The corporate structure is organized by departments of function — sales, marketing, accounting — each with their own set of needs and expenses. Within those divisions could be employees scattered around the world, with costs that vary by location. And even within those locations, there may be employees that have unique situations that require different degrees of spend. For a finance manager, identifying cost saving opportunities and forecasting budgets in this environment is nearly impossible in companies that still use traditional expense reporting.
Controlling Expenses By Department
One of the spending requirements of a sales team is traveling to conferences and entertaining current and potential clients. Everyone on the team has the same needs: food, lodging, airfare, and incidentals such as Wi-Fi and other transportation. It is the responsibility of the company to establish expense policies that define how much money is allowed to be spent. While a suite at the Fairmont might be close to the client’s office, the company may have a partnership with the Hilton down the street that costs half the money.
On the contrary, the Human Resources department has an entirely different need for their travel. Recruitment trips, career fairs, and company outreach programs all require spend, and multi-city travel means a lot of small receipts that pile up, much of which is cash fronted by the employee. Companies are forced to pay whatever the employee shows receipts for, which means the employer does not have control of the spend before it happens. With a prepaid expense debit card that syncs with accounting services, employers can implement an expense reporting system that becomes the Trojan horse of operations.
Comparisons Help Illuminate Potential Savings
You don't have to segment your funding decisions just by department. As in the example above, you may want to isolate how much money is being spent on meals, across every division. Or, you may want to compare the hotel costs of your West Coast employees versus your East Coast employees. Dicing and slicing these variables, and compare their activities:
- Did a travel destination influence spend?
- Are individual employees allocating their expenses responsibly?
- Is money being spent on entertaining clients or on per diem meals?
- How many people are drawing from this budget?
The more you know about how employees are spending their funds, the easier it becomes to encourage mindful spending decisions.
Planning Works Both Ways
Armed with segmented data, you become a corporate scientist. Finance managers and bookkeepers should be looking for ways to tweak the formula to maximize cash flow and revenue while reducing travel expenses. It might be obvious that the Sales department would need more funding than Human Resources, but your accounting team would be able to track and analyze that data in order to make sure that spend is being connected to sales.
Employers can adjust departmental funding to suit each employee's needs, but it's also possible to encourage your employees to plan better. Holding each individual accountable for their own budget instills trust and ownership – and responsibility for cutting costs becomes a company-wide effort.