What every CPO should know about employee spend

The pandemic accelerated the digital transformation of finance:

• New spending patterns take hold
• Employees are buying like never before
• Global travel is making a comeback
• Employee work expectations have shifted

So, what does this mean for the reality of employee spend? If the patterns of employee spending are changing, then your strategy and spend management processes that uphold transparency and compliance must also evolve. Take this most recent situation as an example:

During the year 2020, many businesses experienced an intense period of change due to COVID restrictions and pivoting to remote and hybrid work environments. That year, SAP Concur customers saw a 58% increase in their expense category “Other”.

A category notoriously known for having no visibility, an increase in the expense category “Other” was a signal to companies that the business environment was changing. And if they failed to keep up, then it would affect their company’s ability to manage spending and forecast budgets come the new year. Hence, risking an infamous memo to be sent to all department heads to cut expenses and keep the business afloat in the company’s last quarter.

Quite often, employee spending spills into corporate travel managed programs, along with “Other”, which procurement oversees given its supplier role. This leaves it up to procurement and CPOs to ask their teams: 

“How are we adjusting to this shift?” and, "What’s the cost of doing nothing?"

Since the global disruption in supply chains, along with significant furloughs and business losses, procurement executives must recognize that cost reduction should not be the sole consideration when negotiating or renewing agreements with travel suppliers. Serge Kogon, Value Advisor at SAP Concur, explains:

“It’s just as important to ensure that key travel suppliers  – such as the travel management company (TMC), key lodging partners; air, rail, and ground transportation providers; and related services providers – are adequately compensated for the additional effort and costs associated with ensuring traveler health.”

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. Are you connecting travel data and expense data together so you can gain a complete view of actual spend?

Organizations that are fine with the status quo and fail to adjust end up being less profitable. According to EIU, in terms of the priorities that executives have top of mind, they revolve heavily around the deployment of technology to deliver increased use of data and analytics (42%). This means using connected technology to look at trips booked compared to actual spend -- and 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.

What can procurement do? It takes a cross-functional, aligned strategy to work with the various players in finance, travel, AP, etc. CPO’s should focus on helping lead the efforts to aggregate this data and bring visibility to the various internal stakeholders. Eventually, this heightened partnership can save money, provide better data to manage and forecast spending, and help negotiate better terms with travel suppliers and vendors. CPOs and procurement teams should also look to empower various stakeholders with visual dashboards and reporting that shows actual and forecasted spend to inevitably help keep costs down.

2. In what channels do employees have to spend company dollars, and what systems are tracking this spend?

The pandemic has only accelerated the fact that employees are using more and more channels to pay for goods and services – now with contactless credit cards, ghost cards, virtual cards, checks, P-cards, and other payment methods. And they are likely all managed by multiple systems that don’t connect or share data.

What can procurement do? CPOs and procurement teams should look to conduct an assessment of channels, along with how your company is tracking each of the payment methods; this may help you identify the size of the disparate spending channel issue. Automating each part of the spending process, CPOs should start with expense and then move to travel, non-PO spend, or invoice, and connect those processes with all sources of spending. At SAP 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. Is it easy to capture all outside bookings – or rogue spend – beyond your traditional corporate travel channels?

Despite the pandemic creating even more strict travel policies and procedures, employees are excited to return to travel. But it’s often proven difficult to change employee buying preferences. Many organizations are still struggling with employees booking travel and paying for work expenses outside of company guidelines.

In an interview with Kathy Hinton, the former CPO for Tesero Corporations, she claims it is because “travel is often viewed as personal.” Whether for convenience, cost, or business need, employees who get reimbursed for outside bookings and offer no visibility into where that spend came from, contribute to a “leakage” issue – a problem that exists in every company. Travel suppliers also fuel spend management leakage, putting millions of dollars into clever marketing and loyalty programs that encourage employees to buy directly from their airline, hotel, taxi service, or short-term lodging.

What can procurement do? Investing in a modern spend management solution with automation can help your business uncover this “leakage” and keep track of rogue spend. Whether it’s gaining visibility through integrating card feeds, encouraging mobile receipt capture, or flagging reoccurring, noncompliant spend as a signal that it’s time to update policies or provide employee training. You can also look to arm employees with mobile, consumer-like experiences, so they can capture receipts and accurate data while on the go.

Increase procurement oversight with SAP Concur Solutions

Every time money is spent, your business needs to capture that data and bring it back to a central system. Unfortunately, manual and disparate spend management systems prevent procurement teams from getting a comprehensive view of spend in time to effect strategy for budget. This is causing companies like yours to respond blindly to unexpected disruptions, exhausting the supply chain, and preventing the efficiency of managing resources. Fortunately, digital tools are helping procurement functions better understand, analyze, and improve their visibility into procured spend.

For more information, read this whitepaper on the four insights procurement officers should know about travel and expense. To learn more about key spend trends and risks you can’t afford to ignore, visit us online.