The MacNair Travel Leadership Blog

4 Tips for Finance Directors to Improve Margins

Posted by Mike MacNair on Feb 9, 2016 12:00:00 PM

4 Tips for Finance Directors to Improve MarginsFinance Directors are responsible for a myriad of tasks within an organization; from managing accounting functions, providing insight into IT decisions, hiring, firing and strategic planning. With all of these tasks, where should they start? According to results from the 2016 Finance Priorities Survey from the Financial Executives Research Foundation and Protiviti, of the more than 600 finance executives surveyed, 82% indicate that the top priority that will have significant impact within their business is managing margin and earnings performance.

The operational expenses within business (IT, corporate travel, etc.) have a huge impact on budget and profits for small-to-medium sized enterprises (SME’s.) And while Finance Directors have made significant gains in effectively reducing costs for SME’s, the travel and expense line item is still the second largest controllable cost in the organization.

How can Finance Directors work with travel management leaders to develop a travel management program to drive results and improve margins? Following are four tips to consider:

1. Negotiate vendor discounts and consolidate travel 

Travel expenses are a large part of business, and to further impact cost reduction, it’s imperative that businesses work closely with travel vendors to secure discounts and consolidate travel. Businesses should leverage the volume of staff and non-staff airline tickets, understand data that travel vendors will examine, and work in partnership to determine the purchases that will deliver the best results.

This procurement process will ultimately lead to opportunities for consolidation of services. Will expenses go down if employees fly Delta and stay at the Marriot instead of the Hampton Inn? What other options for consolidation are available for your road warriors?

It may seem that cost reduction in this area is unrealistic; that all of the expenses requiring attention have been vetted. Through intentionally securing volume discounts, and working closely with travel partners to consolidate business travel, this expense can be further reduced, creating a huge savings within the T&E budget, and improving overall company margins.

How Are You Taming Travel Costs?  Download "Taming Travel Costs With a Fare AND Fee Approach"   to Learn the Key Elements to Driving Fare Value

 

2. Automate the travel and expense system 

There are a variety of options for businesses when it comes to automating the travel and expense system. The benefits of automation are clear – costs savings, improved efficiencies, increased compliance and productivity from employees. In Certify’s 2016 Annual Travel & Expense Management Survey, 66% of respondents cited that the driving force behind switching to an automated system was simplifying the expense reporting process for employees and managers. According to the Aberdeen Group, reducing processing costs is the number one T&E improvement for 48% of all best-in-class companies.

Liz Claiborne, Inc. saw significant improvements after implementing Concur’s travel and expense automation system. Employees of the global retail business were failing to comply with corporate travel policies, and systems to audit expenses or manage policy control were nonexistent. As a result, expenses were being reimbursed at will, costing the organization unwarranted amounts of money.

Once Concur’s automated T&E system was installed, corporate card policy compliance increased to 90%; an 82% online booking adoption rate was realized; and travelers were reimbursed for expenses in 48 to 72 hours.

The ability to accurately collect and report on T&E data through automated systems has become a “must-have” instead of a “nice-to-have.” Finance Directors who successfully implement T&E process automation will increase travel policy compliance, optimize employee productivity and most importantly, reduce costs that lead to improved business margins.

3. Consider Business Process Services (BPS) 

An extension of Business Process Outsourcing (BPO) is Business Process Services (BPS). BPS combines the task-oriented process of BPO, and takes it a step further by infusing knowledge experts and available technology that add value to an organization’s overall business process management. BPS doesn’t stop when the tactical process improvement is complete; it continues to provide long-term enhancements to the organization as a whole, contributing to overall organizational goals.

BPS can help Finance Directors improve margins by:

  • Reducing overhead costs: outsourcing a task or a full project to the knowledge experts with the time and talents to efficiently manage the job means not hiring additional staff to get the job done.
  • Providing specific expertise and the necessary technology to expertly manage a project or process when staff lack the expertise nor bandwidth to do it. What business objectives require your focus to increase revenue in your organization? Utilizing BPS allows you to concentrate on doing what you do best, and leaves the experts to complete and manage the core business tasks.

4. Enlist the services of a travel management company (TMC) 

Investing in managed travel leadership encompasses the 3 tips mentioned above to improve margins. TMC’s work to secure vendor discounts for clients, recommend and implement automated T&E systems and manage the travel function for the organization. An effective travel management company will provide quality corporate travel management services at a competitive price and will decrease the money your SME spends on travel – most often by 10-20%.

In 2014-15, we analyzed the work we did for our clients and found that:

  • For domestic tickets, the national average ticket price was $572. Our clients paid an average of just $447 per ticket – a savings of $125 per ticket.
  • For international tickets, the national average ticket price was $2,213. MacNair clients paid an average of $1,783 for a $430 per ticket savings.

Improving business margins may not be easy for SME’s, but it is possible. Finance Directors need to look deeper into all areas of the business to discern opportunities for streamlining and automating processes, reexamining price or cost structure, and to determine the most efficient outsourcing options. It will require vigilance and thoughtful consideration to produce results that reduce costs, increase control and compliance and ultimately, improve margins.

The travel and expense budget is one key area of focus that can significantly impact and improve margins. Additional information on how a TMC can help is found in our “Travel Management Companies: What They Mean for YOUR Company” whitepaper.

What_TMCs_Mean_for_your_co

 

Topics: Corporate Travel, Finance Executive, CFO