For many large firms there are established controls and systems in place to ensure that best practice is followed on company spending. With so much invested in securing preferred supplier lists and discounts it makes sense to ensure the teams on the ground are using them fully. But there is evidence smaller businesses with fewer resources are missing out on the deals their larger competitors enjoy, often purely down to a lack of knowledge of their expenses and fewer systems in place.
At American Express
we’ve heard from a lot of customers in the UK this year that ongoing difficult trading conditions, along with the increase in VAT, has been putting further pressure on their bottom lines. A survey of small businesses we recently undertook showed that 62 per cent of those in charge of making financial decisions believe they currently miss out on savings, discounts and rebates offered to larger organisations. Examining where this could be remedied is a natural starting point when tightening spend policy.
The recent European Indirect Spend Management
survey, undertaken by AT Kearney, found that a third of all indirect spend is believed not to be compliant with preferred supplier lists and rates set
. This shows a massive savings opportunity for companies of all sizes, and a big opportunity for small businesses who were less focused on securing better deals with their suppliers than large organisations.
There are two distinct areas to address here - leveraging discounts with suppliers and making sure employees actually know these discounts exist so they can use them. Some 55 per cent of respondents to the indirect spend study felt they had insufficient controls to identify non-compliance with the lists by their own staff. Company buyers often have poor visibility of supplier lists and 61 per cent don’t have an easy process in place for adding new suppliers. Adherence to lists should be at the heart of a company’s spending policy and always front of mind of a conscientious director.
All too often it’s the employees who can unwittingly act as a weak link in cost control when it comes to expenses too. Research we conducted in the UK revealed employees spend an average of £3,480 per year on company expenses, with one in ten spending up to £6,000. And 60 per cent of expense users do not shop around for the best deals when spending company money, compared to when purchasing personal goods.
In reality this means many business could be losing out through employees either not following or knowing about best practice when it comes to the company plastic. Ensuring your company has invested time in communicating expense policy and gained agreement and understanding is obviously essential.
Necessity is the mother of invention, and now more than ever businesses are realising the need to investigate ways to maximise their spend and secure savings. But with more than six out of 10 financial decision makers in the UK admitting they probably haven’t done enough to achieve further savings and extra value from their suppliers there is much to do.
☛ Pete Taswell is vice president, global commercial cards at American Express