Control Company Costs
What are the New Finance Spend KPIs You Should be Tracking?
It’s safe to say that employee spending patterns have changed dramatically. It means if you’re still measuring your employee spend programmes in the same way you’ve always done, you may not be getting the answers you need.
To explore what’s changed and why, we examined anonymised customer spending data from the past year from Concur® Detect by Oversight. The solution simplifies and streamlines auditing by automatically reviewing expense and receipt data to identify fraud, mistakes and policy violations. It shows us the key areas where you need to focus your attention right now. Let’s take a look – and find out how to keep them under control.
Managing and Mitigating Risk
On the face of it, the news is good. Total violations in cash value in 2021 were down 9.76% on 2020 due to a drop in spending overall. But the rate of violations increased from 2.68% to 3.33% - that’s an increase of 25% and certainly a trend to watch out for.
Familiar categories drove a portion of those violations. Excessive personal expenses were up 21.8%. Excessive missing receipts were up 58.6%. And as travel started to ramp back up, duplicate mileage submissions skyrocketed 2,127% from Q3 to Q4.
So what are the spending KPIs you need to be tracking to address these issues?
-
Cash spend vs card spend: watch for cash spending in categories where corporate cards give you better visibility, control and negotiating power – such as airfare, hotels and car rentals.
-
High-mileage spending: make sure employees who log lots of miles are using the right tools to track mileage accurately and identify more efficient modes of travel, when appropriate.
-
Misused spend categories – in the new world of hybrid working, employees may be purchasing items using personal cards that would previously have been bought centrally. Consider whether your spend categories have caught up with this shift.
Increasing Costs as Travel Takes Off
Travel spend is on the rise unsurprisingly because corporate travel is making a return. Airline travel grew 52% from Q3 to Q4 and jumped 368% between Q1 and Q4. Equally hotel spend was up 180% and restaurant spend was up more that 130% between Q1 and Q4.
These figures raise two concerns. Firstly, cash flow forecasting becomes trickier when you don’t have comparable baseline data to work from. The travel landscape is so different from the one we left pre-COVID, we can’t expect travel to go back to how it was before in the exact same way. Finance and travel managers need to keep a close eye on the costs of the new travel reality.
Secondly, you’re naturally watching every penny carefully, so you want to make sure every spending decision is a good one. Preauthorisations of all travel costs upfront is quickly becoming a norm.
So what are the KPIs you need to be tracking to address these issues?
-
Budget utilisation: determine the difference between what’s budgeted and what’s spent on both the overall level and in individual categories. When you can see all your spending at once, you can see how it’s trending, improve the accuracy of your forecasts, and make sure you can jump on opportunities.
-
Corporate card vs. P-card spending: evaluate your purchasing-card spend to make sure the right kind of expenses are going through the right channels. You’ll help make sure these charges get the oversight they deserve and all your procurement requirements are being followed.
-
Invoice/corporate card late fees: determine how often late fees are applied to your supplier payments so you can see where approval and payment processes can be improved.
Improving Your Spend Management Programme Performance
As spend rose throughout 2021, some concerning exceptions were revealed.
There was a significant rise in the number of exceptions for Excessive Missing Receipt Affidavits – with a massive 306% jump from Q1 to Q4. These exceptions occur when images of receipts are required, but employees are unable to provide them. They should be infrequent, so when there’s such a large jump, you need to understand why – it could be because of a rise in fraudulent charges on receipts.
High Out-of-Pocket Expense exceptions also went up just 3.5% YOY, but saw a significant increase from Q3 to Q4 of almost 70%.
Here are a few of the things you could consider measuring:
-
Receipt attachment: ensure the right receipts with all the relevant fields are attached using automated technology that can easily flag exceptions or missing receipts. Missing receipts should be bounced back to employees without taking up Finance time.
-
Receipt exceptions: set metrics to drive down the number of receipts that need extra attention. These receipts increase the likelihood of mistakes or overpayment, and they bog down your AP team.
-
Audit coverage: compare the percentage of expense reports being audited by human auditors to those being audited by AI-driven solutions. Automated auditing allows you to efficiently review 100% of your expenses and crack down on fraud.
Take Stock Today
Things have changed dramatically in the past two years, so now’s the time to assess where you are and what you need to move forward. You might be looking at your policies and processes to see if they still fit in the new era. You might also be looking at your travel and expense technology and the areas for improvement.
To help guide your thinking, check out two of our latest resources for inspiration. SAP Concur + Oversight: 2021 Spend Insights Report looks back at spend data from 2021 and considers how it can give us a better view of 2022 and beyond. Spend is changing. Are your KPIs keeping up? is a spend management scorecard for finance leaders. Take a look at these free resources today to level up your spend skills.