Believe it or not, a CFO’s job requirements and responsibilities have evolved in recent years. They aren’t strictly number crunchers and finance gurus as they were in the past. Now they’re also strategic architects, trusted advisors to CEOs and leading communicators in the boardroom. To maximize business goals, they need to be capable of more than budgeting for a company. With all that change though, some constants remain. One example is the CFO must continue to manage expenses and grow profitability. What does that look like in today’s business landscape> Here are the three most effective ways for CFOs to realize cost savings and maximize profitability in the 2020’s.
Traditionally speaking, CFOs have looked to cut costs in the most logical areas. For example, easy targets include administrative and operational overhead costs. Minimizing those makes perfect sense. Reduce spend across departments and cut down on expensive dinners, conferences and retreats to free up budget to allocate elsewhere, right? Well, yes, but only in the short term. That won’t be effective in the long term.
CFOs need to be sure that every quarter, they’re thinking outside the box, exploring innovative ways to save money – and that this way of thinking aligns with their overall business strategy and goals. Is a new product or service you’ve invested in providing value and ROI? Are you wasting time and money by complicating processes that could be streamlined with a different approach? These are the types of questions CFOs should be asking themselves to find new ways of cutting costs.
How much money does your company pay for leasing office space? It doesn’t matter what side you take in the from home vs in office debate: leasing office space is considerably more expensive than enabling employees to work remotely. Add the costs of office supplies, utilities and broadband to get an even more accurate number. Companies stand to save considerably by reimbursing employees for the business use of personal assets, including their home office and internet. This is just one example of what thinking outside the box looks like when it comes to cutting costs.
The number of people who travel for work or have the ability to work from anywhere is constantly growing. More companies are paying attention to their mobile workers. And now they’re realizing that having a mobile workforce costs more than they first thought. With greater focus, companies are noticing expense fraud, issues with compliance, vehicle program maintenance and the impact of tax waste.
Let’s consider a fictional example that’ll put these costs into context. Howell Hot Dogs is a hot dog vendor based out of Atlanta, GA. They have a workforce of 10,000 employees that drive for work each day. Roughly half of these employees require a specially-branded, company-provided vehicle. The other half drive their personal vehicles for business.
For those employees that drive company-provided vehicles, how will Howell’s CFO account for personal use? In other words, isn’t it reasonable to think employees might drive these vehicles outside of business hours? This can cost the business significantly. Let’s also say the other half of Howell employees driving personal vehicles are being reimbursed at a cent-per-mile rate. The issue here is that a good chunk of these employees drive far more than others, and in different areas of the country. If they’re all reimbursed the same rate, this leads to inaccurate and unfair reimbursement, which is also costly for Howell’s CFO without truly realizing it.
In the example above, we looked at a vehicle program. Why vehicle programs? Easy. When searching for hidden costs, vehicle programs are an often overlooked culprit. A large number of companies have had the same vehicle program for years, and don’t give them a second thought. But there’s a difference between your vehicle program working for your company and a vehicle program being the right fit. Interested in knowing more about how you’re overspending? You can learn more in our guide, The Total Cost of Vehicle Programs.
To continue with the Howell Hot Dogs example, let’s dive into their mileage capture proess. At HHD, employees submit monthly paper mileage logs to their manager for reimbursement. This raises yet another problem. There’s a good chance that a portion of employees will misreport their business mileage. This noncompliance leads to Howell shelling out excess dollars in reimbursements on an ongoing basis. In fact, a Chrome River Survey shows that 35% of those that commit expense fraud do so by misreporting their business mileage.
Fortunately, by approaching mileage capture with technology, these problems disappear. With an automated technology platform, Howell can reimburse its employees based on where and how much they drive with compliant mileage logs. Also, by eliminating the paper-based process, Howell’s CFO can rest assured knowing employees are being more productive and focusing on generating revenue for the business.
Let’s dig a little deeper into how employers without mileage capture apps overspend on mileage reimbursements. First, they adopt the most popular mileage reimbursement rate: the IRS mileage standard. This standard can help companies prevent tax waste. As long as they reimburse employees below the yearly rate, those reimbursements are tax-free. However, that doesn’t guarantee the reimbursements are accurate.
The IRS standard mileage rate is a national average. But rather being fair to everyone, it’s fair to no one. Some employees receiving this rate may be over reimbursed, while others aren’t reimbursed enough. Employees deserve reimbursements specific to where they own and operate their vehicle. With the right program and app, employers ensure employees receive fair and accurate reimbursements. No more concerns over compliance, unfair compensation or mileage fraud.
In today’s market, the CFO has more responsibility and faces a lot of pressure. They’re required to maximize profitability and report positive results to propel their business to the next level of growth. In order to realize cost savings, CFOs need to be strategic about their overall goals, pay closer attention to the way they reimburse their mobile employees and take a technology approach to avoid costly lawsuits and ensure a compliant workforce. Interested in learning how technology can help? Find out more today!