Spending waste: How to reduce spending and improve your bottom line
Running a business without tackling spending waste is like driving a car with a leaky fuel tank. The fuel might drip out so slowly you barely notice. But if you don’t fix the leak, you could eventually find yourself stranded on a remote section of the A1.
Here’s a look at the most common areas of business spending waste, and what you can do to address them to improve your bottom line.
What are the most common areas of spending waste?
Businesses waste money in an infinite number of ways (Google ‘business spending waste’ and you’ll get a whopping 176 million results). That said, there are five areas that crop up time and time again:
- Stationery and other office supplies
- Software subscriptions
- Travel and entertainment
Let’s look at the numbers more closely.
1. Stationery and other office supplies
UK businesses collectively spent an eye-watering £722 million on office stationery just between April and June 2019. Worse, 52% of finance managers have no idea what they’re spending on ink cartridges, toner, and other printing costs.
In comparison, paperless businesses are 50% more profitable.
2. Software-as-a-service (SaaS) subscriptions
There’s no doubting the business benefits of SaaS. The problem is the way most companies manage subscriptions.
Most of the time, individual teams and departments buy their own subscriptions without talking to each other, which results in duplication. This is a problem that grows with the company. For every 50 employees, the number of duplicate SaaS subscriptions more or less doubles.
If that weren’t bad enough, up to 71% of businesses have at least one ‘orphaned’ subscription. In other words, the person who bought the subscription has left the business, but nobody has thought to cancel it or take over.
3. Travel and entertainment
According to our research, travel and entertainment spending, or T&E, makes up as much as 2% of most businesses’ total annual budget.
Lockdowns and other Covid-19 restrictions have put most T&E spend on hold, for now. That said, it’s historically been an area where there is a lot of spending waste. This is because staff will often pick the more convenient travel option or treat themselves to an expensive main when the business is footing the bill.
Fuel prices have slumped by as much as 90% in the last few months. But with prices still at ‘rip-off’ levels, the costs can still loom large on your balance sheet, especially if you do deliveries or your staff drive a lot for work.
While it’s not strictly an out-of-pocket cost, admin takes your staff’s attention away from billable tasks. And that ultimately hurts your bottom line.
Case in point, it typically takes 60 minutes to process an expense report — 45 minutes for the employee to create it and 15 minutes for finance to process it. A company with 450 employees handles 135 expense reports each month. Leaving aside how frustrating the process is for everyone, that’s 804 hours a year your staff spend pushing paper instead of being productive.
Reigning it in: tips to slash spending waste
There’s a common thread that runs through most categories of spending waste. More often than not, the problem is a lack of accountability, visibility, and control.
So how can you manage company spending better, cut waste, and beef up your bottom line?
You need a clear expense policy
It goes without saying, but if you don’t want staff to rack up four-figure bar tabs — or sneak the cost of cigarettes, scratch cards, and cat litter into their expense claims — you need to be clear that this won’t fly.
That’s where your expense policy comes in. If you’re specific about what staff can and cannot claim, they can’t plead ignorance or say they misunderstood.
Decide how much you’re happy for staff to spend on travel, entertainment, stationery, and other expenses each month, and enforce those limits.
Knowing how much company spending to expect helps with budgeting. Even better, 40% of employees say tighter controls would encourage them to spend more responsibly.
Ditch manual processes
Spreadsheets, printed statements, and paper receipts are time-consuming to sift through and create a lot of room for human error. This makes it harder to enforce your expense policy and spending limits.
Automating these processes speeds things up, simplifies your workflow, and lowers the chances of something slipping through the cracks. And if staff don’t think they can get away with claiming what they shouldn’t, they’ll be less likely to try their luck.
Use technology to your advantage
What if you could automate how you manage company spending, enforce your expense policy, and curb spending waste without having to constantly monitor every employee?
With a platform like Soldo, it’s as easy as it gets.
Every employee gets their own prepaid card loaded with company money, so there are no out-of-pocket expenses to reimburse. And you can restrict what every individual can purchase and set limits, effectively creating a custom expense policy for every staff member.
Best of all, finding out how much everyone is spending and on what is as easy as logging on to the Soldo dashboard. You have a real-time snapshot of all your expenses any time you need it. Which means you can identify waste and address it before it spirals out of control.
Don’t let spending waste cut into your bottom line
With the economy officially in recession and Brexit looming, putting a stop to spending waste and making sure you squeeze every drop of value from company spending is ever more key.
By being clear with staff about what expenses are and aren’t allowable, setting limits, and using technology to keep everyone accountable, you can stop your company from leaking cash and make every penny go further.