Total Business Magazine

Managing Cash Flow Loopholes for SMEs

Managing cash flow is an extremely critical aspect of financial planning for many SMEs.

However, it’s an area which can often be difficult to control and could see benefit from tighter monitoring and planning. Below Adam Bamford, Expedite Services Director at Selenity, talks to total Business about the loopholes in managing business cashflow.

Many SMEs struggle to properly manage and maintain positive cash flow and research suggests that it’s something 63% of SME decision-makers worry about.

The proper management of expenses can give businesses a huge advantage, but when handled inadequately the management of corporate expenses can be crippling. SMEs should evaluate their current expense procedures and pinpoint the aspects which are easy to exploit and put policies in place to ensure that they are not being taken advantage of.

Emptying the unofficial piggybank

There are areas of the expenses process which are easier to manipulate than others and the same pattern of claiming behaviour can be seen across countless businesses. Typically, businesses will get four distinctive spikes in expense claims throughout the year. The first is around Easter, the second just before the school summer holidays and the last two before Christmas – one at the end of November and the other halfway through December. During these peak period’s employees can often be claiming up to 80% more than they would during a ‘normal’ week. If an employee who regularly submits claims of around £200 a week, stockpiles receipts over four or five months, the business could be hit with a claim of nearly £4000. Stockpiling expenses is one of the biggest challenges that SMEs face, especially employees who use the expenses system as a piggybank.

Business owners can get around the issue of ‘piggybanking’ by putting expense policies in place that restrict the timeframe in which employees can submit claims. Setting a time limit of around one to two months encourages employees to keep up to date with claims and stops them from building up large sums.

Fraudulent claims

The second most common area of the expense process which is ripe for misuse is the submission of fraudulent claims. Not all employees will manipulate the expense system in this way but it does pay for SMEs to carry out proper due diligence and check the submitted information. Whether it’s creating fake hotel invoices then staying with a relative and pocketing the accommodation allowance. Or claiming multiple reimbursements from the same train journey by submitting the ticket and collection receipt separately. SMEs should ensure that the expense claims submitted by employees are genuine, otherwise money is leaving the businesses needlessly and employees are tapping into tax free money which they aren’t entitled to.

Tapping into technology

Implementing a digital expense management solution could be an alternative to manually checking claims and helps control employee spending by automating policy enforcement. Out of policy expenses are then instantly flagged to the administrator upon submission.

With the expense policy clearly laid out, employees are able to make an informed decision before making a purchase. It also affords business owners the ability to watch what employees are spending in real-time and helps them to recover the maximum amount of VAT possible. Asking employees to take photos and upload images of their receipts, also adds an additional layer of accountability, helping SMEs to cash flow.

For SMEs it’s worthwhile identifying areas of weakness in the expenses process as they can have a large impact on cash flow. The ability to properly manage and control employee expenses, not only saves SMEs time and money but also ensures that the right processes are in place to maintain the business.

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