What every CPO should know about employee spend
While negotiating with suppliers to find the lowest costs and applying heat when necessary are part of a traditional role of procurement, many procurement leaders are being pushed to help their companies identify new and upcoming spending trends to innovate and contribute for a more profitable enterprise in the future, according to a recent Forbes article.¹ How can CPOs achieve this with their teams?
While transforming procurement and big data projects can be considered and sound impressive, many savvy procurement teams are simply grabbing onto the quick wins around employee spend. However, as they are looking at how money is being spent across the enterprise today, they are uncovering that 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. CPOs need to ask their teams: “How are we adjusting to this shift?” And, "What’s the cost of doing nothing?"
Companies who fail to connect all their processes and spending end up not being able to properly manage or forecast accurate spend. Hence, in the last quarter of a company’s fiscal year, the infamous memo is sent to all department heads to cut expenses to keep the business afloat. Quite often this spills into corporate travel managed programs and other spend, which procurement often oversees given its supplier role.
Other organizations, which 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 the 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. 2
So, what role should CPOs and their teams play to better grasp true spend across their organization? Here are three questions every CPO should ask their teams:
1. As a first step, are we connecting our travel management data and expense data together so we can get an end-to-end view of actual spend?
Looking at trips booked and actual spend is a first step in getting better control and insight into true employee spend. While this may seem like a simple analysis, reporting on this spend can be challenging when two different internal teams with different priorities own the process and, worse yet, the data sits in separate silos. Sometimes this data sits outside the company within vendor usage reports. Procurement can work with the various players in finance, travel, AP, etc., to lead an effort to aggregate this data, bringing visibility to the business and various internal stakeholders. This can save money, provide better data to manage and forecast spend and help negotiate better terms with travel suppliers and vendors. Empowering various stakeholders with visual dashboard reporting that shows actual and forecasted spend inevitably helps keep costs down.
2. In what channels do employees have to spend company dollars, and what systems are tracking this spend?
Many would agree that employees are using more and more channels to pay for goods and services with credit cards, ghost cards, virtual cards, checks, cash and P-cards. These multiple payment methods are likely managed by multiple systems that probably don’t connect or share data. Conducting an assessment of channels and how a company is tracking each of them may help you identify the size of this issue. Most likely, automating each and every part of the spending process, starting with expense and then moving to travel, non-PO spend or invoice, and connecting those processes and all sources of spending can be a next step. At Concur, we’ve seen that digitizing data is at the forefront of many C-suite leaders, and some savvy procurement and finance leaders are connecting spend within this corporate initiative, sometimes referred to as “big data.”
3. Are we using new ways to capture all employee travel bookings outside of our traditional corporate travel process, and are we making it easy for employees to share their spending details?
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 actual spend without chasing the traveler or pushing another policy on them. Also, companies need to arm employees today with mobile, consumer-like experiences as they spend so companies capture accurate 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
There is also strong evidence that shows how much more productive employees can be when credit card data feeds directly into expense reports, or they can be populated by receipt images. For example, IDC research4 estimates that companies that go beyond automation and take advantage of an ecosystem of value-added partners end up with a 49% time savings on travel planning, 70% time savings on expense reports and 35% more employees complying with internal report and travel rules.
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?
¹ Forbes, The Supply Chain Transformation, Jonathan Webb, December 2016.
² Oxford Economics, How Finance Leadership Pays off: Effective Spending Management Boosts Performance, July 2017.
³ Forrester Report: Financial Leaders Must Embrace T&E Solutions Strategically to Drive Growth and Innovation, Chris Taylor, September 2016.
4 IDC Report: Driving Business Value through Travel and Expense Management maturity, January 2016.