The reopening of offices heralds the return of events, business lunches and after-work drinks. This should be celebrated ‘ but handled with care by finance leaders
The UK’s return to the office has been a drawn out and stop-start affair. Last year, eager calls for business as usual were retracted as Covid cases once again began to surge. However, following a successful vaccine programme, we may finally be nearing the resumption of normality.
Research undertaken by Soldo has shown that three in four businesses cut their operating costs during the pandemic, both in terms of payments to third-party suppliers and employee expenses. Perhaps unsurprisingly, the early stage of the crisis when uncertainty and panic peaked saw many CFOs empowered to cut and control expenditure like never before.
As workers come back to the office, there is no doubt pressure on finance teams to loosen the purse strings. Businesses are poised for growth in the coming year and general spending is set to rise as a result. Most businesses we surveyed showed they will be adopting financial automation technologies to help them manage rising employee expenses, marketing and advertising, fuel expenses as a priority (in that order).
Whether it’s the return of IRL events, business lunches or simply reuniting colleagues wanting to go for team drinks, there are many valid reasons for costs to increase as the workforce returns to a more sociable and face-to-face style of working.
Businesses would undoubtedly love nothing more than to go all out in celebrating employees reuniting with colleagues and meeting new ones in person for the first time. What’s more, there are many reasons to feel optimistic. The UK’s job market is thriving and record economic growth was achieved in Q2. Further, many sectors showed an unexpected resilience in the face of lockdowns and certain markets – such as e-commerce ‘ did nothing short of flourish. However, the fact is that many businesses are still not yet in a position to let their guard down when it comes to spend. The pandemic took its toll on SMEs across a range of sectors, and they remain in a vulnerable position.
There is a real danger that expenses could start to creep up exponentially for SMEs. Businesses will be focused on spending for growth in the coming year and will choose to retain visibility and control over expenses. According to recent research provided by Soldo, employees will have far less flexibility around expenses in future ‘ with most finance leaders surveyed (52% in a survey of 900) believing that further oversight and control will be required across employee expenses.
As such, while expenditure may inevitably increase to some extent, finance teams need to try and retain control on spending over the past 18 months. There are various ways that they can ensure that happens allowing leaders to protect cashflow and growth.
As a starting point, finance teams should consider setting both firm and realistic budgets. While the crisis has stabilised, we are not out of the woods yet and other issues are coming to the fore – namely labour shortages and the resultant food, gas and fuel crises. The economic landscape remains treacherous and careful budgeting will ensure that SMEs can weather these storms and have the emergency resources needed to absorb any further shocks on the horizon.
Secondly, we speak to finance teams about the best way to implement and enforce codified rules around third-party costs and staff expenses. Excessive expenditure of this kind can weigh businesses down and it is important that employees have a firm understanding of what is and what isn’t acceptable spending – but most importantly where the leaks are within the business, plugging those fast. We think it is important to empower employees to successfully manage their business spending.
Lastly, efficient approvals processes with a link to reconciliation are essential. Leveraging digital tools is particularly key to getting this right. The most successful SMEs understand the importance of carefully scrutinising expenditure. It is an unfortunate fact that expense fraud remains rife in the UK. Research from Soldo has shown that a third (38%) of British employees admit to committing expense fraud, at the cost of £1.9 billion a year for UK businesses. Laxity of this kind is not an option for SMEs that wish to truly take advantage of the great reset and prosper in the post-Covid era.
The reopening of offices is a blessing. We have all missed the face-to-face interaction that brings so much joy to working life. A strong sense of comradery is essential to successful working and is difficult to recreate via Teams or Zoom. It is therefore quite understandable that socialising and team buildings is high on the agenda for many SMEs.
The return of higher expenditure on socialising and renegotiated commercial rents is something that should be welcomed but nonetheless managed with caution. The knock-on effects of deep economic shocks are often far-reaching and unpredictable. Finance teams and CFOs should remain prepared for the unexpected and, in the words of former UK government advice, stay alert.
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