Project Expense Management

How do you keep track of your team’s Project Expenses?  Learn some tips on streamlining your expense reporting process. 

PODCAST TRANSCRIPT

Darell Brown:

Welcome to The ProProject Podcast with ProProject Bookkeeping. This is your host, Darell Brown, bringing you bookkeeping tips and tricks to make your project finances run a little smoother.

This is part one of our four part series around project bookkeeping and accounting. For the first part of our series, I will be discussing project expense management. I chose to delve into expense management as consultants and managers tend to have concerns around expenses.

From the consultant's perspective, they need to be reimbursed for project expenses. If the submission and approval process are long and tedious, they're worried about how long reimbursement's going to take, or if some of their expenses might not even get approved.

For managers, they want to keep project costs within limits and track it against project budgets. Again, if the submission process is long and tedious, they are not able to track the expenses against the project budget in real-time, and depending on exactly how long the approval process takes the project may actually end before you have real numbers to work with.

Most companies will try to estimate cost and travel for potential airfare, hotel, food, project materials, and other resources when they are negotiating the project fee. During this phase, it is also important to know what your client's expense policy is. They may require under 150 per night rate for hotel rooms. They'll want itemized restaurant receipts. They will not reimburse for alcoholic drinks. That's a big one. Depending on how many hours of flight time, they won't allow business class flights. So it's important to know this when setting your expense budget.

Once this has been set and communicated to consultants, how are you able to track these expenses? And how are your consultants able to submit their expenses for review?

Even though there are several cloud-based expense management options, the common method is the Excel sheet or the Google sheet. I've seen many mistakes with Excel report templates. These tend to work best for companies with minimal expenses. If an employee entertains clients once in a while, or takes occasional business trips, then this makes more sense. Mistakes are less likely. But consultants submitting expense reports at the end of every week or two weeks with a shoebox full of receipts to review will often have a lot of mistakes.

A few issues I've seen: The receipt doesn't match the entry on the Excel sheet. They meant to type 100, but due to a clerical error, they accidentally typed 1000. They didn't calculate the total charges on the Excel sheet correctly. So the total shows 600 when really 1200 is the correct amount due. Very common; they didn't list a submitted receipt on the Excel sheet, so now they have to submit another report for this receipt.

Mistakes cause delays in the approval process. And now the manager is waiting for more reports to be submitted and mistakes to be corrected so they can get accurate numbers to track expenses against the project budget. If the project has already ended, managers really need these numbers so they can review and bill the client for any reimbursable expenses they are responsible for. So any delays in the expense process at this point, delays billing the client.

I always recommend using a cloud-based system for tracking expenses. I usually suggest Expensify. The initial setup is quite easy. It syncs with your accounting system, so it is able to import the most current chart of accounts as well as your customer names. So consultants are able to match expenses to the correct account as well as the correct project when coding expenses. Consultants are able to snap pictures of receipts via the Expensify app on their phones. So it's able to actually recognize a good portion of those receipts and populate store names, as well as amounts automatically.

For managers needing to track expenses against budgets in real time, you can set expense reports to auto submit. So if you want reports to be submitted every Thursday, of course, make sure you tell your consultants about the weekly deadline so they can add their receipts and code their expenses in Expensify, then on Thursday Expensify will pull in those receipts and expenses and automatically create a report for each consultant and submit it to you for your review.

Any mistakes on the report, you can reject the report back to the consultant in Expensify with a note that explains why you're rejecting it. Most mistakes with this method of submitting expenses are usually around account coding mistakes. So you should always take time to explain the account coding system to your consultants to cut down on these kinds of mistakes. But with this, usually with Expensify, most mistakes are able to be corrected the same day or next day and the expense reports are resubmitted.

Once the reports are approved, the next step is to export the reports to the accounting system, which you can do with the click of a button.

The expense report will retain the account coding and the customer job coding from Expensify once it reaches the accounting system. From there, you're able to generate various reports, which reflect the expenses to date. Managers can use these reports to track and analyze expenses against the budget.

Once you reach the end of the project, you can use the same reports to determine how much to bill the client for reimbursable expenses.

There is a lot more I can touch on with expense management, but these are usually the main concerns in a project-based environment.

To recap: A manual expense management system via an Excel template or Excel sheet is likely to be a slow process with mistakes, which will cause approval delays. These approval delays won't allow managers to track expense budgets in real-time. A cloud-based expense management system is the way to go. They are intuitive, which cuts down on mistakes, and an automated submission process will allow managers to have access to expenses and analyze actual expenses against project budgets in real-time.

That's my two cents on expense management. I hope switching to a cloud-based system eases your project expense dilemmas. If I've touched on some issues you are facing in regards to project expenses, as always, please feel free to reach out and discuss. The email address is info@proprojectbooks.com. Once again, that's info@proprojectbooks.com.

Stay tuned to the ProProject Podcast for part two of our four-part project bookkeeping and accounting series. The second part of our series will discuss contract management.

How detailed are your contracts? Do they specify project timelines, billing schedules, and payment terms? If you'd like an answer this question, or if you have any issues to share in regards to contracts, send us an email and we will incorporate a few responses into our next podcast. Responses can be sent to info@proprojectbooks.com.

This is Darell Brown with The ProProject Podcast signing off. Thank you for listening and Happy New Year.