Going into the new year, finance teams across companies large and small could be dealing with more than the January blues.
Research carried out by SAP Concur found that the busiest day for expense claim submissions was December 18th, just as many were winding down for the Christmas break. This means that they may be in for a cashflow surprise as they return to their desks in January.
After analysing all of our expense data from 2017, it’s clear that there are substantial patterns around expense claims that come to a head in December. Whether explicitly laid out as part of the role or undertaken out of goodwill, finance teams will have been the ones that bore the brunt of the additional workload when it came to the last-minute scramble to get expenses paid by the company and into individuals’ pockets before the holidays.
The aforementioned 18th of December saw a 125% rise above the average – more than double the number of expenses submitted on that day. In fact, December sees both of the highest expense submission days during the year (18th and the 11th) meaning that finance teams will undoubtedly have had their work cut out.
So, what is being claimed in December? The answer is there’s no clear trend of what is being submitted at the end of the year - it’s a largely disparate group of expenses.
Some, such as subscription-based expenses (332% more expensive than the usual submission cost), make sense as annual fees being billed. But airfares? Highest on the 18th. Car Rental? Highest on the 18th. Dining? Yes, you guessed it. This speaks to a wider issue that expenses are often regarded as a tedious task, put off until later or forgotten about completely.
Companies will, of course, want to make sure money is back in the pockets of the individual before the festive period. But with many forecasts and budgets set for the year ahead before December, this last-minute scramble for submitting expenses can have a knock-on effect on cash flow come January.
What impact could this have?
The impact of these unplanned costs can have far-reaching consequences across any business. If a particularly large run of expenses is processed in one month, it could be that this impacts the day-to-day running of an organisation, from paying the monthly bills to paying staff.
An influx of expenses in one go could be all the difference for a small business remaining in the black or needing a business loan to stay afloat.
Not only this, long term plans can also be derailed. The dream of moving to a bigger office will have to be put on hold. The need to hire new staff to bolster already stretched teams will have to be put back and company away days scaled back. These will all have to be postponed while the books balance themselves again.
It is true that smaller businesses will feel the impact of surprise expenses more than large enterprises, due to their slimmer cash margins and leaner ways of operating. However, bigger businesses will not be immune. Imagine if an entire sales team claim their travel expenses at the same time: the bill that would be footed would be huge and make a sizeable impact.
Yes, they may have a cushion of cash that small businesses do not have the access to, but is it worth dipping into these cash reserves for something that could have been foreseen?
Predicting the unpredictable
For anyone above a handful of employees, you should be using technology to capture this kind of data. Yes, it may be simpler and faster to use than a spreadsheet, but the real value that is can provide is visibility.
If you do not have a clear picture of the cash coming in and out of the business, it will be impossible to accurately forecast and plan for the future. And the larger a company grows will inevitably go hand-in-hand with the reducing amount of insight that you will have over company expenditure.
Essentially, manual processes like this are outdated and slow. There are now a wealth of tools out there to help businesses of all sizes to automate their expenses and invoices.
Today’s workforce is used to using apps in their everyday lives and if they have access to this for expenses, will be able to submit their travel claims during a business trip for example, not weeks or months after. Crucially, even if employees don’t submit their claims straight away, the data gathered previously can help you have an accurate insight into any future costs that may be around the corner.
Lastly, and perhaps the most significant way to manage visibility into cash flow is to have defined and clear policies in place around expense submissions. For example, specific cut off points for submitting will ensure that there are no surprise backdated mobile phone bills or mileage that has accrued over the year.
Using technology to automate business processes is nothing new; however, the level of detailed x-ray vision that it can provide you with is vital. Business decisions need to be made on concrete facts and accurate, up to date data can provide this for a company of any size.
Whether you are planning for a small upgrade to the current office or looking to begin a huge recruitment drive, knowing the state of your cash flow is the place to begin.
By employing the right technology for your business, you can provide the critical visibility you need to maintain full oversight of company spend. Not only this, it can help you future-proof your organisation and help ensure its success going into the new year ahead.
About Dafydd Llewellyn
MD of SMB for UK & France at SAP Concur