Countless piles of receipts and endless expense reports... finances can quickly turn into a headache at the end of the month. But how can fast growing startups manage their company spending without it leading to chaos?
Company spending refers to many processes, from managing invoices and reporting expenses — to subscriptions.
It can be difficult to know where to start, but according to Jeppe Rindom, CEO and cofounder of Pleo, a software solution that automates company spending, the first step is to acknowledge where your business has made mistakes. “Only once you know what those are can you start to build a framework to fix them,” he says.
So, here is a list of common mistakes — and what you can do if you've already made them.
1. Wasting time and money on manual processing
Rindom says relying too much on paper is a key mistake. “The majority of businesses today are still beholden to manual, paper-based expense processes,” he says. “More often than not, this leads to wasted company time.”
The majority of businesses today are still beholden to manual, paper-based expense processes.
In fact, a recent Pleo survey found that employees spend on average 11.5 hours per month manually processing expenses. On top of this, it discovered three in four senior managers spent over an hour a week on expense reports, with 14% losing nearly a whole working day each week to the admin around their bills.
“You burn so much time,” says Victoria Cozens, company director of Perky Blenders, a specialty coffee roasters who used manual processes before Pleo. “I’ve stayed up late in the night searching for invoices and receipts.”
One solution is using a financial tool — such as accounting software or spending cards — to automate expense reporting. For instance, if you can capture receipts on the go, you can eliminate a lot of paperwork.
2. Using too many processes for bills
However, automating processes with too many different pieces of software can also be problematic when it comes to things like invoices.
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“There’s a lot of people involved at different stages of the bill’s lifecycle,” says Loui Funding, one of Pleo’s product managers. “There are other software tools out there that solve a specific part of the bill but it doesn’t solve the complexities around having transparency of what’s going on.”
There are other software tools out there that solve a specific part of the bill but it doesn’t solve the complexities around having transparency of what’s going on.
When there is no transparency or way of checking the status of the bill, Funding says, things can go wrong: “You can pay things that shouldn’t be paid. You might experience fraud. It’s very hard to keep track of the things that you should be paying and the things that you shouldn’t. That’s where mistakes come in.”
3. Not looking at the specific needs of the business
Although startups and scaleups often make similar mistakes when it comes to spending, it doesn’t mean their solutions should be the same.
For example, when looking to automate with Pleo, employee benefits app Cobee wanted to get rid of the hassle of its employees paying expenses with their own money, while esports association Ninjas in Pyjamas wanted to streamline the costs of its merchandising.
“While automation may be an obvious choice for many, it’s not the be all and end all solution to a business’ challenges,” says Rindom. “A company’s size, industry and structure should be taken into consideration first.
While automation may be an obvious choice for many, it’s not the be all and end all solution to a business’ challenges.
“A large construction company with tradesmen on the road needing to make company purchases may be more suited to an automated spending solution,” he adds. “For a small startup however, it may be more of a case of streamlining your current processes.”
4. Overlooking the impact on employees
Using a spend management tool for company spending doesn’t just save time and money, it can also alleviate employees from a lot of hassle and stress.
“One of the biggest mistakes companies can make is to overlook the issues that manual spend and expense processes can have on employees,” says Rindom. “You should start by speaking with your employees to understand what challenges they are facing on a daily basis.”
One of the biggest mistakes companies can make is to overlook the issues that manual spend and expense processes can have on employees.
Rindom adds that a lot of companies assume conversations around money and company spending should only be discussed by the CFO or finance department, which can make other employees feel they aren’t trusted or empowered to make decisions.
Cozens says using a tool has been a “gamechanger” for her employees, as they can take responsibility for their role in admin and expenses without stress. It has also helped each branch of Perky Blenders become more self-sufficient, she says, because they can purchase what they need without approval from business leaders.
“In order to empower employees, and increase a company’s financial resilience, businesses should seek to foster an open conversation about money,” says Rindom. “This level of communication and transparency will only help to build trust within your organisation, something that is all too overlooked in businesses today.”
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Should you let your boss into your bank account? In our next Sifted Talks, we’ll be discussing whether transparency improves employee financial health or simply gives bosses more control. Join Sifted and Pleo online, on May 13.