The stinging impact of the recession’s first full year is hitting home this earnings season, pushing companies to look for new ways to cut costs and save money, American Express reports in a new study of Fortune 500 companies. The study reveals the best ways to drive savings and cut back on travel costs in the downturn.
Working with Accenture, American Express interviewed a number of Fortune 500 companies in industries ranging from consumer products to business services. These companies had median gross revenues of $30 billion, and were identified as having leading T&E spending policies.
“Today’s economic crisis is putting great pressure on companies to reduce costs and control spending wherever they can,” said Gunther Bright, senior vice president, Global Client Group at American Express. “By gathering best practices from some of the best expense management programs in the world, we can share a number of concrete, straightforward steps that virtually any company can take to reduce costs and deliver savings and value well into the future.”
Key findings of the American Express report include:
Hold Employees Accountable
Perhaps the simplest recommendations begin with making employees more accountable for their corporate spending decisions – which require little or no investment.
* Communicate: Make spending policies more clear and accessible to employees to increase understanding and compliance.
* Educate: Explain the financial implications, for individuals and the company, of disregarding corporate policies, which encourages employees to make cost effective decisions.
* Enforce: Offer carrots and sticks. Some companies hold managers accountable for policy violations; others tie compliance to performance assessments.
Drive Value through Data Analysis
The study found that companies with strong expense management programs tend to embed three key steps in their analysis:
* Consolidate: Companies with leading practices consolidate data from multiple sources at the global, regional, and local levels to gain a complete picture of their expenditures.
* Analyze: In a time of economic uncertainty, it is important to understand spending trends and related financial impacts. Companies that have developed a sophisticated approach to data analysis often consider it to be a competitive advantage.
* Act: Data analysis gives business leaders the information they need to act with certainty and make fact-based, beneficial decisions about spending and policy, and hold their suppliers accountable.
Plan for the Long-Term
Expense management professionals have the support of senior leaders for cost-cutting measures, as companies use the current economic climate to justify structural changes that will improve their performance in the short-term and position them for success over the long-term.
* Simplify: One principal strategy for cost-cutting is to simplify and improve operations by standardizing processes, streamlining systems and reducing redundancies.
* Improve: Leading expense management programs make targeted investments in technologies like database and meeting management tools with quick returns to drive savings and deliver long-term value.
“Insights like these are particularly useful during challenging economic times, as they place a focus on leading business practices that help companies identify steps they can take to achieve cost savings,” said James Ellis, managing director of Accenture’s Finance Operations practice. “For companies that enter a down economy from a strong position, dollars saved oftentimes can be redirected to activities that deliver more value to a company.”
For the full report visit http://www.americanexpress.com/corp/pc/2009/bestpractices.asp