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CFOs AT MID-SIZE COMPANIES GROW MORE CONFIDENT ABOUT U.S. ECONOMIC GROWTH, NEW SURVEY SAYS
Despite Accelerating Economic Recovery, CFOs Still Concerned with Lack of Compliance to Corporate Spending Rules by Employees and Senior Executives
Survey Highlights:
- CFOs Challenged to Drive Savings and Boost Profitability with Limited Resources
- Senior Management Needs to Lead the Way in Enforcing Spending Policies
- Goals for 2005: Reining In Maverick Spend, Better Vendor Deals
NEW YORK, March 16, 2005 -- Financial executives at America's mid-sized companies are much more
optimistic about growth for the nation's economy than they were a year ago,
according to a new poll commissioned by American Express.
However, these CFOs haven't forgotten lessons learned during the economic downturn and still
actively seek more effective ways to improve profitability by managing indirect expenditures,
such as corporate travel and the purchasing of office supplies. The new survey indicates employees
and senior executives who don't comply with established spending rules pose a real challenge to
managing spend. Further, many financial executives report low satisfaction with data they
receive on employee spending, and say it blocks them from achieving cost-saving goals.
"America's growing companies are anticipating bigger profits this year, but, at many of these firms,
there's also increasing awareness that financial health is closely tied to managing expenses,"
said Anr Williams, Executive Vice President, U.S. Commercial Card, American Express Global
Corporate Services. "After taking steps to control the most obvious costs, these companies are
aggressively searching for new ways to drive savings throughout the entire organization."
Increasing Optimism on Economy
Expense Management: Driving Savings Through Better Information and Spending Policies is the
third-annual study of senior financial executives at U.S. mid-size companies - completed by CFO
Research Services and commissioned by American Express. CFO Research polled more than 300 CFOs,
Controllers, VPs and other financial executives to explore how mid-size firms drive savings through
expense management.
In the study, conducted last September, more than two-thirds (68%) of respondents believed the
economy would grow during 2005. In comparison, less than half (48%) of the respondents surveyed
in the prior year thought the economy would improve.
Non-compliance to Policies is a Problem
While the new survey highlights a brighter outlook on the economy, it also reveals room for
improvement in the way financial executives manage indirect expenditures. CFOs are concerned with
raising compliance to spending policies by both rank-and-file employees and upper management. More
than one-third (36%) of CFOs said the lack of compliance to policies by senior management is a
significant barrier to effective indirect spending policies. Successful spending policies require the
participation, enforcement and endorsement of senior executives.
Nearly three-quarters (74%) of those polled said compliance is high for "submitting hard-copy receipts"
of expenditures. But the survey indicates a need for better adherence to policies that limit employee spending.
For example, only 36% of respondents reported relatively high rates of compliance with "using only designated
vendors." And only 40% indicated high compliance with an established rule for "limiting spending per
transaction."
Limited time and resources pose a challenge to financial executives striving to manage expenses. But mid-size
companies are determined to improve policy adherence. To drive cost savings in 2005, half of CFOs polled say
they'll give high priority to "identifying and controlling unauthorized spending."
Wanted: Better Data on Employee Spending
While 59% of respondents say their firms have a corporate card system, only 29% use aggregated spending data
available from those systems. Many CFOs want data in a flexible, easy-to-use format in order to better analyze
and manage indirect expenditures. Of those who do receive comprehensive data, the majority (68%) of finance
executives get it in a static, hard-copy format. One in five (20%) rated the inability to access detailed
spending data as a major barrier to reaping cost savings.
"Maximizing the control of indirect expenses requires the ability to access employee spending information and
the power to manipulate that data in useful and meaningful ways," noted Williams. "Web-based reports enable
companies to easily access valuable spending information to help them secure better rates and ensure spending policy compliance."
Obstacles to Negotiating Better Deals
In the new CFO Research survey, 63% of financial executives indicated that they plan to place a high priority on
negotiating better prices from vendors in 2005 - in order to achieve cost savings.
Many CFOs reported low levels of satisfaction with current tactics used to secure preferable pricing. Only
40% of respondents indicated high compliance to spending policies that drive dollars to selected vendors.
When asked what challenges they face in getting the best prices from vendors, the top answer,
from nearly half (49%) of respondents, was that they "lack time and resources to focus on negotiating deals."
About The Survey
This survey of 320 senior financial executives at middle market companies and the accompanying research were sponsored by
American Express and conducted independently by CFO Research Services. In addition to the mailed survey, CFO
Research Services interviewed seven finance executives. This survey was written, designed and implemented by CFO Research
Services.
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