26/01/10

By Andrew Jones, Expenses Software Specialist, Selima

It’s time to make some financial resolutions. With one of the worst recessions in history barely even thawing out, and many businesses looking at ways to save, expenses is one untapped area with massive recession-proofing potential.

This article gives businesses advice on how to reign in expenses during the recession.

The cost of bad habits

In the past, many organisations have taken a ‘laid back’ approach to expenses. A survey we conducted recently showed that only a quarter of finance departments and management periodically cross-check expense claims against company policy.

It’s telling that in most cases the task of signing off expense claims falls to time-pressed senior management, many of whom admit to not inspecting each one thoroughly. All too often, a demanding workload means managers at best only scan claims for obvious anomalies, before forwarding them to the payroll department. As a result, even if expenses policy is stringent, it may not be reflected in day-to-day operations, meaning organisations miss out on the opportunity for substantial savings.

Good habits and good fortunes

Over half the organisations we questioned reviewed their strategic stance on expenses in 2009 in an effort to cut costs, and a further 13 per cent have placed the issue high on their agenda for 2010. If you are wondering whether the potential savings are significant enough to warrant a crackdown on expenses, our research should leave you in no doubt. An overwhelming third of respondents announced successfully reducing their expenses spending by over 20 per cent in the last year.

Where to start?

Consuming an enormous 60 per cent of our respondents’ expenses budget, mileage claims are the most costly of employee expenses, but also the most commonly exaggerated. Salaries can be ‘bumped up’ by employees claiming reimbursement for more miles than they’ve travelled.

A simple way to start saving, is by putting a stop to any opportunities for ‘creative claims’. You can do this by putting in place software that calculates the most costs-effective route for vehicles to get from A to B

All work and no play...

Accommodation and entertainment take second and third place as organisations’ most costly expenses, according to 22 and 15 per cent of respondents respectively. While such expenses are key to maintaining good relationships with staff and customers, our survey highlighted the steps some managers are taking to minimise them.

For example, to receive a breakfast allowance at one organisation, staff must have started their working day before 7am and be at least 50 miles from their normal place of work. By identifying cost-saving opportunities and introducing more pragmatic policies, businesses can begin tightening their belts, without being too restrictive.

Check, check, cheque please

Many organisations don’t have a fail-safe system in place for checking expense claims. Mounting receipt piles and demanding workloads mean managers simply don’t have the time to examine each claim. Expense management software is one route for organisations looking to increase efficiency without putting more pressure on senior staff.

As well as relieving the burden of manually sorting, cross-checking and signing off expense claims, it eliminates the personal conflict that causes many managers to let excessive claims fall under the radar.

Start as you mean to go on

Over a third of our respondents claimed savings of at least 20 per cent or more thanks to making their expenses procedure more concise. As a result, businesses that aren’t yet on top of their expenses may wish to do so sooner rather than later.

Do you have a clear policy on what expenses do and don’t cover? Do you communicate this clearly to staff at all levels? Do you have an electronic system in place to process expenses and control spending? If the answer to any of these questions is ‘no’, you could benefit from reviewing your organisation’s approach to expenses. Make some simple resolutions now and your business will quickly see the benefit, with a leaner, more recession-proof 2010.

About the Author
Andrew Jones is a leading expert on the integration of human relations, expenses and payroll systems. As group sales and marketing manager at Selima, Andrew advises all sectors of the market on how to regulate and manage their business process to achieve better efficiencies and cost savings.