As we find ourselves tumbling toward a global financial crisis, every business is taking a second and third look at expenses going out the door to make sure they really, truly need them. Based on more than a decade of experience processing billions of dollars in expense reports for the top startups in Silicon Valley, here are the high-level keys to keeping costs low and managing expenses: hire people you trust, keep policies light and flexible, and invest in experiences that bring your team together. On the tactical side, get your travel policies in order (you know, when travel is a thing again), give everyone a smart corporate card and be honest about what really matters. These should all start way before the point of scouring spreadsheets for savings — and as a startup, you have a chance to get it right out of the gates. Invest now so you don’t have to cut later.
Quick background on me: I started programming when I was six and spent the early days of my tech career building 3D graphics engines for video games. Eventually, I ended up working at Red Swoosh, a startup that Akamai bought just in time for the world to descend into the 2008 recession. Since then, I’ve been focused on relieving the world’s frustrations one expense report at a time. I’ve come to see how more than a million companies handle billions of dollars in expenses, and I’m here to give you some of the best expense-management tips I’ve picked up along the way.
Hire people you trust
Rule zero of expense management is to hire people you trust. If you trust your team, you don’t need to micromanage expenses. If you don’t trust your team, no amount of micromanaging expenses will matter. Expense tools aren’t lie detectors or mind readers; they exist primarily to catch mistakes, not criminals.
Keep policies light and flexible
Expense management is the one area of business that everyone despises. Employees hate it, finance teams hate it and you’re clenching your jaw just thinking about it. It can quickly devolve into a whole system of internal policing that stresses finance teams and makes employees resent management for treating them like kids with allowances. Make expense policies as flexible and automatic as possible — let people have that extra hour in the evening with their kids instead of looking for receipts. Take the burden off of employees and they’ll be happier and more productive as a result.
Invest in experiences that bring your team together
When it comes time to tighten up, cut the flashiness first: carbon fiber ping-pong tables, fancy nap pods and luxe gym memberships. At Expensify, we don’t give a general gym and fitness stipend. Why? Because we found that less than half of people actually used it, so it became a reward for some people over others — compensation is the place to do that, not perks. If you’re not confident a perk is being used by 90% of the company, then it’s basically a randomized bonus.
Instead, invest in experiences that bring your team together — that is, assuming we aren’t in the midst of a global lockdown. For example, we reimburse employees up to $20 for lunch every day, no questions asked, and I’d fire myself before I got rid of that expense. This means employees can go outside, enjoy lunch with their colleagues, support local businesses, forget awkward budgeting and bill-splitting and avoid becoming a cafeteria captive whose weekly highlight is Fishstick Thursdays. We’ll also cover $75 per person for any activity, from a fancy dinner to an escape room to a comedy show, as long as you invite the whole company on Slack. It encourages bonding outside of work, and creates better working relationships and even real friendships. No one would say that all this doesn’t make people happier and more productive at work.
Of course, with the current pandemic, we’re adjusting to a temporary “new normal” in personal and professional life. Now more than ever, flexibility and understanding should be your guide. For instance, we’ve adapted our daily lunch benefit into an alternative option: we’re offering employees $100 a week to cover groceries while they work from home. Even with simple tweaks like this to existing policies, we know we’re helping our employees feel comfortable at home during uncertain times, which can’t be undervalued.
Centralize travel booking decisions
When business travelers take to the sky again — and costs inevitably creep up — first-class travel is typically the first thing to go, but most people don’t realize that the hotel stay typically costs more. There are way more options for hotels than flights, which means more opportunities for saving. But finding those savings takes time better spent on real problems. Help employees help you by having strong guidance — automated, if possible — on bookings (e.g. preferred airlines or hotels, expected ratings) to shepherd your people toward reasonably economical options. Centralize travel booking responsibilities to one or a few people, depending on scalability. Having experts who know the best options saves time, money and frustration across the organization. Most of all, it circumvents a thousand needlessly tense conversations with the people you depend on.
Give everyone a smart corporate card
Old-school corporate cards had such weak controls they were often seen as a “license to kill [your budget].” New corporate cards are tightly integrated into the expense management process and dramatically reduce the invisible financial exposure from months of unsubmitted expense reports (which have a way of being submitted right at the worst time).
Additionally, they provide great record keeping, instant compliance and continuous reconciliation. The real savings of rolling out a modern program at a midsize company isn’t measured in dollars saved but headcount freed up to work on higher-value tasks. Don’t fool yourself into thinking that making your employees submit for reimbursement gives you control: it just magnifies your risk, increases everyone’s workload and pisses off your best people who realize you are just forcing them to give you a zero-interest loan they pay credit card interest on. Hand out corporate cards like candy — $100 will cover most individual expenses — and sleep better knowing this is taken care of.
Be honest about what really matters
Little things make a big difference: good snacks and good coffee are absolutely necessary for a productive and enjoyable workplace. Cut your own salary before you get rid of those. Proper ergonomic chairs and desks are also essential — the literal tools of today’s trade.
At the end of the day, no amount of “perks” will compensate for a fundamentally bad work environment. The best way to save money is to hire the fewest number of the best, most trusted people you can find, equip them with the best tools and then watch them actually enjoy the challenge of the work itself. Because headcount is your only real expense — the one expense you can’t delay payment on. Don’t miss the forest by squeezing the trees: generously pay the smallest team you can tolerate, and view hiring less like basketball and more like golf: WhatsApp only had 79 employees when they sold for $12 billion, why do you need more?
And if the time to trim down comes, carefully consider what each expense in the column actually does for your employees and how they work. Great people don’t come cheap, but they come way, way cheaper than the management overhead of a fundamentally unsatisfied team with constant turnover.