In the current corporate environment, large companies are always looking for new ways to save every dollar possible. A company that I visited a couple of months ago, let’s call them Dreyware Corp, were all about saving every dollar, but it came to the point where they were removing the free newspapers and fresh fruit from the lunchrooms. While it did reduce costs slightly, it was at the expense of employee morale. There was, however, low hanging fruit in the purchase cards!
Dreyware’s Expense Policy was very grey, and didn’t give employees clear direction as to what was an acceptable purchase. After running some basic analytics on the credit card spend, we identified a lot of spend that made it hard to justify cutting the free newspapers and fresh fruit out of the budget. The real turning point was when we highlighted the following 2 corporate expenses and presented them to the Group Financial Controller and the Head of Accounts Payable:
The Most Expensive Chinese Restaurant
A team of 10 people went for a team lunch down at the local chinese restaurant. The bill came to a whopping $5,000! It was approved by an executive and therefore still technically within Dreyware’s Expense Policy. I don’t know about you, but I’ve eaten down at my local Chinese restaurant many times and would really struggle to spend over $100 alone.
Executive Assistants Go to Town!
A high level executive at Dreyware Corp decided that the Executive Assistants should have a night out with the Executive Assistants of their largest suppliers to build the corporate relationships. Not a bad idea, given it’s the EAs who do most of the talking/work with each other. The executive decided to hire a limousine to drive all over Sydney to pick up the EAs for the night, sit around while they had dinner and drinks, then drive them all home. At a cost of $6,000 for the night. Again, the spend was authorised, it was for business purposes and technically didn’t breach Dreyware’s Expense Policy. However, people in the Finance Department were having a hard time finding this reasonable.
Driving Policy Compliance
These examples of overspending taught Dreyware Corp to:
- Go back and re-write their Expense Policy so that it was very clear what was acceptable and unacceptable purchase card spending.
- In a nice way, follow up with cardholders on transactions and enquire about someone’s spending. This ensures policy compliance as some become relaxed and without supervision of expenses, purchase card spending can be abused.
- Eliminate excessive spending, as seen in the example given above, both large expenses were authorised as there was technically no policy breach. Implement a spending limit to ensure employees spend more appropriately.
- Communicate the repercussions of breaching travel & expense policy. If there is no disciplinary action enforced, this encourages employee’s thinking that their spending may go unnoticed.
By implementing these initiatives they halved their credit card expenditure over a short period of time. The key to their success was re-writing an Expense Policy making it easy for everyone in the organisation to understand. Also, the Accounts Payable Manager who re-wrote the Expense Policy also made sure the policy was communicated to everyone. Once employees understood the new Expense Policy, and knew that they would be asked questions in relation to any irregular spending, policy compliance was ensured.
We Can Help You
Over the past 10 years, Expense8 has helped hundreds of organisations to create better policies that increase employee compliance. Although the two examples above were technically within policy, it’s very common to have transactions like these that aren’t within policy.
If you are looking at ways to reduce expense fraud in your organisation, download our free guide 3 Ways to Beat Travel & Expense Fraud now.