When It Comes to Managing Budgets in Uncertain Times, Hope Is Not a Strategy.

For small and midsize businesses, employee spend is often the largest cost after payroll. And no wonder. With less capital and fewer (or smaller-sized) shared services for managing IT, travel, purchasing, and even HR, more spending is done at a line-of-business level. This spending shows up on employee expense reports.  

Thanks to adoption of decentralised spending using personal or corporate credit cards, employees have been empowered to make all types of purchases – from travel plans and event space reservation to office supplies, entertaining and cloud software. This freedom has helped businesses grow faster and be more agile and responsive to new needs and opportunities. But it has also contributed to budgeting blind spots – which are a real liability during times of disruption and uncertainty, when proactively managing spend and controlling costs is critical. More than ever, finance leaders can’t hope that money is being spent where it’s most needed and in alignment with the company’s current strategy. To manage the business, they need to manage change, respond to unforeseen challenges and opportunities, and keep cash flowing to where it’s needed most. This requires having accurate, current, and real-time visibility into:
 

·       Exactly where company dollars being spent by employees are going 

·       Whether discretionary purchases are compliant with organisation policies and government regulations  

·       Potential overspending so it can be stopped before it’s too late 

·       When there’s underspending in business-critical or strategic areas that could hurt business stability, prevent  realisation of goals, and result in lost opportunities 

·       How spending supports and enables the current business strategy and departmental priorities 

As explored in a new paper from SAP Concur solutions, to get the most out of your budget, all associated costs must be assigned as soon as dollars are requested or spent. Even planned expenses can be further controlled and tracked proactively using pre-spend authorisations. What’s key is ensuring timely postings of spend – and planned spend – to budgets so you always have an accurate understanding of how much budget is currently available. Without this visibility, your budget is essentially useless for making informed, strategic decisions about things such as: 

·       Boosting capacity to meet market demands 

·       Making investments to meet increased competition, improve the customer experience or to operate more efficiently 

·       Hiring or laying off staff 

·       Adding a new product or service 

·       Opening or closing locations or expanding into a new industry 

Staying within budget also provides you with the agility needed to manage uncertainty  – both good or bad. Knowing how much money is in the so-called pot can help you mitigate negative circumstances, as well as take advantage of unforeseen opportunities such as a spike in demand or acquiring production materials in bulk at historically low prices. In such instances, decision windows are often short, so it’s vital that you, as a finance leader, know with confidence if you have the financial resources to take advantage of such opportunities. Because when cash is strained, it’s easy to fall into the trap of extending credit through loans and additional, uncontrolled credit card purchases.  

Precise, up-to-date accounting of incremental employee spending against budgets also helps you plan an accurate budget for next year. Have you ever just added 10% to the current budget and hoped that it would be adequate? If so, how did you justify that amount? When you have accurate, complete, and current records of what employees spent this year and on what, you can better define next year’s budget – and make the most of the financial resources you have. 

The good news is, digital technologies for travel, expense, and invoice management can vastly simplify how you capture discretionary employee spend data – accurately, in real time, and holistically across all lines of business and locations. SAP Concur solutions, for example, equip you to actively manage costs so you can effectively adapt and respond as things as they change. 

Want to learn more about the power of budgeting to gain clarity and stability in the current business environment? Read the new white paper from SAP Concur solutions: “Creating Certainty in Uncertain Times: A simple equation for thriving no matter what.”