4 Steps to Turning Your Expense Data Into a Powerful Asset
Is your travel and expense data difficult to leverage because it’s inconsistent and incomplete?
Is it nearly impossible to meet your budget, because your employees are spending too much on certain expense categories, like hotels or client dinners?
Or, is it challenging to make business decisions or to negotiate better deals, because you’re not taking advantage of aggregated spend?
Regardless of your scenario, your frustration is likely exacerbated by the fact that these issues are affecting your company culture and your bottom line.
Stop the madness right here and now.
Follow this four-step process to get better expense data, and leverage it for business impact.
Step 1: Input accurate, timely and integrated data
In a 2015 study by PayStream Advisors, 56 percent of businesses said that cost reduction is their top focus for improvement this year, while 41 percent said overall process automation was among their goals.
Why not cross two hurdles with one leap? If you’re serious about controlling expenses, process automation is where to start. When you begin to collect quality data, you lay the foundation of the analytics needed to determine where to cut back, find cost-savings opportunities, justify expenses and/or find areas where you should invest more.
A few tips to get you going:
- If you haven’t already, establish your expense policies. Make it as easy as possible for employees to comply.
- Determine your business process for how your organization wants expense reports completed, submitted, approved and reimbursed. (i.e., Is it mandatory for there to be a “bill to” identified if you’re billing it to the client? Or, when is it necessary to associate a client with an expense?)
- Determine and enforce standard nomenclature for data entry (including things like how to enter airline, hotel and car rental names), so expense data can be accurately aggregated and analyzed.
- Request details on all necessary transactions, so you have a checks-and-balances system in place.
- Educate both employees and managers on your expense policy and process.
By establishing policies and processes before implementing a new technology, you can help ensure your procedures are driven by business objectives. While technology automates and provides efficiencies, it doesn’t create process.
Often, with the help of expense management software you can:
- Add policy enforcement tools to enforce your expense policies and standard nomenclature.
- Rather than relying on printed receipts that are easily lost, snap a photo to digitize copies.
- Directly integrate your credit card transaction information into your expense report to avoid manual input errors.
- Tie your expense management system to your accounting system to get a real-time look at all your finances.
With a system in place, you can capture expense data correctly and efficiently at the point of entry while concurrently enforcing expense policy. Your data will finally be in a state where you’re able to use it to make informed business decisions.
Step 2: Analyze your data
Now for the challenging part: How do you make the numbers speak in a way you quickly understand?
Get started by aligning your people, process and technology. Create an analysis system that makes digesting complex information possible and palatable.
You’ll want to slice and dice data according to your company’s goals and objectives. However, before you start churning out reports, identify who the right person is to develop your reporting criteria.
Turn to a professional with the right level of analytical skills to deliver the insight you need. If you don’t already have this aptitude within your team, you’ll need to outsource or hire new talent, or work with a financial analyst or consultant.
Data analysis is all about making comparisons. To make data meaningful, you have to put it into context to make it relevant.
When you determine what matters most to your business, you can see the correlation between that business driver and your actual data. It’s at this juncture where you can gain the insight you need to make informed business decisions.
Not sure where to start? Here are a few examples:
- Compare actual spend to budget
Monitor your employees’ spending in real time so you can make adjustments as needed to stay within budget.
- Compare actual spend to a benchmark
Compare spending from one department to another, or keep tabs on the costs of similar projects. If you can get access to the data, you can even compare yourself to industry averages or a specific competitor.
- Compare actual spend to revenue or profitability
Help to ensure your spending is generating a return on investment. For example, understand who your most – or least – lucrative clients are, and discover where you can and cannot justify travel spend.
- Compare actual spend to trends
See an emerging trend in your data? Monitor it over time to see if there’s potential for a cost-saving opportunity with a travel vendor. When you can show a travel vendor evidence of your company’s travel with real data, you can make a good case to negotiate better rates.
Ready to leverage your expense data? Get it into a format that allows for quick viewing and interpretation.
Good expense analytics technology is built for this purpose and should include conditional formatting and data visualization tools.
For example, conditional formatting will keep you focused on your key business drivers so that data that’s pertinent to your objectives jumps off the page.
Or, like traffic lights, a color-coded data visualization tool will help to quickly direct your actions. When it’s green, you’re in the clear. When it’s yellow, you stay vigilant. When it’s red, you hit the brakes on spend.
Regardless of the system you use, your expense reports should provide you with a consistent, timely and intuitive way to analyze your data.
Step 3: Make business decisions
Typically, with business intelligence in front of you, you will make decisions based on three scenarios:
1. Does the data reaffirm what you thought?
Just because it appears you’re doing things right, doesn’t mean you shouldn’t challenge yourself and ask questions.
Consider why this may have occurred. For example, is your expense budget too generous? If so, there may be an opportunity to tighten the belt.
2. Is the data better than you thought?
While this might feel like a time to celebrate, still ask yourself why this is the case. Similar to the previous scenario, there may be an opportunity to make changes.
Is the result simply an anomaly, or is it a positive trend? If your data is trending positively, you may assess how you could do even better, or begin to explore how to apply this information elsewhere for the same positive result.
Say, for example, you changed a travel policy with the goal of reducing your average hotel stay by 10 percent per night, but your data shows a 20 percent reduction per night. You might see how you can similarly apply your approach with other vendors to save even more money.
Or, you may even look to see where unspent funds can be deployed.
3. Is the data worse than you thought?
Before you sound an alarm, be sure you understand your data.
Again, is it an anomaly, or has your spend data been trending this direction for a while? Does it correlate with bad planning? Is it isolated to a group, department or individual, or is the problem widespread in your organization?
At the very least, consider this a yellow light situation, indicating you should move forward with caution.
If it is truly a red light scenario, you should take immediate action to rectify it. Unlike traffic lights, red lights in a business often mean your company is hemorrhaging cash.
You might spot a need to implement a new spending policy or a new process. For instance, you could require employees to get pre-approval on spending so you don’t discover a large expenditure after the fact.
Step 4: Make operating adjustments
Once you’ve made a business decision, you need to determine if a change in your business process or expense policy is necessary.
If your data was within acceptable ranges, your business decision may be to do nothing. If you see trends, problem areas or potential opportunities, let those guide you in your decision.
If a change is necessary, keep in mind that making operating adjustments is often the most difficult part of the process, as transformational initiatives most often fail during the implementation phase. Handle this with great care.
A few tips for getting started:
1. If a business process change is warranted, determine what type of change is necessary.
Ask yourself: Is it big or small? How many people will it impact? Will you roll it out in a big bang or an incremental manner? Think it through, plan thoroughly and tactfully execute your plan.
For instance, train your managers and employees on the new policies and processes, and be sure to explain the business impact of non-compliance.
2. Assess how quickly you think your company can adapt to change.
If your organization is agile, it may be a quick process. If your company struggles with adopting new business practices, you need to allow for more time and increased communication before you can expect see results.
3. To get buy-in, implement your operating adjustments according to change management best practices.
For example, help your managers and employees understand why the change is necessary, the potential business impact and how it will affect day-to-day routines. It’s amazing how people will buy into change when they understand the “why.”
Provide an outlet for employees to ask questions, and be sure to give your team the adequate time needed to adjust. If change management isn’t your strength, consult with your HR team, or reach out to a consultant for assistance.
To quickly recap, here are the four steps to preparing your data to leverage:
1. Input accurate, timely and integrated data. You can’t leverage inaccurate and untimely data.
2. Analyze your data. Analysis requires comparisons, so you must compare it to a meaningful metric.
3. Make business decisions. Know your business objective, and just do it.
4. Make operating adjustments. Engage your staff with change management best practices.
Need help with expense management or evaluating your expense data?
Insperity® ExpensAble® technology and advisory services can help you control your expenses, analyze your data and help you make the right operational decisions to drive the success of your business. We’re not just another software provider; we’re here to help you turn your business data into a powerful asset.