Hands Tied Over Expense Management

Most companies have a mandate to cut expenses—by an average of around 20 percent—but many lack efficient systems that would help them make such cuts.

A recent survey by Forrester Consulting, commissioned by American Express, polled 216 decision-makers in North America, Europe, and the Asia Pacific region who have responsibility for expense management. Although other recent surveys have shown cost control as middle-of-the-pack and falling in importance when treasury and finance managers are asked to rate a list of concerns, the Forrester survey found that three-quarters of companies are operating under a management mandate to cut expenses this year.

Forrester divided the respondents into two categories based on company size. It defined midmarket firms as those with 100 to 999 employees and large enterprises as businesses with 1,000 or more employees. Among respondents from large enterprises, 76 percent said their company is under a management mandate to cut expenses, and the average size of those cuts is 18 percent. Among midsize businesses, 72 percent of respondents said they have a management mandate to cut expenses, and by an average of 24 percent. (See Figure 1.)

Figure 1, with sourceline updated
 

For 62 percent of respondents, travel and entertainment (T&E) is the largest component of their company’s expense outlays. Technology is the biggest expense for 21 percent of respondents, telecommunications for 7 percent of respondents, and meetings for 5 percent of respondents.

One big challenge for survey respondents tasked with making substantial cuts to these areas of spending is that their processes and tools are inefficient. As the survey report puts it: “Firms that have fully automated other business processes have yet to make the same move with expense management.” In fact, Microsoft Excel is the software most commonly used for expense management among midmarket firms. Only 23 percent of large companies—and 10 percent of midsize organizations—use third-party applications built specifically for expense management. (See Figure 2.)

 Figure 2, with sourceline updated

American Express sees the combination of corporate cards and cloud-based expense management software as the key to achieving efficiency, reporting that the combination can provide expense managers with regular, automated updates; can reduce the cost of expense management processes; and can improve accuracy. A solution that achieved these benefits would resolve some of survey respondents' biggest concerns about their current expense management processes and systems, which include errors in expense filings, lack of real-time insight into company expenses, and poor-quality reporting due to data quality issues. (See Figure 3.)

Figure 3, with sourceline updated

Comments

Advertisement. Closing in 15 seconds.