We’re getting towards the end of the second quarter, which means that public companies will soon be doing their earnings calls and press releases. If you’ve ever read these, you’ll see that they’re full of jargon and code-words. One of these is “expense management,” which is often code for “cost-cutting,” which in turn often means “job cuts.”
While public companies’ shareholder obligations force them to disclose this, private companies are certainly not immune. And regardless of whether an organization has 100 or 100,000 employees, if it needs to reduce operating expenses, the first step – long before benefits cuts, staff reductions and other drastic measures are considered – should be to see how wasteful spending can be reduced without negatively impacting operations.
Related: How Can You Maximize Expense Policy Compliance and Maintain Traveler Happiness?
While this may seem straightforward, it can often be the case that old spending habits die hard for many employees, and changes can be slow and have limited impact, without the right programs in place. Even though most wasteful spend by staff isn’t deliberate (such as only ordering small quantities of office materials, thereby not securing volume discounts, or staying in hotels with which the company doesn’t have a pricing agreement), sometimes those best intentions need a guiding hand to help them along the way.
Here are some straightforward steps that any organization can take to cut the fat:
- Reduce unnecessary travel: can a meeting be done via Skype, Webex or some other virtual method, or does it need for all attendees to be there in person? For probably 75% of meetings, the latter is the case. Investing in higher quality videoconferencing cameras and microphones in the corporate boardroom to make videoconferences more effective could pay off quickly in reduced travel costs.
- Keep a closer eye on travel costs: while cutting travel is a good start, many trips cannot be avoided. However, there are some obvious steps that can be taken to reduce travel costs, such as tightening the criteria for trips that can be taken in business class. However, there are several other ways that unnecessary costs can be eliminated:
- Analyze travel spend and work with hotel chains, airlines and car rental companies to negotiate volume discounts. Keep track of this spend and renegotiate each year to leverage deeper discounts.
- Identify and reduce / eliminate out-of-policy travel expenses by implementing an expense management solution which enables travel managers and finance teams to only reimburse approved expenses.
- Leverage an online booking tool to guide employees to make smarter travel decisions, by eliminating the ability to book more expensive flights.
- Consider pre-approvals for all business trips. Employees will often make good decisions if they know their travel choices will be scrutinized before take-off. And it really helps when you have an expense management solution that reminds business travelers of spending caps and preferred vendors for hotels, flights, rental cars, etc.
- Keep better track of invoices: if your invoices aren’t all processed centrally, tracking what’s been spent, where it’s been spent and whether all invoice have been paid becomes significantly more difficult. This can lead to a range of issues: accidentally paying invoices twice; incurring late payment charges from vendors; and, of course, simply losing hard copies of invoices as they pass from approver to approver. Automating this process not only reduces the amount of employees’ time spent processing invoices, but also enables organizations to eliminate the other challenges presented by manual invoice processing.
- Identify and reduce spend inefficiencies: Centralized tracking and analysis of purchase orders and invoices can also help organizations to spot – and therefore eliminate – inefficiencies in spend, as well as enabling AP teams to negotiate vendor discounts. Having PO and invoice visibility outside of the direct approval chain means that decisions can be made on a company-wide basis, so lower cost bulk purchasing, or volume discounts can be secured.
Although there are certainly countless other – often more drastic – ways that expenses can be reduced, an organization’s first option should be to identify ways to cut wasteful or inefficient spend without the need to impact operations or staff morale. By enabling finance teams to easily spot and analyze areas of inefficient spend, and proving actionable intelligence to help reduce this spend.
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