Effective Expense Management For a Financially Healthy Business

Aug 2, 2024 | Listen

John Krebsbach shares insights on effective expense management on the Help, My Business is Growing podcast hosted by Fractional CFO Kathy Svetina

If your business is struggling with expense management, you might find yourself wondering where all your hard-earned money has gone or why your company keeps exceeding its budget. Tracking your expenses—no matter how big or small—is a must for any business because every dollar you spend can either contribute to your growth or drain resources.

So why do many companies struggle with expense tracking? Is it a lack of discipline or an issue within the financial structure? Are there special tools or platforms that can make this easier for your team? And what can you do to ensure that your solution is a permanent fix?

John Krebsbach: Small business expense management

In this episode, John Krebsbach and I tackle the challenges of expense management. We explore why companies struggle with tracking expenses and discuss tools and strategies for lasting solutions.



Timestamps for this week’s episode

02:25 What is expense management and why it matters

05:14  Managing credit card expenses and tracking spending

17:49 Expense management for check and ACH-heavy businesses

28:15 Implementing expense management processes 

42:21 One actionable step to take to implement an efficient expense management system


What is expense management and why it matters

Expense management is when you keep track of and control the money going out of your business. Whether you’re running a small family-owned company or a large multinational organization, managing and tracking your expenses properly can make a big difference in how smoothly your business operates.

At its most basic form, expense management will help you know how much and what money is being spent and where it’s going. This includes everything from bills, supplier costs, admin or compliance fees, card transactions, and employee reimbursements. If you don’t have a good system in place, you will most probably get surprised by unexpected expenses, like when a big receipt shows up months later, throwing off your budget.

Automate the things that are routine and focus on the things that are exceptions.

Managing credit card expenses and tracking spending

Many business owners, especially those focused on sales or recruitment, might find expense management doesn’t come naturally.  One common problem is when employees use company credit cards for various expenses, leading to a chaotic flow of receipts and unclear spending reports. This is extremely frustrating for both the accounting team and the employees. 

Thankfully, there are now many new tools and platforms to make it easier such as Ramp.com and others.  One way to solve this is to use tools that assign specific budgets and virtual credit card numbers to employees for pre-assigned or designated expenses. For example, if someone in your marketing team needs an email marketing tool, you can issue a virtual card with a set budget that can only be used for that tool. 

When you have an expense tracking process and supporting platforms or tools in place, it will drastically reduce all the administrative-related hassle of filling out forms, preparing expense reports, and more. When all expenses are logged, you’ll be able to accurately budget, improve your internal controls, and focus on growing your business.

“Employees are more comfortable when they know what to expect.” – John Krebsbach

Expense management for check and ACH-heavy businesses

Unlike credit cards, checks and ACH payments often involve more manual work, leading to delays and confusion about where your money is going. To handle this, you can

  • Digitize as much of the process as possible via accounting software that integrates with your bank to track transactions in real-time
  • Set up clear internal controls and approval processes for check and ACH payments like requiring dual approvals for larger payments and so on
  • Regularly reconcile bank statements with your accounting records so you can catch any unauthorized spending.
Deciding not to automate expense management is deciding to not put money in your pocket.

Implementing expense management processes 

To have an efficient expense management system in place, start by understanding why you need to make the change, whether recovering from financial issues or you are poised for rapid growth. 

Start with implementing strict controls for a smaller group, like owners or managers, using virtual cards for regular vendors. Then come up with simple and clear expense policies that set expectations without overwhelming details. You can then customize this as needed for field operations or client visits, using tools and trackers to flag anyone violating your policies. 

Finally, remember that the goal is to really get down and start tracking and managing expenses and to have it in place in a seamless and organic way without disrupting your day-to-day operations.

One actionable step to take to implement an efficient expense management system

Start by evaluating your financial situation. Are you struggling with overspending or finding it difficult to track where money is going? If these issues sound familiar, it’s time to explore solutions. John shares that traditional options like Concur or Expensify may not be ideal due to recent changes, such as Expensify discontinuing its free plan. Instead, he suggests that you consider modern platforms like Brex or Ramp. 

These tools not only help you manage expenses but also provide insights and automate processes, which can streamline your financial operations. Ramp, in particular, is reliable and well-regarded for its customer support, making it a top choice for many businesses. By adopting these tools, you’ll gain better control over your spending, have all expenses clearly laid out and categorized, and potentially even earn some of your cash back.

Summary

  • Expense management tracks and controls business spending to prevent budget surprises.

  • Business owners face challenges when employees use company cards for various expenses. Tools like Ramp.com simplify this by assigning budgets and virtual cards, reducing admin work.

  • Streamline check and ACH payments with software that integrates with your bank for real-time tracking and clear approval processes.

  • Implement strict expense controls with virtual cards for key personnel and clear policies, using tools for seamless monitoring.

  • Evaluate spending challenges and consider platforms like Brex or Ramp for automated processes and improved financial control.

Transcript

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About guest – John Krebsbach

Principal

Precision Advisors

John Krebsbach is an experienced founder and chief operating officer who enjoys the journey of building high growth companies with great people. He earned and refined his growth operator skill set in a variety of environments, from co-founding a startup (and shutting it down) to scaling an Inc. 5000 business and building new teams within a global corporation.

When partnering with owners of private businesses, John is often referred to as the “general contractor” of their business operations; a “quarterback” for the sports fans. He keeps an eye on the overall picture so that the team of subject matter experts (i.e. tax, legal, HR, accounting, banking, insurance, etc.) complement one another’s work. This is especially needed when those functions are partially or completely outsourced.

Beyond back office tune-ups and orchestration, John works with business owners + their leadership teams to identify, evaluate, and execute initiatives that grow profit. Whether entering new markets, right-sizing product/service offerings, implementing cross-sell and upsell initiatives, conducting strategic M&A, or firing unprofitable customers, John is a thought partner who translates ideas into action.

Over his career, John has collaborated with and advised leaders of companies both large and small across a variety of industries, including Ancestry.com, Angie’s List, AT&T, CarGurus, DoorDash, Google, Harley Davidson, Macy’s, Nordstrom, Sprint/T-Mobile, Walmart, WellNow Urgent Care, and more.

John is the Principal at Precision Advisors, a business operations advisory firm for companies who are growing or are looking to ignite growth.

Website:  https://precision-advisors.com/

LinkedIn: https://www.linkedin.com/in/johnkrebsbach/

Special offer for listeners of the podcast Get a $500 sign-up bonus from Ramp to manage your business expenses: https://ramp.com/partners/precision-advisors


About host – Kathy Svetina

Kathy Svetina is a Fractional CFO for growing small businesses with $10M+ in annual revenue.

Clients hire her when they’re unsure about what’s going on in their finances, are stressed out by making financial decisions, or need to structure their finances to keep up with their growth.

She solves their nagging money mysteries and builds a financial structure with a tailored financial strategy. That way they can grow in a financially healthy and sustainable way.

Kathy is based in Chicago, IL and works with clients all over the US.

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