In an economic climate where you might have to do some belt tightening, a cash leak from internal theft is unacceptable.
However, according to Aaron Evett, director of implementation of the expense management and business budgeting software company Divvy, a lot of companies don’t realize how much money can be saved just by taking measures to mitigate internal theft.
In the ResourcefulFinancePro webinar “5 Meaningful Ways to Cut Costs and Improve Cash Flow in 2022,” Evett quoted an Association of Certified Fraud Examiners report that about 5% of every company’s annual revenue is lost to internal theft (It adds up to a staggering $4 trillion in total global fraud loss).
Some things to audit for – and correct – right now:
- Inflated business expenses
- Made-up expenses
- Non-business purchases being claimed for reimbursement, and
- Exceeding spending limits/overcharging company credit cards.
“Monitoring things and having systems and tools in place will be super helpful,” Evett said, mentioning that one of Divvy’s clients didn’t realize it had lost $50,000 over the course of a year due to employees inflating expenses, until it started using a software solution that provided spend visibility.
Other inefficiencies besides internal theft
Eliminating redundant expenses is another great way to cut variable expense costs. Easy-to-miss redundancies include:
- Overlapping SaaS subscriptions
- Paying for unused services, and
- Multiple departments paying for different tools that perform the same service.
And are there any recurring errors in your T&E management process? Correcting an expense report with data entry errors, for example, takes an average of 18 minutes and costs $52, according to the Global Business Travel Association.
Other common time-consuming and costly errors are related to:
- expense reports that are submitted late to A/P, or not submitted at all, and
- lost or illegible expense documentation.
Better budgeting to control variable expenses
To ensure that you’re optimally budgeting for items you need and are driving value to the business, two budgeting methods that Evett said can get variable expenses under control are:
- Value proposition budgeting. Analyze every budget item and determine its value for your business, customers, staff and stakeholders. Then eliminate the low value items and maximize the budget for high value items.
- Zero-based budgeting. Assume that every department has a $0 budget to start, then build their budgets from the ground up, justifying every penny. It ensures that each individual department is spending effectively.