Evolving Fiscal Culture As You Grow, Part Three: Stabilizing

For companies with more than 1,000 employees, expense management becomes increasingly critical, and fiscal culture is harder to change.

In the first two articles in our Evolving Fiscal Culture As You Grow series, we addressed creating a solid fiscal culture in Starting Strong and developing operational rigor in Scaling. As you become a large, established company—generally more than 1,000 employees—your fiscal culture becomes harder to change, so it’s especially important to make sure your systems and processes are optimized.

As we’ve prepared to launch our CenterCard program, we’ve talked to dozens of companies of all sizes about the business challenges they face. In this piece we’ve included a few quotes from our research to illustrate the experience of finance leaders of mature companies, in their own words.

At this stage, expense management becomes a high priority to hit quarterly profitability numbers promised to investors or shareholders. Consistently poor forecasting or execution on expense management will raise red flags, but fine-tuning your financial machine can yield significant impact.

Team structure and tools

Organizations of this size often have large global finance teams of 50 people or more, with increasingly specialized roles. Travel spend can reach $10 million per year or more. Budgeting and forecasting become more sophisticated, with quarterly or monthly updates and a wider range of integrated systems such as Ariba and other SAP tools. The executive team typically becomes more hands-off (as long as things are running smoothly.)

On executive oversight:

“The executive team doesn’t look at details when things are going well—they only do so if things go wrong.”
FP&A Manager, specialty pharmaceuticals company

Corporate card usage

Corporate card programs are often fully evolved at this point, although some large companies pull back by limiting participation to more senior employees or particular job functions. Travel is more likely to be booked and charged centrally, and other kinds of discretionary spend such as employee lunches and office supplies may also become more centralized. With established processes and data, company spending is often predictable enough that finance can accrue for outstanding expense reports fairly accurately, although bigger ticket items like events can cause occasional blips.

On the benefits of more predictable spending:

“When you stabilize you can get a sense of what’s really happening.”
CFO, global testing and certification company

Challenges for managing expenses in large organizations

• Across-the-board pre-approvals can become burdensome and time-consuming. Policy adjustments may be needed to keep things streamlined.
• The more corporate cards that are in circulation, the more difficult it is to track spending and keep reporting on schedule.
• Compliance and duty-of-care become increasing concerns. Company-wide training is often necessary.
• Making in-quarter adjustments may require draconian measures, such as company-wide travel bans. These dictates are difficult to enforce, however, and can act as blunt weapons that hamper opportunities for revenue growth.
• Metrics can start to feel abstract to employees, and it’s less clear how their individual actions affect company performance. They can easily adopt a mindset of believing the company can afford it, especially if the company is perceived as growing or successful. Yet with large teams, discretionary spend can have an increasingly big impact if it’s not tracked well.

On the impact of unchecked discretionary spend:

“Even a healthy growth rate on revenue can get absorbed very quickly.”
FP&A Manager, specialty pharmaceuticals company

Suggestions for policies and tools

• Once you have a strong baseline established, consider adjusting pre-approval policies to focus only on out-of-policy spend or other outliers.
• Implement tools and technology to analyze patterns and minimize the time spent on manual review.
• Share information throughout teams about how individual and team contributions affect overall financial performance.
• Think about compliance earlier, rather than later. Build it into your processes and tools as much as possible.

On compliance:

“A lot of times, companies start out as the wild, wild west. And then you get into compliance issues. Then you need to get a process going, compliance going, measurement going, which divert you from growth. It would be nice to have good policies from the very beginning.”
FP&A Manager, specialty pharmaceuticals company

TO THE POINT:

When you’re operating at scale, it becomes increasingly challenging—and increasingly essential—to keep discretionary spend in check. Larger companies need to shift from reviewing individual transactions to analyzing patterns and outliers.