Why Your Expense Management Strategy Should Be Capabilities-Driven

Cost-cutting initiatives are a cyclical phenomenon for most companies. Why? Because after the "appropriate" measures are taken, resource allocation policies remain the same.

There's a smarter expense management strategy. Today, more companies are taking control of expense management by adopting a capabilities-driven approach.


What is a capabilities-driven expense management strategy?


In his post, A Better Way To Cut Costs, Forbes contributor Josh Peters describes a capabilities-driven strategy as entailing “shifting resources toward activities that support your differentiating capabilities and away from others that don’t.” Capabilities-driven expense management is not a one-time initiative that works its way from the top down. Rather, it is an ongoing evaluation that aims to allocate finite resources to the activities that offer the biggest return.


A capabilities-driven expense management strategy is not quickly implemented or optimized. As Peters notes, “to channel resources to these differentiating capabilities, you’ll need to adjust every aspect of your organization, from formal structures and processes to informal work habits and mind-sets.”


Here are three areas of focus that can help your company adopt a capabilities-driven strategy for expense management.

1.) Do you have the information you need?

Do you have the right information when you need it most? Choosing the right expense management software can help your company leverage information in the following ways:

  • Integration with hundreds of expense, travel and data apps allows users to make real-time decisions with confidence.
  • Users can gain access to up-to-date, relevant insights from anywhere, at any time.

Using comparison data, companies can benchmark their expense management strategy against similar companies to determine success and areas for improvement.


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2.) Do you have the proper structure in place?

As discussed earlier, the reason most cost-cutting initiatives are cyclical, and are largely ineffective, is because they address costs without addressing the system responsible for cost overruns and ineffective spend.


Expense management software allows companies to leverage expense management policy best practices, while also tailoring the policy to the unique needs of the company and its employees. The right expense management solution eliminates the need for employees to police the policy (which rarely works). This structure shapes an effective expense management strategy from the outset.



3.) Mindset alignment


“If you don’t align mind-sets with strategic priorities, people will keep making resource choices that don’t prioritize differentiating capabilities,” says Peters. Having employees help create your T & E policy is a great way to gain buy-in. And compliance is more than automating the enforcement of your policy – it’s about empowering employees with the tools to take the perfect trip for both the employee and the company.


Your employees are making decisions all the time. You can take the heat off these decisions, enabling employees to make decisions that are good for the company and them.

See how better visibility, data analytics, and reporting can help your company take control of T & E spend. Download Forrester’s report, “The Power of Real-Time Insight.”


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