Using Commercial Cards to Save Costs

"The survey shows that North America's mid-size companies are pragmatic about weathering uncertain economic times," said Eduardo Vergara, Senior Vice President, Global Commercial Card & Services at American Express. "They are determined to improve their oversight of expenses and to keep growing over the long term by giving employees more power and more education to boost productivity."

A majority of mid-size companies surveyed recognize opportunities to tighten management of costs by improving their analysis of employee spending, such as for office supplies and business travel. For example:

• 76% want to improve the use of information to find ways of consolidating their spending, a strategy that could boost overall buying power and oversight.
• Two-thirds of survey respondents see room for improvement in analyzing spending data in order to determine eligibility for tax refunds, improve back-office tasks, identify spending patterns for business planning, and negotiate special prices with preferred vendors.
• 63% see opportunities to optimize payment terms with suppliers, while more than half cite room for improvement in detecting fraudulent spending by employees as well as monitoring employee compliance to expense policies.

The survey offers more proof that mid-size firms are policing costs: More than one-third (36%) will reduce employee relocation expenditures into 2009, while 30% will cut back on spend for construction and facilities improvement. Respondents also plan to cap spending: 69% for office supplies, 64% for meals, and 60% for both meeting and transient business travel.

Despite plans to tighten or hold the line on spending, many firms will actually increase budgets on productivity tools, equipment and education to influence long-term growth. In the survey:

• 42% say they plan to purchase more computers and laptops
• 37% will invest more in educational training
• More than one-third (34%) will buy more mobile phone products and services.

"Mid-size firms want to keep their employees productive, and making life easier for business travelers is a top priority," noted Vergara. "Companies want tools that not only help them save, but also offer superior comforts and benefits to employees."

The new survey also reveals that CFOs at many mid-size firms face challenges to cost-management goals. Many have negotiated discounts from preferred suppliers, but a significant number maintain internal policies that can undermine those deals.

About three out of four respondents say they have agreements with preferred vendors for office supplies and computer equipment, and another 61% have deals for shipping services as well as mobile telephone products and services. Nearly half of all respondents (46%) report special relationships with airlines and hotels. Almost all respondents, 93%, said their firms have benefitted at least somewhat via lower prices from those deals; another 82% cite better customer service, while 72% report greater control over employee spending. Meanwhile, 68% reap improved information on spending activity.

Yet more than half of survey respondents have policies that, ultimately, allow employees to decide which suppliers to use. Among those, 43% report that employees are "strongly encouraged to use preferred vendors" but "are not required" to do so, while another 15% say that employees may use preferred or other vendors "at their discretion." Only 38% say they have a policy that requires employees to use the firm's preferred partners.

"By tightening policies that govern how employees spend, mid-size firms can channel spending to favorite suppliers, build for future deals, and at the same time save money," noted Vergara.

About the Survey

In November 2007, CFO Research Services surveyed 402 senior finance executives at North American mid-size firms, across a wide spectrum of industries. Company revenues ranged from $10 million to $1 billion. The survey explores CFOs' views on managing indirect expenses at growing companies. To complement survey findings, CFO Research also conducted in-depth interviews with more than a dozen companies. Getting the Most for Every Dollar: Tools and Strategies for Expense Management is the sixth annual CFO Research Services report prepared in collaboration with American Express.