The theme of safety is top-of-mind for all businesses, whether addressing the physical health of employees and customers, or protecting personal information and company data. It’s important to assess smart ways to put safeguards in place for the things that we can control, including social distancing rules and shoring up security protocols around data. There are other areas of ongoing exposure to risk that companies face that can and should be addressed, notably spending by employees of company funds. Companies need their employees to spend money to get the resources required for success, but putting the right kind of protections in place is essential.
Safeguarding funds means ensuring that spending complies with agreed-upon budgets that were set to produce optimal business results. In a complex economic climate, those budgets may be subject to change, so having the levers to implement changes is important. It all comes down to being both prepared and responsive, but, paradoxically, often the companies that are the most prepared for the future do not assume to predict it. Instead, they take the initiative to implement processes and systems that protect them from risks, and open them to opportunities, whatever changes occur. In the end, those kinds of safeguards are smarter than limiting or strictly policing expenses. The companies that are thriving right now are the ones that can act quickly in the face of uncertainty.
How safeguards control company spend.
Controlling company expenses to protect the bottom line doesn’t have to mean strictly monitoring employees. When financial information across a company is available in real time, department heads, managers, and finance teams can instantly access the information they need to stay on top of budgets. Armed with this information, it’s easy for them to adjust the levers of control, which may be raised or lowered. It might be necessary to raise the dollar amount of a budgetary line item if it is suddenly vital for success. The need to rapidly increase spending amounts for the tools needed to assist with remote working, which occurred in March 2020, is a good example.
In situations like that, responsiveness is key. A clear-cut approval process means that finance teams can make quick adjustments up front, instead of reacting to a credit card bill weeks after expenses are incurred.
By adjusting spending limits on corporate cards instead of removing cards from employees, there can be greater precision around budget changes and budget discipline.
Perhaps more importantly, however, budget adjustments happen in a manner that is perceived by employees as productive, not punitive, a perception that can ripple across a company and actually impact morale in a positive way.
That was the experience of Daryl Allen, Senior Director of Finance at Gremlin (who also wrote this blog post). “People don’t always think about finance being tied to culture, but when you’re remote, any engagement has an expense component that has to be easy to understand. I don’t want to be just the bad guy telling people they had messed up,” he said in a recent Twenty-minute tales from the frontlines of finance talk. Instead, he was able to empower employees to purchase what they needed. If an expense request was out of compliance, a conversation followed to find an alternative — before the money was spent.
When finance team members don’t always have to say “no,” and approval workflows are clear and automated, their role can shift to one of collaboration and support. The spend management software becomes the enforcer.
Using safeguards to protect budgets.
In addition to providing insight into, and control over, budgets, spend management safeguards can help prevent unnecessary expenses. For example, the visibility enabled through virtual corporate cards prevents zombie spend because each card is unique to a specific employee, vendor, and time period if necessary. When an employee leaves, it’s easy to stop all activity on any cards belonging to them. Similarly, if an employee creates an expense request for a service their company already uses, they receive an alert when creating the request.
Those controls also provide safeguards in bill paying. Without spend controls in place, poor communication, or simply bad timing, can also lead to costly confusion when it’s time to pay bills. When integrated into a spend management platform, an intelligent bill payment function can help prevent unnecessary spend. A comprehensive spend management system can also help finance teams identify opportunities to save money and time.
With a complete view of how money moves through an organization, finance teams are able to think more strategically about expenses and ensure contracts are compliant.
Safeguards for preventing fraud.
Fraud can happen on many levels: Employees can abuse corporate cards; imposters can obtain payments intended for legitimate vendors; and contracts can be ignored. The costs of these types of fraudulent activity are alarming. A 2018 report from the Association of Certified Fraud Examiners states that employee fraud costs businesses around the world $7 billion annually. The study concluded that poor internal controls were responsible for nearly half of the incidents of fraud that took place. Virtual cards provide the controls necessary with built-in spend limits. And if a card is canceled due to fraudulent activity, it’s much easier to update the payment information for a single vendor, instead of updating the details for multiple merchants and services.
The best way to respond to the risks inherent in an uncertain economic environment is to be able to adapt quickly, so implementing agile safeguards is an important part of adapting to today’s complex business world. If you’re interested in learning more about the role that intelligent spend management can play, now is the time to reach out to Airbase.