Editor at large AccountingWEB
Columnist
Share this content
Business entertainment claims dropped in 2020 - like many other expenses
iStock_Business lunch_zoranm

Expenses analysis quantifies lockdown savings

by

Covid-19 significantly changed the way businesses engage with customers and reimburse employee expenses, according to an analysis from The Access Group.

5th Nov 2020
Editor at large AccountingWEB
Columnist
Share this content

Medium to large businesses spent on average £49,000 per month less on travel, accommodation and office running costs since lockdown restrictions were imposed on British businesses in March, the Access report found.

Based on a study of more than 2.8m expense claims from 1,000 organisations in the 12 months to August 2020, the researchers tracked a 66% drop in from March this year compared to 2019.

In June 2020, finance teams handled just 4% of the volume of claims processed in December 2019 and the average value of claims had dropped to £326.86 in May 2020 compared from £677.37 in September 2019.

Digging into the detail clarifies what happened when the UK ground to a halt and puts some tangible numbers against what thousands of businesses have been seeing in their spending patterns.

As might be expected, the largest falls occurred in the biggest category – transport claims, which incorporates company cars, personal cars, train, airfare, car rental, parking, taxi, tolls and sundry travel.

By June, claims for air travel had fallen 96% compared to the previous year flights were cancelled and business travellers stayed home. The study even tracked a negative value for claims in May as the authors speculated that companies received refunds for pre-booked flights that never happened.

Among other travel-related costs, the study found:

  • Train travel claims were down nearly 80% from March to April and the average cost for journeys that were claimed was down 43% as travellers appeared to take shorter journeys.
  • Hotel claims showed an 87% year-on-year drop between May and July 2020.
  • Entertainment claims fell 82% during the lockdown.

Ben Stark gave a commentary on the trends from his perspective as project officer for continual improvement at care and housing specialist Abbeyfield: “We’ve seen a drop of almost 60% in our expenses claimed over the course of the pandemic and lockdown.

“With staff no longer travelling by car, train and plane to meetings, we are utilising video conferencing services instead, leading to less time lost to travelling and greatly reduced travel expenses. We have also seen an increase in claims for home working and IT equipment for staff working from home.”

Working from home costs

Stark’s observations about home costs were borne out by aggregate figures for home phone bills, which jumped 256% in May compared to the previous year. Most mobile providers include unlimited minutes in their contracts, so the advice from Access is to encourage employees to use their company mobiles rather than making calls on home landlines.

The average value of claims for computer consumables rose 23% in March and a further 38% in April before dropping off in May. The survey also spotted a 48% increase in claims for IT repairs as employees sought help to set up their home workstations.

On the plus side, however, the study found that spending on stationery fell away during lockdown.

Staff welfare

The spending patterns are mostly predictable, but the Access survey highlighted that companies were spending more on staff welfare, with the year-on-year figure rising 57% in May 2020.

“It’s also possible that things that are usually provided centrally now have to be sent out to individuals’ homes,” the authors noted.

“In the absence of a definitive answer we prefer to take the positive view that employers are recognising the pressure that their staff are under and are rewarding them more for going the extra mile.”

Lessons to be learned

The changing expense patterns point to some fundamental issues for finance managers. Arguing that such insights challenge spending assumptions that can lead to “a leaner, cheaper organisation”, the authors continued: “We believe that it would be a very poor CFO who wasn’t looking at the travel and accommodation expense lines and wondering whether they were getting value for money.”

During the first lockdown, both employers and employees discovered unexpected productivity and quality of life gains from not spending so much time and money community. Will it be worth spending large amounts of money for city centre offices if home working now been proved to be efficient and practical?

On a more day-to-day level, people are now used to making video calls, calling into question whether so many face-to-face meetings are necessary.

“Organisations will look at this and think whether long journeys and nights away are still needed to effectively deliver their services and products,” commented Brendan Flattery, managing director of Access Group’s ERP division.

“Which results in more sales; three meetings in person or five video calls?”

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.