5 Steps to Assessing—And Reducing—Organizational Spend in the WFH Era

by Anant Kale

5 critical steps to take to understand expenses and reduce spend.

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Enterprises spend millions—even billions—on business activities, goods, services, software/hardware, and other related expenses yet their spend processes can be outdated and inefficient. Historically, a huge source of leakage is travel and expense (T&E), which after salaries and benefits, is the second-largest controllable business expense—however, it’s also one of the most complex and difficult to manage.

The pandemic then added another even more complicated layer to the situation. While controlling company spend has always been high on the list of priorities for finance teams, the new WFH environment and the potential for hybrid-remote work scenarios going forward further exacerbated the challenge.

So where do you start? In my experience, there are five critical steps to take to understand expenses and reduce spend.

1. Assess and map out current expense policies

Expense types have changed as a result of working from home as people aren’t claiming classic travel and entertainment expenses but are claiming new types of WFH related expenses. These include one-off items such as office chairs, external monitors, and desks; subscription costs such as internet usage; and COVID-specific items like hand-sanitizer and face masks.

Many organizations have been slow to adapt expense policies and to embrace this change but having insight into your spend will save future headaches. New policies need to be transparent, fair, and configured in a way where they can be applied the second they are activated.

2. Identify and outline non-compliant or wasteful spend

What may have been considered an acceptable expense before the pandemic might not be true now, and vice versa—or at least with different reimbursement thresholds. And, despite the pandemic, this has been a historical challenge as some employees can get pretty creative in what they claim as business spend.

Regarding flat-out, non-compliant spend, I’ve seen it all—strip clubs, dog kennels, jewelry, cigarettes, and gambling losses are among the most notable. Although these charges may seem like obvious violations, they often fly under the radar with generic names on the receipts. Technology could help solve this issue.

There are systems such as AI that can cross-reference online data and learn over time which expenses fall into which categories as well as flag fraudulent spend that human auditors could overlook. Now, it’s more important than ever to understand expenses and if they are compliant—and technology is a huge piece to solving that puzzle.

3. Clearly define and communicate updated policies

With new expense policies in place, organizations must proactively communicate the changes and, of equal importance, why such changes are occurring. These communications should be as visible and personal as possible—webinars or video meetings are ideal in this situation.

But communication should not stop after the initial flurry of activity around a new policy. Proactive reinforcement of policy rules and regulations are essential to ensure full understanding and compliance around expenses. With a clearly-defined policy, visibility into expenses, and a method for identifying fraud, organizations will be well-equipped to innovate their back office processes and reduce spend.

4. Eliminate the risks of manual work and oversight

Finance teams are under an immense amount of pressure to not only comply with internal spend control policies, but also ensure compliance with a number of laws such as the Foreign Corrupt Practices Act (FCPA), which can be risky when relying solely on human auditors.

This is where automation and autonomy come into play. I like to use a self-driving car analogy: technology has evolved to the point where we have lane indicators and guides for parking, for example. However, these improvements are essentially driver-assist functions (i.e. automated tasks) where the driver still has to pay attention and keep their hands on the wheel (i.e. a manual task). Autonomy, on the other hand, is when the car is smart enough to drive on its own, without the need for human intervention.

The same tenets hold true for Finance AI—autonomous systems can make decisions and execute AP-related tasks, including matching, accounting, approvals, and more—all without manual review. Looking at autonomous solutions is a critical step to ensure a self-driving finance department—one that truly learns, acts, and eliminates traditional risks associated with human error.

5. Be prepared and expect the unexpected

Many people believed that the pandemic would be over and done quickly, but, as we have seen, WFH could remain in place for the rest of this year or longer. One thing is for sure—you never know what’s coming around the corner and you need to be ready for any disruption.

One of the several lessons learned in the past year is that there’s a critical need to implement, strengthen, and/or reinforce a company culture—from increased employee engagement and communication to leveraging the right technology—allowing organizations to quickly adapt long-standing methodologies and policies.

The world of finance software is rapidly evolving and becoming an integral part of enterprise digital transformation. Over time, we’ve gone from manual processes to limited automation, and we’re now entering the era of complete autonomy—one where AI can fulfill its true purpose so that it will not only get the job done, but it will become more accurate as it learns, grows, and adapts to whatever we throw at it.

Anant Kale is the CEO and Co-Founder of AppZen.