Companies should leverage intelligent solutions that utilize innovative technologies to manage spends to give them a much-needed edge in their businesses.
The world is grappling with an unprecedented emergency situation currently and its economic impact has been unparalleled. According to the International Monetary Fund (IMF), the pandemic may drag global GDP lower by 3% or even further in 2020. A sudden shutdown of all key economic activities has impacted all industries and almost every company is reeling under severe pressure. India’s economic growth projections have also been reduced to 0.8% by Fitch Ratings for the financial year 2020-21.
Amidst this crisis, there is an added emphasis on protecting revenues and the financial health of the company. With profits shrinking, it becomes critical for companies to find out ways to lower their operational expenditure and cut down costs where possible. Here are five practical ways to ensure necessary savings can be done to maintain business viability:
Better Invoice Management
According to an IDC projection, by implementing effective invoice management, annual business benefits would equate to more than $750,000 per organization on an average. Sometimes, companies receive multiple invoices via different channels. As many organizations only audit a fraction of expense reports and invoices by cross-checking, this can lead to the unfortunate situation of duplicate payments. Automatic two- and three-way purchase order matching can ensure that nothing gets overlooked. This can help in identifying and resolving discrepancies thereby protecting the organization from being overcharged. Utilizing invoice management solutions can help in monitoring purchase requests, eliminating late payments and managing cash outlays in an effective manner
Integrated View and Increased Visibility
When a business is going through a crucial time of financial stress, every decision becomes even more important. Business leaders have to consider all the possible scenarios and implications that one decision may have on the overall company. Preparing a business strategy and decision-making is enhanced when it is supported by complete visibility into the expenses ensuring necessary data and insights. The organization needs to know where the money is being spent even before the expense happens. An integrated view of the company’s finances can help in managing budgets comprehensively, deciding expense areas, forecast more accurately, and ensure policy compliance. This can help in eliminating unnecessary expenditures and improve the financial stability of the company.
Curbing Internal Frauds
According to an Oversight Systems 2017 Spend Analysis Report, the typical organization loses 5% of annual revenues each year to fraud – 89% of which, according to a 2018 ACFE global study, is asset misappropriation which includes expense reimbursement schemes. This can spell a considerable financial setback for any company. The first step to prevent fraud is to set up robust internal controls. As per the ACFE 2018 Global Study on Occupational Fraud and Abuse, 50% of fraud is due to weak internal controls. Hence, assessing the fraud risks and designing anti-fraud controls can prove to be immensely beneficial in saving valuable capital.
Reclaiming tax on expenses can be a surprising source of money for a company. According to industry estimates, around €20 billion in VAT goes unclaimed by companies each year globally. With Goods and Services Tax (GST) implemented in India, it is important to capture all the information to claim refunds. Pen and paper-based claims can be difficult to manage and often leave gaps in capturing the required information. It is essential to have a solution that can identify and integrate all potential tax reclaims, collate into compliant format, and submit directly to the relevant tax office.
There are always some expenses that are outside the policy and guidelines laid down by the organization. These rogue expenses can cause considerable loss to the company, in addition to compliance issues. It is mission-critical to control such expenditures by gaining full control of the company expenses and enforcing strict internal policies. There needs to be upfront visibility to govern such spends and save the company from incurring financial losses.
Focusing on these areas can help a company in considerably lowering wasteful or overlooked spend. Companies should leverage intelligent solutions that utilize innovative technologies to manage spends to give them a much-needed edge in their businesses. With careful observation, analysis, and intelligent decisions, organizations can protect their financial health during current times.