One of the biggest challenges that many business owners have with regards to budgeting relates to estimating and planning for fluctuating expenses. Many of your expenses may be fixed, such as your loan payments and mortgage or rent. In addition, any fluctuating expenses may be known in advance so that you can budget accordingly, such as travel expenses for a business trip. However, there are other expenses that may be difficult to budget for. Employee expenses are among the most significant type of expense that can be difficult to plan for, but regular monitoring can provide business owners with better budgeting capabilities and improved financial management.
What Are Employee Expenses?
In some businesses, employee expenses may be responsible for a large portion of your budget. They can include everything from fluctuating wages for hourly employees and overtime pay to expense report reimbursements and more. Depending on the number of employees that you have, the type of work that they do and how they are compensated, the amount of fluctuation in this expense category can vary dramatically from one month or quarter to this next, and this can create a budgeting nightmare for you to contend with. The inability to properly plan for these often high expenses can have a detrimental impact on your ability to run your company, so you may benefit significantly by exploring some of the tracking options available.
How to Track Them
It may be difficult to fully estimate the amount of employee expenses that you will be responsible for from month to month, but you can look at the trailing 12-month period to get a realistic idea and to watch for increasing or decreasing trends. In addition, you can track these expenses in different ways. Tracking expenses can give you the ability to more accurately make adjustments to your budget as you go rather than to be surprised by high expenses at the end of the month or quarter. One idea is to invest in an advanced clock-in system for hourly employees and to implement a requirement for all overtime to be approved by you beforehand. In addition, you can open a business credit card that gives you the ability to view all transactions in real-time online for each employee card.
Even with these efforts, it will be up to you or your accounting professionals to keep tabs on employee expenses. If you have only one or two employees, tracking employee expenses may not be difficult. If you have more employees, you may consider investing in a software program or a smartphone app to help you better track and monitor the expenses. This can have a truly beneficial impact on your ability to budget properly and better manage your business finances.