Some finance teams may feel they have employee spend well managed across their organization. Reports are being sent to the CEO’s desk and, at a high level glance, they seem to be in order, within budget and pass muster.
Yet, as we look at how money is being spent across enterprise organizations today, there’s a real shift happening: Employees are spending more money across more spend categories, and using more payment methods than ever before—including, credit cards, ghost cards, checks, cash and P-cards. Additionally, all of these payment methods are likely managed by multiple systems that don’t connect or share data across the organization.
CFOs need to ask their teams: “How are we adjusting to this shift?” And, "What’s the cost of doing nothing?"
In extreme cases, a disruption to the business could happen. A multi-million dollar FCPA or global tax violation puts the enterprise at risk with its reputation, shareholder confidence or financial health. Hence a costly “all hands on deck” exercise ensues, which uncovers that part of the disruption arose from the finance team not having true visibility and control over how employees are accessing, reporting and spending company dollars on its behalf. Employee initiated spending is spread across multiple budget line items, so it’s more complex to manage.
Other organizations, who are fine with the status quo and fail to adjust, end up being less profitable. Recently, Oxford Economics Research surveyed 1,500 financial leaders globally and revealed that most profitable companies are the ones most likely to use analytics, and 82% of companies with profit margin growth above five percent find T&E spending analytics extremely or very useful.
So, what should CFOs and other senior finance leaders do to better grasp true spend across their organization? Here are three questions every CFO should ask their teams:
1. Does our travel and expense solution easily connect to other financial systems either through native integration or pre-built connectors to provide up-to-date financial data?
Get a “quick win” in the financial transformation movement to the cloud by revisiting travel and expense processes and technology. A first step in getting better insight and control over employee spend is to review your current travel and expense spend. A Gartner research report recommended companies look outside of ERP systems: “Don't be afraid to purchase a TEM product from a vendor other than your ERP or financial management provider. Many established TEM vendors have experience of integration with many ERP/financial management solutions. TEM is a well-proven example of postmodern ERP in action.”
2. Are we making it easy for employees and their managers to comply?
Employees today expect mobile, consumer-like experiences at work. If a company is not delivering the tools and functionality they want, and thrusting a frustrating, inefficient process on them, companies will have trouble capturing accurate spend data. A Forrester research report found that, “Employees are embracing new digital capabilities in their personal lives to make purchases, and they now expect their employers to support those same capabilities as they relate to employee-generated spend.”
3. Are we using new ways to capture all employee travel bookings outside of our traditional corporate travel process or tool?
Despite strict travel policies and procedures, employees are booking travel outside of company guidelines whether for convenience, cost or business need, and getting reimbursed for it. There’s definitely a “leakage” issue that exists in every company. Also, fueling this missing data are travel suppliers putting millions of dollars into clever marketing and loyalty programs encouraging your employees to buy directly from their airline, hotel, taxi service or short-term lodging. There is new technology that can help companies uncover this “leakage” and reconcile it with spend to ensure finance teams are aware.
To learn more about key spend trends and risks you can’t afford to ignore, watch The Cost of Doing Nothing: What is the Status Quo Costing You?