can reap many rewards. Let's have a look.
Whether you’re self-employed or managing a team of employees, nothing is worse for morale than poor financial management. Even if it can’t be directly seen by most employees, they can feel it. The office party turns into a short, cheap, night in? Office plants are plastic, rather than real? Are the usual office drinks and snacks in increasingly short supply?
All of these seemingly insignificant items add up. Effective spending management allows for a consistency that avoids the ‘rollercoaster’ of early budget profligacy. Where too much of the allowance is spent too early in the project (or time period it’s supposed to last for).
Getting off the reimbursement roundabout
Everyone knows, cash flow is an extremely important consideration for businesses and finding yourself constantly out of pocket and waiting to be reimbursed for the expenses you’ve incurred can have a huge impact on your personal and private life.
Perfectly viable businesses can encounter troublesome (or worse) situations with basic expenses like rent and bills simply due to being paid late themselves. Or merely being unaware of the balance between when credits or debtors fall due. There are plenty of cash flow forecasting tools to help you mitigate this, with Float being a prime example. And if you still get stuck? Head to one of the new wave of short term finance providers such as Iwoca, Satago or the comparison service - Funding Options.
If cash flow is important for businesses, you can bet it’s doubly so for employees (especially those who struggle to exercise sound financial judgement). Requiring them to pay expenses out of their own finances is, in itself, somewhat backwards in this day and age.
Not only that, but often, taking too long to reimburse these could land them in their own personal financial trouble. With 40% of employees waiting over two weeks for reimbursement and over 20% have to wait 4 weeks, seemingly minor delays can result in costly fees if they end the month overdrawn. As well as a demoralised workforce - who have to tighten their own belts while subsidising their employer.
Our Expenses Economy research uncovered that on average £109 goes unexpensed each year, which equates to a whopping £3.5 billion. That said, almost a third of this is due to the expense not complying with the company’s expenses policy.
Instead, we advocate keeping detailed records of all expenses, and using technological help to ensure that reimbursement is made in the quickest possible time - or rendered unnecessary by providing employees with funds upfront. Not only does this improve employee satisfaction, but you can also ensure you have better control over what is actually happening - in real time.
Ending the Expenses time-suck
Another thing that can make or break your office environment is effective time management. For example, if you neglect your business expenses over a course of weeks or months, you’ll likely be in for some very late nights and early mornings once the end of the tax year starts approaching. Parkinsons law is a law for a reason - the work always expands to fill the time you allocate to it. If you have anything more than a daily deadline for expenses, the vast majority of people will let them build up.
But you shouldn’t have to spend hours poring over piles of last minute receipts. Technology has long ended this bizarre ritual (among many others). And in fact, by keeping on top of your expenses throughout the year you’ll be saving yourself both time and money in the long run. Think of the hours your business pays employees to do facile admin that contributes little (if anything) to moving the business forward.
Furthermore, by monitoring your situation on an ongoing basis, it’s easy to have a far better grip on your financial situation from month to month. Giving you a better basis for both planning and execution.
Divide and conquer your expenses
Finally, good financial management is key to keeping your personal and your business expenses separate. It's bi-directional though, as keeping your business expenses separate is also key to good financial management.
And while this might sound obvious, it can be a big challenge for anyone starting up on their own. Especially with business bank accounts costing far more than personal ones. At the very least, look to one of the new wave of challenger banks designed specifically to cater to this niche such as Starling, Coconut or Loot. Unsurprisingly, Expend is often considered in the same breathe as these, with our ability to operate as a business account alongside our expense busting features.
Of course, the line is sometimes blurred if you have used your own assets to launch your business, or if you start out as a 'side-hustle' for a period of time beforehand. But it’s still vital to keep a clear divide between the two entities - and this can be particularly difficult if your accounting is a mess.
Leave everything until the end of the year, for example, and you might not remember whether a certain dinner or petrol receipt was for a personal or a business expense. But just by keeping track of things as you go along, you can be sure to file everything in the right place - ensuring that you don’t miss out on any important claims. It could end up costing your business (and yourself) if you aren't able to justify the VAT return claims you have submitted. Being able to back these up could lead to hefty fines from HMRC, especially with Making Tax Digital launching in 2019.
A solid business is built on solid financial grounds, it can save you time, money, hassle and keep your employees and accountant happier.