CFOs increasingly focusing on controlling expenses: study

After focusing on revenue growth, a majority of domestic companies are now setting expense management as their priority area, says a study.

In line with business and revenue growth, nearly 64 per cent CFOs who participated in the study said business expenses growth of 10 per cent or more needs to be controlled.

"About 89 per cent firms are prioritising expense management in line with their aspirations of revenue growth, ensuring efficient cost management of controllable expenses like travel," according to an American Express-IMA study.

The study said as corporate India enters a radical change, companies will focus on travel and expense management, identified as one of the most controllable expenses.
 

With total spends of USD7.4 billion and an average per company spend of USD 0.4 million on travel, entertainment and lodging, there is a huge scope for companies to generate savings.

According to the study, about 82 per cent corporates stressed that a clearly articulated expense management policy leads to cost savings. However, only 65 per cent of companies have such a policy in place.

Also, only about 40 per cent run routine checks of adherence to all components of the travel policy, indicating weakness in the prevalent compliance monitoring processes.

As companies focus on business expansion in 2017, expenditure on travel, lodging and entertainment is expected to continue to increase in FY18 at about 10 per cent for the services sector and 5 per cent for the manufacturing firms.

"In a competitive business environment, it is vital for companies to combine the levers of policy, process and vendor negotiations while doing bulk purchasing in order to maximise the RoI on controllable expenses incurred," the survey said.

To derive full benefits of automation, companies should move towards fully automated and integrated expense management systems from the predominant partially automated systems, it added.

As per the study, about 21 per cent of CFOs feel they have fully automated and integrated systems, while about 47 per cent of them have partially adopted automation. Another 13 per cent companies are ready to institute automated systems by end-2017.