Battening down the hatches…avoiding an expense revolt

Rogue expenses can harm SME margins. It’s important to use technology to ensure this doesn’t happen, as we explore in this article.

Implementing rules in a small business can be hard. The pace is frantic and it is common practice for rules and best practices to be made up as a business grows. However, this can cause issues, particularly when expenses are involved.

Unlike big corporations, where such rules are clearly stated in employee handbooks, not many workers in SMEs know what should and shouldn’t be claimed. It’s often the case that smaller indiscretions are allowed to slide, which in turn makes them harder to police moving forward.

Before a SME knows it, bad expense practice has crept in, which can end up hitting the very margins owners work so hard to protect. As ever, it’s far easier to shut the stable door before a horse blots, than to do it when it is half way to freedom.

The expense grey area

One area where bad practises can develop far too often, is travel and expenses. While larger organisations often have detailed guidance on the area, SMEs quite often rely on the discretion of managers, small finance teams or even the CEO to sign these off.

Considering small business can be busy places to work, this naturally means there is never enough scrutiny placed on ensuring expenses are legitimate.

This issue is made worse when expenses are paper-based. Imagine if you are a financial controller or the managing director of a small business that employs 15 people, the majority of which are in sales roles and naturally must be out of the office, or entertaining. Now picture the end of a busy quarter, where targets have to be met, the taxman must be paid and appraisals filled out. Add to this, a few months of expenses that have all been filed at the last possible moment. Many small business owners will admit to the fact that it’s unlikely that each and every paper receipt, stapled to a printed-out Excel sheet, will be thoroughly examined before they are authorised.

Of course, trust is key within small businesses. No matter how close people work together, managers and credit controllers simply can never take it for granted that there will never be someone that attempts to push through expenses they shouldn’t be. As such it’s important that they have the tools in place that can help them define – and spot – when illegitimate claims come through (intentionally filed or not).

Stray pounds can hungrily eat away at margins

When your team works hard and margins increase year-on-year as a result, many people may ask about the true impact of the odd expense slipping the net. The fact is however, that the more of these that creep in, the less likely it is that those margins will stay as they are.

Of course, identifying where ‘grey expenses’ are damaging company revenues is one thing. But implementing change can be harder. As mentioned before, a factor such as the closeness between senior management and employees in small businesses can make such changes difficult. Other issues can arise, whereby employees, used to claiming for certain things, who are now told they can’t, may feel resentment. This could lead them to going ‘underground’ in order to get claims through, which in turn make identifying such claims even harder. Culture has to be carefully considered.

Technology for insight

By now, you may be pondering your own expense process and have come to the realisation that it is more complex and perhaps eating away more margin than you realised.

This is where technology can come into its own. Using processes that can bring your company’s expense process under one, streamlined environment, you can not only obtain a firmer grip and identify how much is wrongly being spent and why, but also introduce new policies that can be implemented and monitored, in an official way.

Such solutions can also take a granular approach to how to cut your expense bill. For instance, by using intelligent software there is the ability to see when staff are claiming for travel.

This could be a particular habit where staff book their flights at the last minute, losing out on savings that could come if they had been booked months in advance. Or perhaps it is the ability to analyse mileage claims to ensure their validity and that the routes being taken are acceptable. Using technology to gather and analyse this kind of information allows it to become the detective, rather than already stretched finance teams.

Technology also has the ability to use technology against more sinister acts of wrongful expense claims, by identifying fraudulent submissions or picking out people that continuously submit claims for things they shouldn’t.

Finally, and perhaps most importantly – smart tech can also ensure that small business owners can reclaim the right amount of VAT on expenses. Such a tool can be a welcome relief when it comes to dealing with what can be a very tricky and complex set of tax laws.

But tech should be reinforced as a positive change for the most part – it is saving your people time on arduous tasks, allowing them to use devices familiar to them and allowing them space to focus on what they enjoy. It’s important to frame technology in this way.

The human element

Of course, while technology can provide many insights and benefits it’s important to remember that nothing can replace the human factor, which is so important in the success of the millions of SMEs that exist in the UK today.

Slamming down the expense gates will often lead to backlash, or merely a short-term effect. Therefore, it’s important to get, not only the technological foundations in place as quickly as possible, but then look to ease in the rules and regulations needing to be enforced. A company may have policies to tweak, some may bring in new policies alongside the technology and some may not even have any rules to begin with. Therefore, expert consultation can be the differentiator between spend success and spend revolt.

Combining strong operational sense with the power and ability of technology can ensure that the expense process begins smarter and builds a strong business. Failure to take a proactive approach to expenses could lead to a big receipt-shaped hole in your company margins. And not just cost money in terms of spending too much – travel and expenses are legitimate drivers for business growth. This is why the importance of spending this money correctly can’t be underestimated.

Dafydd Llewellyn, managing director of UK SMB at Concur and Natalie Gwilt, director, account management, SMN at Concur

Owen Gough

Owen Gough

Owen Gough is a reporter for He has a background in small business marketing strategies and is responsible for writing content on subjects ranging from small business finance to technology...

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