There are several mistakes that startups can make and that can potentially ram the company towards a dead-end. All the businesses must have a strategic approach to tackle the challenges.
FREMONT, CA: Startups may face failures if the owners are not strategic about managing the costs and expenses from day one. Allocating and tracking employee business-related expenses will only get more complicated with growth. All the businesses must have a strategic approach to tackle the challenges.
Some common mistakes that startups can make that can potentially ram the company towards a dead-end are:
1. Losing track of receipts to validate business expenses
Several things, like dues and unpaid bills, can gain additional costs for the company. Losing track of bills to be paid can also give incorrect insights into the business's financial standing. Due to such issues preparing for audits or reconciliation may be delayed. For clarifying errors, reclaiming refunds, or staying audit-ready, the employee expense receipts are the ultimate source of truth. That is why it is advisable to manage receipts and maintain tracks.
2. Unclear travel and expense policies with weak enforcement
If the do's and don'ts of the company's travel and expense policies are unclear, it gives birth to fraudulent and unusual activity. Then poorly defined plans create confusion between the finance departments and the employees. Loosely defined and poorly enforced policies can also cause employees to make purchases above the budget. It can cause an imbalance in your company's finance.
3. Little-to-no visibility into employee business expenses
First of all, the startups need to know their financial standings at all times. Knowing where your business stands financially can help to make accurate purchasing decisions, optimize strategies, and tweak operations. If an organization wants to avoid making decisions based on assumptions, they should look into the spending trends and patterns of employees. Having insights into employee spending habits can help the finance team assign budgets accordingly.
4. Not maintaining detailed expense records
The companies which are not cooperative with the regulation of the IRS are imposed with high penalties. Therefore, in order to save themselves from such expenses, companies have to follow specific legal rules when reporting their expenses and income. Maintaining detailed expense records includes having proof of expenses receipts; invoices, forms, etc. will help in staying audit-ready in case there is an inquiry regarding the tax returns. Missing details or inaccurate information can put out a wrong impression of the business.
5. Spending too much time on manual tasks
Manual expense management can take up a ton of valuable time. Mainly when time is of the embodiment for developing new businesses, this can influence the organization's advancement. Manually logging and entering cost records occupy time as well as create errors. Data entry errors can likewise take up a higher amount of your finance team's time to correct it. The tedious work can also take away the energy of representatives.
6. Assemble a solid finance team
The finance team is responsible for forecasting the company's financial growth, budgeting and managing expenses, and income. If the group of people is sufficient enough to handle, such even under pressure will prove beneficial for the startup. It is a crucial need for all the companies to hire an excellent team of finance that can keep all the tracks of financial activities. Different tasks, including reviewing expense reports to make sure it aligns with company policies, are time-consuming and tedious, so it demands a good bunch of people to handle these activities smoothly.
7. Adopt smart technology
In this era of digitization, many different types of tools are available to help organizations with expense management. These tools save human resources, time, and money by eliminating routine tasks of manually going through the expense forms, inputting expense records, and more. These modern tools will keep all the records of a company expense at a platform, which will make viewing and managing finances more manageable.