The Successful Consulting Series is a set of articles that are being written to both, help decisions on joining the consulting field and also, help existing consultants in their professional development initiatives. Please visit, “Successful Consulting Series” for a full listing of each part in this series.
As a consultant working independently or for a consulting company, expenses can be one of the hardest and most easily forgotten aspects to managing yourself. There are a few techniques and habits you can take on to help this aspect to consulting that will make expenses something as easy as entering your hours billed. In saying that, I’m imagining all the consultants thinking, “Urgh! I forgot to track and enter my hours this week.”
Time as an Expense
If we look at expenses like time, we could make a comparison to expenses being a loss in time worked if they are not tracked. In my last consulting position, a portion of cell billing was paid for monthly. Although this was an expense I did use, I often failed to enter that simple report to request it be reimbursed. Why? Really, it’s money going out of my pocket that could be paid right back. The problem was something we could compare directly to time management (which we will talk in great deal about in a later post in this series). Before discussing my own failure on this simple process, let’s look at billable time compared to the cellular expense. Let’s say the reimbursement was $75. That could be, for some consulting companies, a billable hour. (If you are really cheap…I kid!) So we can look at the cell reimbursement as if it was one billable hour. So why do most people see a billable hour paid to them as much more than the task of getting the $75 back when they’ve already paid for it? I’m sure laziness can be one factor but more so, it’s simply a time issue and conscious ability to force yourself on a schedule to submit all those expenses. Most expenses have a limit on when they can be submitted. So if that time limit elapses, you are not capable of submitting them any longer. We see, all things come back to time management. For expenses it is simply a task of scheduling yourself to manage those tasks.
Since an expense report is not per se, a working task, it is a task that must be enforced. Consultants, even if they don’t admit it, work for free a lot. Now, working for free has its returns. – long-term relationships with clients and overall utilization that enhances our careers. It does do a career some good by the fact, as a consultant, you technically will work for free at some point. Working for free aside, expenses and not promoting a scheduled mindset to ensure they are logged and submitted on-time, is on the other side; you are paying to work. Now that is one thing I know consultants do not like.
Independent consulting holds a completely different variation and critical nature to expenses. I’ve worked independently in the past and run my own consulting business. Although that business was simply me, expense logging and submitting (to myself) was even more critical. The expenses paid out had an extreme impact to the thing we love so, tax time. Without expenses in the factor of being independent and running that consulting business, I’m fairly confident taxes would have caused each year to be a complete loss. Of course, that business was run while working a fulltime position also. So billable hours were only 20-30 a week and the hourly rate that early in my career was fairly low. Nonetheless, the expenses were absolutely critical.
Tools to Help
There isn’t just one set of tools to help you maintain expenses. There are a plethora of tools out there though and many of them easy and free. Tools will work for both consultants working for a company and independent consultants. Independent consultants may pay for more functional tools, the concept of managing the expense is still the same. As a consultant working for a firm, I still manage expenses on my own. This is done even when there are tools provided in which the expenses are submitted for reimbursement. The reason this is done is a conscious need to manage them so they are not lost. We do not like to pay to work. So don’t do it.
A good example of tools to manage expenses: While traveling, you may forget to keep track of expense more so than a schedule cell reimbursement. To combat this and to make an effort to make it easier to track and not forget expenses, I adopted a tool called Expense Manager for Droid. The app is free and extremely basic. The best part of the app is, it is a few clicks to saving an expense. This allows later review of that expense being paid out. The other nice thing about this app and apps like it - you can categorize the expenses quickly. Categorizing the expenses is a major factor as it will be a factor in the reimbursement process.
Of course, receipts are another story but saving those is as easy as having 4 pockets in a pair of jeans. Really, save receipts for everything. Over the years, I’ve gotten so into the habit of saving receipts, I save them for everything that isn’t work related. That habit forming has made managing expenses so much easier. Smart phones have made this even easier. Scanning apps can be used to scan the receipts right into your phone and email them off. Just don’t lose your phone while traveling.
Travel and other major expenses can be hard. Travel can lead to expenses like hotels and rentals. They are expenses far beyond the $40 cab that you needed to get from point A to point B. . Hotels have gone up in cost greatly over the last 10 years as well. Depending on where you are traveling to, a hotel can be $200 a night. Over a week, that adds up. When dealing with these expenses as an independent consultant, you’ll weigh in the clients paying ahead for them or having a surplus of funds set just for travel. Then the expenses are billed back to the clients. When a working for a consulting company, that is typically not the case. Typically you will pay the expense and be reimbursed, like anything else. That means, if expense are processed once a month, you have to manage this carefully. Set aside a credit card or surplus of funds just for the expense. Yes, you will get reimbursed but what if it isn’t in a time that meets a credit card billing cycle? Timing is everything in this respect. You do not want to be scrambling to find $4000 for a long trip at the last minute because you will not get reimbursed in time.
Don’t take all this as consulting companies are heartless and cold when it comes to you and your expenses. I’ve never worked for a company that wouldn’t bend if they are asked due to timing of things. It is usually in their best interest to make the evolution of a statement of work a success. That includes your ability to maintain financial stability and not have instability from working. We do work to pay bills, support our families and do the things we like; not to go in debt and have bad credit.
I’ve covered a lot in this post. Utilize applications, even Excel, to manage expenses better. There are far too many free and easy to use applications these days to not find one to help manage this task. Making a conscious effort to schedule the time or administrative efforts to manage and submit expense (even if they are tracking as an independent consultant), is absolutely critical. If you do not make an effort, time passes and expenses are lost. Again, we are paying to work at this point.
Travel and all other major expenses should be treated as a different level of expense. Ensuring timely payments are made in conjunction with reimbursement schedules is critical. If time is simply not working on a major expense, work with your consulting company to find an alternative or as an independent, ensure a surplus is on hand.
The last thing we can afford is consulting being a hindrance on ourselves and our families. With a little management and effort, just like the effort we put into our consulting work, expenses will simply be a task that gets done and not a problem.