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Fiscal Culture is Company Culture. What's Yours?

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By: The Center Team

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As we prepared for the launch of our CenterCard program, we encountered a wide range of fiscal cultures. One well-established company's CEO still approves every expense, no matter how small. One culture was so notoriously frugal that salespeople used to living a relatively lavish “on the road” lifestyle ended up considering other offers. Another company instituted a policy where employees only get to accrue card points if they submit expense reports on time.

Although no two fiscal cultures are identical, a clear continuum between empowerment and control has emerged. We took a look at three small companies that illustrate the range.

1. “The Carrot”

People who are a good culture fit can be trusted to follow the policies.

Business: Manufacturing startup 

Process and Philosophy: The current CFO of this rapidly growing 60-person team previously ran the corporate card program for a huge company where managers were required to review every single transaction. That company ultimately decided manager approvals weren’t worth the time because they uncovered very little fraud. In his new position, the CFO’s focus is on empowering the sales and marketing teams to grow the company and on shaping a strong culture built on trust. He manually spot checks a few reports every week, and if he uncovers any issues, he tries to determine whether the employee just needs coaching on policy or if there is a larger cultural mismatch at hand.

Priorities: Maximize visibility; minimize controls (including time-consuming workflows) to the extent possible.

Center Team Take:

We favor focusing on process to identify miscategorized or out-of-policy spend instead of sorting through all expense submissions just to find it. 

Jeff Drummond, VP of Finance and Accounting, CenterCard

2. “The Stick”

If something is spent that shouldn’t have been, it’s hard to get that money back.

Business: Software startup  

Process and Philosophy: At the CFO’s previous company, the number of corporate cards in distribution was slashed from 80 employees to just 3 execs. The operating principle was that requiring employees to use their own cards would force them to make more sensible spending decisions, preventing situations like expensing $500 for a dinner that should have only cost $100. This background shapes the current “no corporate card” policy—all 40 employees must use personal cards and request reimbursement.

Priorities: Enforce spending policies; minimize spend

Center Team Take:

We’ve talked to CFOs with hundreds of employees that only give out five or six corporate cards because they believe there’s an implicit threat to spenders that if they use their own cards and the expense is not approved, they’ll be out the money. But this approach can be inefficient, since it typically takes more time to track down expense submissions and close the books each month, and you end up with less visibility into spend. 

Jeff Drummond, VP of Finance and Accounting, CenterCard

3. “Trust but Verify”

Don’t be penny-wise and pound-foolish.

Business: Consumer goods startup

Process and Philosophy: At this 20-person team, the CEO’s personal airlines-reward card is used by about half the people in the office. There’s no finance department, so the CEO runs the books, approves everything, and wants to know everything that’s being spent. He requires a receipt for all purchases, even those well under the $75 IRS requirement, and tracks them through a digitized expense reporting tool. As he puts it, “The longer I can have control over finances, the better I’ll feel.”

That said, he acknowledges that empowering employees to make decisions is critical for a strong culture. He likes his team to go ahead with purchase decisions, and if there’s any disagreement about those decisions, they can discuss later. The key goals are to stay agile and communicate openly.

Priorities: Maximize visibility and alignment without slowing decisions down or wasting time sorting through piles of receipts

Center Team Take:

The ideal state is a healthy, growth-oriented work environment where employees make smart decisions guided by clear parameters. The challenge is not just determining the right balance of choice and controls, but refining that balance as the company grows. What works for a team of 20 won’t scale to a team of 40, not to mention 200. 

Heather Singh, Chief Marketing Officer, Center

To the point:

Fiscal culture is company culture, so it’s worth thinking about the kind you want to create, and ensuring your policies and processes reinforce it.

Related Articles

Your Employees Want to Do the Right Thing. Here’s How to Help Them.

Who’s Responsible for Keeping Your Budget on Track?


 

Evolving Fiscal Culture As You Grow, Part Three: Stabilizing

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By: The Center Team

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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

  • 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

  • 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

lineTO 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.
 

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Related Articles

The Blueprint for Effective Budgeting

 

Evolving Fiscal Culture As You Grow, Part Two: Scaling

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By: The Center Team

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In Part 1 of our Evolving Fiscal Culture As You Grow series, Starting Strong, we covered strategies for shaping a strong fiscal culture in the early days, but remaining flexible as you grow is key.

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 companies in the growth stage, in their own words.

For many mid-sized companies (generally between 100 and 1,000 employees), it’s increasingly important to grow revenue, achieve profitability, meet financial targets, and demonstrate operational rigor to satisfy investors or even pave the way to an IPO. Your fiscal culture may need to shift to support a change in strategy or to respond to unexpected business challenges and opportunities.

Practically speaking, policies and policies need to grow and evolve along with your team. What worked with 20 employees often becomes harder to maintain and manage at 200.

Team structure and tools

At the scaling stage, the finance team typically expands to include more specialized functions, although it doesn’t always grow as quickly as other teams like sales and marketing do. More employees throughout the company mean more pressure on finance, with more expenses to track down and review, more complex budgets to track, and more reports to generate. And when a company is seeking outside funding or planning to go public, the demands on the finance department increase significantly. More specialized tools, such as Concur and budgeting or planning software, are often added to the mix during this stage of growth.

Corporate card usage

A corporate card program is often introduced in the scaling stage, but it may be optional instead of mandatory, and things can get messy. As teams grow and there are more employees making purchases with their own cards, duplicate subscriptions, wasteful spending, and out-of-policy expenses become increasingly common. Expense reports continue to be a challenge to track down, and the lack of visibility into spend starts to have a larger impact on the overall financial picture. The time required to consolidate and reconcile data across multiple sources skyrockets, and when information doesn’t come in on time, many companies start making monthly accruals to account for outstanding expenses. The monthly close process becomes more time consuming, but less accurate—even though it’s more important than ever to hit financial goals.

On hitting the threshold: 

When you’re a startup, you want to do things in a flexible way, and I was never in a big rush to implement a corporate card. But as you grow, you start to care about making those expense targets.

          - CFO, IT software company

Challenges

  • Employees may overextend themselves financially by covering business expenses on their own cards or opening up additional credit card accounts to keep business and personal transactions separate.
     

  • More employees traveling and associating their business cards with services like Uber, Lyft, and Airbnb increase both the likelihood of personal expenditures being mixed in with business and the difficulty of identifying which is which.  
     

  • More employees traveling typically means more delays in submitting expense reports, resulting in a loss of visibility. Finance team members have to spend more time tracking down reports and missing data instead of spending time on more strategic activities.
     

  • Outstanding expense reports, duplicate data, and missing information--spread across multiple sources  like Concur, bank statements, and personal card statements--make it increasingly difficult to close books at the end of each month.
     

  • Team members may chafe at new processes and policies or feel that the company is losing its startup spirit.
     

  • Cost center managers are accountable for managing to a budget, but they lack real-time visibility into their employees’ spend, often learning that they went over budget 15 to 30 days after month-end.
     

  • Cross-departmental communication can become more challenging and less collaborative.

On the challenges of being a good business partner:

It’s hard to be a good finance business partner when I have to go explain that because someone didn’t submit their expense reports for three months, now we’re way over budget. It’s hard to really navigate and steer the business.

          - FP&A Manager, healthcare tech company

Suggestions

  • Implement a corporate card program, and ensure that all spenders use it for business purposes.
     

  • Articulate a clear policy on what expenses can be made on personal cards, and which expenses need to be pre-approved.
     

  • Implement a clear process for software subscriptions to minimize duplicates and unused renewals.
     

  • Communicate clearly that if business cards are associated with app-driven services like ridesharing and meal delivery, any personal expenditures should not be included in expense reports. Provide clear, specific examples of business and personal expenses, addressing “gray areas” like working late or personal days tacked on to business trips.
     

  • Educate team members on the impact of discretionary spend.
     

  • Revisit existing policies to ensure they are still meeting the needs of the business. Be sure to involve employees in the process to avoid surprises and secure buy-in.
     

  • Investigate ways to reduce the time employees need to spend on submitting expenses.
     

  • Dedicate time with company leaders to discussing how planned spending is supporting overall business strategy, and make adjustments if needed. Be sure to focus on strategic spending opportunities as well as reductions.

 

On the ultimate goal:

We’re not looking to underspend budgets. We’re looking to spend them, to invest the money, and we need up-to-date information to dial back or to invest more when we need to. 

          - FP&A Manager, healthcare tech company

 

lineTO THE POINT

When you’re scaling, or preparing for a big milestone like securing funding or going public, clear policies and strong communication are essential for balancing out decreased visibility into spending.

 

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Keep reading: Evolving Fiscal Culture as You Grow: Stabilizing

 

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What To Do When Your Spending Culture Outpaces Your Growth

5 Signs Your Company is Ready for a Corporate Card Program

Evolving Fiscal Culture As You Grow, Part One: Starting Strong

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By: The Center Team

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Fiscal culture is your company's approach to managing finances, but there’s no one way to define an effective one. It incorporates everything from how you finance your company and pay your employees to how you spend your budgets.

Some companies are known for their frugality, while others spend lavishly. Some executive and finance teams are highly disciplined, while others struggle to keep pace and hope for the best. Ideally, your company's fiscal culture is created with intent, and fundamentally, it should align strongly with your company’s values and overall culture.

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 smaller companies, in their own words.

For startups and early-stage companies (up to 100 employees), the key success factors are, in essence, stable leadership, figuring out product/market fit, and not running out of money—monthly cash flow is critical. If you’ve taken on outside investment, you need to show that you are good stewards of the capital and demonstrate operational rigor.

Team structure and tools

Smaller businesses typically don’t have a full in-house finance department and may outsource accounting or other key functions. The CEO (or CFO) is often closely involved in day-to-day spending and approvals, and Excel is used heavily for tracking. Tools may extend to QuickBooks, bank applications, or mobile apps like Expensify.

Corporate card usage

At this size company, employees often use their own credit cards, the CEO’s personal card, or small business credit cards (with the CEO as personal guarantor) for business and travel expenses. A handful of cards may be distributed to growing sales teams or maybe a few people in marketing. Software subscriptions or other shared expenses are sometimes consolidated on one central card.

On growing pains: 

I’d love to get people off my personal card, but I don’t want to chase people down for receipts. 

           - CEO, smart lighting company

Challenges

  • Keeping data in static spreadsheets creates a serious lack of visibility. There’s no way to see recent transactions or communicate key financial information to teams and employees.
     

  • As the team grows, it can be increasingly burdensome to carry large balances on personal cards (or on the CEO’s card). Employees may feel disempowered.
     

  • Getting approved for corporate credit is difficult, especially for younger companies.
     

  • Team members often spend too much time spend chasing down receipts, and expense reports can pile up.
     

  • Policies may not be clearly articulated. Even if they exist, it’s difficult to enforce compliance before spending happens instead of after the fact. (Precisely why many early -stage execs prefer the “stick” of forcing employees to use personal cards with the threat of not being being reimbursed for out-of-policy spend.)
     

  • Processes can get bogged down if the CEO or small finance team has too much on the plate. The system is difficult to scale.
     

On the limitations of pre-approvals:

Even with a pre-approved budget, an employee could pay $500 for a dinner that should be only $100, and then there’s no recourse. It’s hard to get money back if something is spent that shouldn’t have been.

          - CEO, customer data platform company

Suggestions

  • Be sure you have key policies in place: travel policy, expense reimbursement policy, and approval workflows.
     

  • Investigate other card options for spenders. Transition from having the CEO as personal guarantor to a corporate card.
     

  • Look for creative ways, such as software and outsourcing, to offload operational tasks, such as reviewing every expense report for compliance
     

  • Involve employees more in budgeting and forecasting while keeping the process as streamlined as possible.
     

  • Focus on establishing a strong fiscal culture with the right balance between empowerment and controls.
     

  • Keep the lines of communication open so employees understand the big picture and how their decisions impact the bottom line.
     

On communication: 

I want people to be making decisions about spending. Seven out of ten times, I’ll totally agree. Three out of ten times we’ll disagree, and we’ll talk about it. Two of those times they’ll be right, and one time I’ll be right. I just don’t want to stop decisions from being made.

          - CEO, smart lighting company

 

lineTO THE POINT

It’s far easier to establish a strong fiscal culture from the get-go, with clear policies and open communication, than it is to rein things in when you’re feeling pressured about cash flow.
 

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Keep reading: Evolving Fiscal Culture As You Grow: Scaling

Related Article

What Type of Business Traveler Are You?


 

What Type of Business Traveler Are You?

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By: The Center Team

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Travel is typically one of the biggest drivers of a company’s discretionary spend, especially for companies with sizable sales teams. Yet it’s also one of the most difficult to corral, as control continues to shift away from centralized travel departments, toward employees arranging their own flights, lodging, and transportation—often right from their phones.

We wanted to get a handle on employee attitudes toward business travel in the age of Uber and Airbnb, so we surveyed more than 300 employees to find out more. We identified five distinct types of business travelers.

1. The Cost-Conscious Traveler (28%)

This type of traveler is motivated to help the company save money. Cost conscious travelers, who represented just under 30% of our survey takers, seek out cheap flights and inexpensive lodging, and rarely use full meal per diems. Many businesses ask employees to treat company money as their own, and this group takes that to heart.

Of note:

  • cost conscious travelerCost-conscious travelers were more likely not to know what the budget is (22% vs. 16% overall). They’re doing their best to do the right thing despite a lack of clear information.
  • This well-intentioned group was most likely not to complain about doing expense reports—4 out of 5 agree that they’re necessary to a well-functioning business.

2. The Policy Follower (37%)

The Policy Follower—the most common type of business traveler in our survey—sticks to company travel guidelines. This type of traveler flies on preferred airlines, stays in approved corporate hotels, and carefully observes meal per diems.

Of note:

  • policy followerPolicy followers are more likely to use online software like Concur (27% vs. 21% overall), and more likely to know what the budget is and keep spending within it (70% vs. 61% overall). This suggests that online tools, clear policies, and budget visibility play a significant role in keeping spending in check.

3. The All Business, All the Time Traveler (15%)

This type of traveler tries to be reasonable with costs, but does what it takes to get the job done, even if that means booking more expensive flights or last-minute hotels. About 1 in 7 of the business travelers we surveyed described themselves this way.

Of note:

  • all biz travelerThis type of traveler was more likely to file expense reports manually (64% vs. 52% overall) and to say that filing expense reports is time consuming (39% vs. 27% overall). Comparing to the Policy Follower suggests that manual processes, combined with a “spend now, get approval later” model, make it more challenging to keep discretionary spend in check.

  • This group was somewhat more likely to charge things like rideshare services, music subscriptions, meal delivery, and Amazon purchases under the radar (19% vs. 13% overall).

4. The Work the Perks Traveler (13%)

Though certainly the majority of business travelers we talked to act with the company’s best interest in mind, just under 15% of the respondents acknowledged that they want to eat and drink well, stay in nice hotels, take advantage of upgrades when available, and chose car services over public transit.

Of note:

  • work the perksThis group was three times more likely to agree that expense reports are a waste of time, or that they don’t see the point (19% vs. 6% overall).

  • This type of traveler was also more likely not to know what the budget is and just spend what they need (20% vs. 16% overall).

5. The Budget Renegade (6%)

And a handful of travelers—about 6%—described themselves as Budget Renegades. These travelers may be unpopular with the finance team because they rarely stick to company policy, but ultimately feel they are doing the right thing because they deliver against their sales targets and goals.

Of note:

  • renegade traveler

    Most of these travelers (87%) are not required to submit expense reports. Of those that do, they’re more likely to complain that expense reports are time-consuming (40% vs. 27% overall).

  • Budget Renegades are nearly twice as likely not to know what the budget is; they just spend what they need to get the job done (31% vs. 16% overall).

lineTO THE POINT

Across all five groups, we see employees generally trying to do the right thing when it comes to business travel.

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When there’s a lack of clarity and visibility into policies and budgets, a subset may Work the Perks, but many more do their best to make the most Cost-Conscious decisions. And companies who make clear policies and centralized tools a priority are rewarded with responsible Policy Followers.

Business needs change more frequently than budgets do, however, so there are times when employees need to be empowered to make smart, strategic spending decisions. All Business, All the Time spenders and even Budget Renegades believe their spending choices support larger business goals—which they certainly can, as long as their decisions yield results and don’t result in unexpected surprises.

The key is for businesses to have clear budgets and policies in place, for employees at all levels to have visibility into those budgets and policies, for budgets to be adjusted regularly along with changing business needs, and for teams to have frequent communication about how spending decisions do (or don’t) support the larger strategy.

 

What kind of business traveler are you? Drop us line or or tweet us at @TheCenterCard!

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Your Employees Want to Do the Right Thing

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By: The Center Team

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We recently surveyed 300 employees at a range of small, medium-sized, and large companies for a deeper understanding of their attitudes toward business travel, expense reports, and corporate cards. The good news? As we expected, people generally want to do the right thing.

Tools and Processes

A full 4 in 5 of the respondents still use manual processes such as collecting receipts and inputting expenses into spreadsheets to complete their expense reports (52%), or a combination of manual processes and online tools (28%). Only about 20% submit reports online.

Achieve more: Embracing streamlined tools and processes saves everyone time, shortens cycles, and helps your team stay focused on more strategic priorities than taping receipts to sheets of paper.

Expense Reports: Friend or Foe?

Though more than a quarter (27%) of respondents felt that submitting expense reports was time-consuming (likely due to the manual processes mentioned above), and 23% wished there was a more effective way to get them done, 75% of employees say they understand why expense reports are needed. Only a handful (6%) feel they are a waste of time.

Achieve more: Though most employees understand why expense reports are important, you can level up by explaining how those expenses connect to larger business priorities. Engaging your team in the big picture gets everyone working together more effectively.

A Little Knowledge

Six out of 10 of employees are aware of the budget for travel & entertainment and keep their spending within it most of the time. An additional 18% do their best to stay within the budget but occasionally go over. And well over half (61%) would be more inclined to stay on budget if spend were monitored and tracked in real time.

On the other side of the spectrum, 16% don’t know what the budget is—and only 5% know what the budget is but ignore it. In general, employees at smaller companies were less likely to know what their budget is (29% compared to 16% overall).

Achieve more: When employees know what the budget is, they’re more inclined to respect it. Even if you’re not big enough for sophisticated tools and processes, timely communication about how much employees have available to spend will go a long way toward hitting key numbers.

Business Travel

An impressive 4 in 5 business travelers consistently make cost-conscious decisions, adhere to company policy, or generally try to be reasonable with their expenses. Only 13% aim to “work the perks,” and just a handful (6%) ignore the budget in favor of meeting their sales and business targets.

Achieve more: When you have clear policies in place, employees are inclined to follow them—though it’s also important to empower employees to seize opportunities on behalf of the business from time to time. Consistent communication and a shared understanding of your strategic priorities are key.
 

The Facts on Fraud

If you’re concerned about fraud, the good news is that almost 9 in 10 (87%) of the employees we surveyed never charge “work-related” expenses to their corporate cards, and 74% said there is “no way” they could get away with personal expenses on a corporate card. Interestingly, small company employees were much more likely to say personal expenses could go under the radar (43% said it would be easy or were somewhat confident they could get away with it, compared to 26% overall).

As for which questionable expenses do occasionally go under the radar, the top offenders were Amazon purchases (7%), rideshare and food delivery apps (4.5%), and music streaming services (1%).

Achieve more: Since our results do show that employees generally do want to do the right thing, establishing and communicating clear policies about these kinds of “gray area” expenses is worthwhile, even when you’re just starting out. Even better? Involving your team in setting those policies.

In the Center Manifesto, we say, “We believe that the solution lies not in statements and spreadsheets, but in tools and trust. And that when people have the right information, in the right environment, they will make the right choices.”

lineTO THE POINT

Our research backs this up, which is great news for companies of all sizes.

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What’s your take on making it easier for employees to do the right thing? Drop us line or or tweet us at @TheCenterCard!

 

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Are Spreadsheets Something to Celebrate?

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By: The Center Team

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There’s a holiday for just about everything, it seems, and today happens to be National Spreadsheet Day.

Certainly there are those who might view this day as cause for celebration, a chance to geek out on pivot tables, vlookup, and the DOLLARFR function.

But for most of us, spreadsheets are so ubiquitous in planning, budgeting, tracking, reporting, and organizing processes that every day feels like National Spreadsheet Day.

In fact, our survey of business leaders revealed that more than half of companies require their employees to input expenses into spreadsheets, and spreadsheets remain the most popular way for companies of all sizes to manage their budgets.

We’ve talked to teams who “hack” their forecasting process and estimate accruals by circulating spreadsheets to capture expected travel expenses and invoices as they close their books each month. And we've seen Excel used for everything from managing an RSVP list for a company party to tracking client relationships.

Here are some of the issues we’ve seen with spreadsheets, and a few ideas for addressing them.

  1. No way of communicating updates. The minute you send a spreadsheet as an attachment, it’s out of date.

    The fix: Share live documents instead of circulating attachments, and then hoping everyone has the right version.

  1. Disconnected from other tools. Today’s finance teams are using a wide array of tools and technology, but they don’t always talk to each other—and it seems that most don’t talk to Excel. One CFO we spoke with generates financials in Quickbooks, for example, but doesn’t update his Excel model unless there’s a board meeting coming up.

    The fix: Simply increasing the cadence of your cross-functional budget check-ins can help you start to transition to a more automated and informed process.

  1. Various levels of sophistication. Finance pros can push the boundaries of what spreadsheets can do, but there’s a limit. And our own VP of Finance and Accounting estimates that more than 80% of spreadsheets include errors.


    The fix: Just because you can do something in a spreadsheet doesn’t mean you should. A simpler spreadsheet, free of errors, is better than a "fully loaded" one that might be fully loaded with mistakes.
     

Everyone is comfortable using Excel, but it’s flawed as a budgeting tool. It’s estimated that over 80% of spreadsheets have errors, and there are serious problems with version control and managing access to the latest model. For this reason, Excel spreadsheets quickly become static and dated. 

           Jeff Drummond, VP of Finance and Accounting

 
  1. Various levels of understanding. Remember that people absorb information in different ways, and not everybody speaks spreadsheet.

    The fix: Look for creative ways to present your data visually and pull out the real story behind it in relatable terms.

  1. Can shortchange true collaboration. It’s tempting sometimes to just communicate via spreadsheet, but face-to-face discussion can go a long way toward shared understanding and effective teamwork.

    The fix: Carve out time for active collaboration and discussion when you need to get everybody on the same page (or tab) about strategy and priorities.  
 

Spreadsheets: a necessary evil, or just evil? What are your tips for making them work at work? Let us know!

lineTO THE POINT:

National “holiday” or no,
as we say The Center Manifesto,
we believe the solution lies not in statements and spreadsheets,
but in tools and trust.

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What To Do When Your Spending Outpaces Your Growth

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By: The Center Team

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A high-flying start-up drops $4 million on its holiday party. Its 5,000 employees have free run of the lavish theater where the Grammys are awarded, surrounding bars and restaurants included. Drake is the headliner, and Diplo performs an exclusive set atop a glittering 100-foot DJ tower.

This is not an episode of Silicon Valley—it was an actual party thrown by Snap earlier this year. You might deduce that Snap was rolling in cash, but in fact the company had reported a loss of $350 million the previous quarter.

Snap’s CEO Evan Spiegel reportedly footed the bill for the bash himself, but the disconnect is still jarring. What a company spends its money on is a clear reflection of its strategy and its values, and a signal to its customers, employees, and investors.

There’s no question that primo perks can help startups land great talent, bring teams together, and make employees feel valued. And of course, most companies aren’t spending millions on  over-the-top parties. But when you add up how much you are spending, on everything from snacks and birthday cakes to hoodies and events, you might be surprised. Here’s how your team can pull together at every level to ensure your perks work with your higher-level goals, not against them.

Executive Team: Set the Tone

When your company is in build mode, it’s easy to adopt a “more is more” mentality as you establish the culture and pursue key hires (particularly when stories like the Snap bash are plentiful). The executive team plays a critical role in shaping the strategy and setting the tone.

It’s important to know what similar companies offer as perks to ensure you’re being competitive, but that doesn’t mean you have to match what others offer exactly, especially if it starts to feel like an arms race.

Prioritize perks that emphasize what’s unique about your company, and think outside the box. REI offers its employees two paid days—YayDays—each year to get out and enjoy the great outdoors. Seattle-area digital marketing firm Wheelhouse DMG plays up its scenic setting overlooking Salmon Bay with a 25-foot office boat that can be used for meetings. Selecting a few well-chosen perks that connect strongly to your company’s unique qualities can help you stand out to job candidates and create a stronger sense of community internally.

Questions to consider:
  • What perks would be a powerful extension of our vision and our values?

  • How can we use perks to stand out instead of just trying to match what other companies are doing?

  • What kinds of perks feel right given where we are with our funding, size, and performance?

  • Are we sending the right message to our team, our customers, and our investors?

Communication inspiration:
  • As you know, our mission is to make international travel accessible to all, so we’ll be offering every employee a yearly $2,000 travel stipend to help fund a dream trip.

  • One of our values is originality, so each year we have a companywide contest to plan the most unique holiday party for a set budget. We’ve done everything from indoor skydiving to square dancing!

Finance: Clarify the Costs

To the finance team, perks are some of the most visible expressions of fiscal culture. They are also opportunities to strengthen that culture, since they’re often easier to talk about across departments than measures like EBITDA  or Unlevered Free Cash Flow.

The most important role the finance team can play is to truly understand costs and communicate them in a way that increases understanding and drives productive conversation.

Questions to consider:
  • How much are we spending on perks on a per-employee basis, by department and across the whole company?

  • What tools and processes do we need to make our spending on perks more visible?

  • How is our spending on perks per employee tracking to our growth and our financial performance?

  • What are some creative ways we can communicate the costs so it’s clear and memorable?

Communication inspiration:
  • Did you realize that last year we spent almost $1,000 per employee on the anniversary party? You know, if we had brought that down by just 25%, we could have funded 10 new hires for a year or upgraded our entire server infrastructure!

  • Did you know we’re spending $900 a month…..just on bananas?!

Budget and People Managers: Weigh In On What and Why

At the people level, perks are powerful for building team morale and rewarding hard work. And when you’re hiring, they can be enticements or even table stakes when the job market is hot.  

Some perks are created with intention and managed well, while others take hold organically and spread like aggressive weeds. Unofficial traditions like weekly office lunches, or bringing dinner when a key deadline is looming can quickly become the norm—and when you’re adding multiple new hires monthly or even weekly, those costs start to snowball.

It’s important for people managers to stay tuned in to what matters the most to team members, and adjust course as needed.

Questions to consider:
  • Which perks are most valued by team members? What’s most important to your people, individually and as a group—off-site activities, individual rewards, time off, other?

  • Why are we offering a certain perk? Is it for a certain time period, or is it ongoing?  

  • How can we communicate the reasons for perks and the guidelines around them as clearly as possible?

  • How can we involve team members in coming up with ideas for changing things up?

Communication inspiration:
  • I know you’ve all been working extra hard for this product launch. To help you stay fueled during the crunch, we’ll be bringing in lunch every day for the next two weeks. Let me know if you have any special requests, and enjoy!

  • You’ve probably noticed that we’ve added more than a dozen new team members in the last couple of weeks. We’re having a special happy hour this Friday to give you a chance to get to know the new folks.

All Leaders: Revisit Regularly and Communicate Clearly

When you’re caught up in a heady phase of growth, it’s easy to just keep doing what you’ve been doing—our research shows that only 14 percent of businesses adjust their budgets regularly throughout the fiscal year. But companies can outgrow perks just as they outgrow small offices and inefficient processes. Even when you’re operating at a scale like Amazon, there’s a point at which certain events and traditions can’t keep up with the pace of growth.

We often see companies who set their budgets by taking what they spent in a particular year and simply adding 10% to it, but when you have proliferating perks in the mix, costs can spiral out of control quickly.

Revisiting spend regularly can help avoid a crisis where you have to overcorrect and slash perks, which can be disconcerting to employees and undermine the very culture you’ve built. And whenever it’s time to make changes, the way they are communicated makes a huge difference.

Questions to consider:
  • Have our strategic priorities changed? How should those be reflected in our perks?

  • Which perks have we outgrown in terms of time, money, or space?

  • How many employees are we planning to add in the next quarter or year? Which perks are incurring per-employee costs, and how much are we spending on those?

  • Is our fiscal culture where we want it to be? Are we sending the right message to our teams?

Communication inspiration:
  • We hope you’re as excited about our new office location as we are! Now that we’re in a more central location, we’ve decided to keep our team lunch to once a week. We encourage you to explore the neighborhood, get some fresh air, and look forward to Fridays, when we’ll gather in the Cascade Room.

  • We know many of you have enjoyed the on-site massages, but you may have also noticed that we’re in a space crunch! We’ll be reclaiming the small conference room effective next month, but we’d love your ideas for reducing stress - talk to Janet!

At every stage of growth, it’s important to think strategically about what perks make the most sense for your culture and your company size, to be clear about how much they cost, and to revisit as your situation changes.

lineTO THE POINT

Involving employees in the conversation and communicating clearly will help you create a strong fiscal culture based on success, not excess.

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Related Articles:

The Problem with Set It and Forget It

The Blueprint for Effective Budgeting

 

5 Resolutions To Start the New Business Year Off Right

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2018 business resolutions
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By: The Center Team

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We’ve found that many businesses simply accept the budget process as being cumbersome and complex, but it doesn’t have to be that way. As you turn the page on the calendar year, it’s an ideal time to introduce some new perspectives and methods to get everyone on the same page and transform your budget into a dynamic, strategic tool. Here are five resolutions to start fresh.

Resolution 1: Make the Shift to Rolling Budgets

Business needs change rapidly, but most budgets don’t. A recent survey we did with business owners and finance managers showed that more than half set budgets just once a year. Less than 15% of the companies we talked to evaluate their budget periodically throughout the year and adjust as necessary, and businesses with more than 500 employees were even less likely to operate this way.

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  • Moving away from static spreadsheets to more automated tools certainly helps, but there’s no need to wait for a technology-driven solution. Simply increasing the cadence of cross-functional budget check-ins and changes will help you make this important and impactful shift.

  • If you’ve been thinking about your budget annually, put quarterly or monthly check-ins on the calendar right now. And if you’re already doing that, try increasing the frequency to weekly or even daily to help your organization transition to a rolling, “live” budget mindset.

Resolution 2: Break Down the Silos

Our survey results showed that of the companies who never go over their budget, about three-quarters (73%) report that they have ongoing communication and budget updates across departments. We found this strong cross-departmental communication to be the top driver for budgeting success. Too often, budgeting and reporting is done department by department, without a shared understanding of how each department’s budget and priorities connect to the overall business strategy.

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  • When you put those regular budget check-ins on the calendar, be sure to make them cross-team events. Set the “we’re in this together” tone by giving updates on your business priorities (highlighting any changes each time you meet), and then allowing time for discussion of how each department’s line items support that strategy.

  • By devoting sufficient time to the big picture, with frequent reminders that everyone is working together toward the same goals, you can help your teams be more open to trade-offs and discussion about the best way to invest company funds. You’ll also increase visibility into each department’s priorities and challenges.

“Ongoing communication and iteration with budget owners and spenders helps teams stay aligned with overall strategy and empowers everyone involved.” Jeff Drummond, VP of Finance and Accounting, Center

Resolution 3: Demystify the Data

Most budgets are written in financial terms that are well understood by FP&A teams, but aren’t always easily digestible by other departments. This can perpetuate the mindset that finance “owns” the budget and can make team members feel less invested in it.

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  • Remember that people absorb information in different ways, so look for ways to get beyond spreadsheets and charts. Look for creative ways to present data visually and pull out the story behind it in real, relatable terms.

  • Challenge team members to title each chart with a headline summarizing the story behind the data. Make it a practice to explain commonly used acronyms to build shared understanding, and allow time for questions and discussions. Building a shared understanding will help your whole team feel more invested in the process—and more accountable for the outcome.  

Resolution 4: Empower Your Finance Team as a Strategic Business Partner

Your finance team can be an essential resource for helping the entire organization use the budget as a strategic business tool. The trick is to set the expectation that finance doesn’t “own” the budget—everybody owns the budget.

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  • Set the right tone by creating regular opportunities for cross-department collaboration, and empowering your finance team to partner with each department to develop a budget that supports the overall business strategy.

  • Finance can drive the progress and be the expert on the overall strategy, but it’s essential that each department feels invested in the process as well as the outcome. And the more the finance team knows about what each department is trying to achieve, the more effective the partnership will be. This takes active collaboration and discussion beyond just circulating spreadsheets.

“We believe that the budget should more than a dreaded annual event: it should be an ongoing opportunity to reflect on what’s happened and plan for what comes next.” Heather Singh, Chief Marketing Officer, Center

Resolution 5: Get a Handle on Discretionary Spend

Office supplies. Subscriptions. Trade shows. Travel. These types of one-off expenses may not be the largest line items in your budget, but together they can have a surprisingly big impact on your bottom line. Discretionary spend is the easiest area for companies to control, yet 25% of the business owners and managers we polled had “no idea” how much of their budget goes toward it.

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  • If you don’t have a baseline figure for discretionary spend, now is an ideal time to establish one. Simply add up everything from 2017 that’s not a fixed cost and calculate the percentage of your total expenses. If you’re above 20%, this is likely a strategic area to focus on for your bottom line.

  • When you review your discretionary spend from the previous year, you might identify some areas where more formalized policies would make a difference. Be sure to involve your team in the discussion, and communicate any new policies clearly. The more people understand the why behind your policies, the more successful they will be.

To the point: It’s easy to simply accept the budget process as cumbersome and complex, but some simple organizational and practical changes can help you transform it into a strategic tool that helps your team achieve more.

 

Related articles:

Getting a Handle on Discretionary Spend

The Center Manifesto

Budgeting Methods, Attitudes, and Success Factors

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Infographic reveals attitudes about budgeting process
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By: The Center Team

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Managing budget and spend is time-consuming and complicated. We recently surveyed nearly 250 US-based business owners, CFOs, and managers to build a deeper understanding of how companies of all sizes manage this critical business function.

Not surprisingly, most respondents’ companies set budgets on an annual basis (55%), despite best practices that recommend rolling budgets. Just 14% of respondents said their companies adjust budgets periodically through the year.

We also found that nearly half of companies (43%) continue to use manual processes and antiquated tools like spreadsheets, and that a quarter (25%) had “no idea” how much of their budget went to discretionary spend (travel and entertainment, office supplies, software subscriptions, and other controllable expenses).

Our conclusion is that new tools are needed to make it easier to answer the question “How are you tracking to budget?” It’s more important than ever to connect budget to spend so companies can make strategic decisions about where to invest resources.

Here is a visual summary of what we learned.

Infographic of results from Center Survey August 2017

 

Full-Size Infographic

Press Release: New Center Study Reveals Companies are Eager for Fresh Approach to Budgets

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