- “You’re Welcome” In standard
Recently I attended a presentation about a new accounting technology that streamlines the AP and expense reporting process. I was impressed, and started running through in my mind how well this could improve the lives of our clients, give them better control over their travel spend and give them the ability to scale into larger companies without having to replace the system in years to come.
After we got an idea of the cost, my initial thought was, “well that is more expensive than the current provider we use, but how much is this going to save us in the long run?”
I turned to a fellow attendee and asked her what she thought. “Wow. That’s expensive,” she said, “$10 an expense report! I’d rather just keep on doing things the way we have always done it.”
I come to find out the “way we have always done it” meant having a salesperson on the road fill out a detailed, itemized excel expense report, print it out, then neatly tape all receipts on an 8.5 X 11 sheet of paper and mail the form into headquarters. Once at headquarters, an admin would open the mail, put it in the AP person’s overflowing inbox. Then the AP person would manually check if all receipts were attached, if not, they would call the sales person and have them send the missing receipts, etc. Then they would send that completed expense report to the manager for approval and wait for them to approve before manually entering in the expense report into the accounting system, decide if it was billable to the customer then send the paper check to the employee for payment.
I felt like saying, “Honey, $10 is a BARGAIN compared to how expensive your current process is!”
But it happens all the time. People step over dollars to pick up dimes. They compare their “free” process to something that has an tangible cost like $10 per expense report. My fellow attendee didn’t see how much time went into compiling and processing that expense report, how many touches, how many follow ups were needed, how slow that process was, and–most importantly— and how much money they were actually spending on a simple expense report. That was the calculation going through my head. Her calculation was # of expense reports X $10. Which she equated to additional cost… Period.
Here’s how to avoid the Stepping-Over-Dollars-to-Pick-Up-Dimes syndrome:
1.) Look beyond the “cost:” Like my fellow attendee, it’s easy to see the dollars when someone puts it in front of you. It’s a whole lot harder to see the dollars when they buried in someone’s salary, in postage costs and overhead expenses. How much do you pay a sales person per hour? Do you really want them spending an hour a month taping receipts to a 8.5 X 11? Do you really want your AP person spending their time chasing receipts, paperwork and approvals?
2.) Think now and later: One of our biggest challenges with people like my fellow attendee is that they are not thinking long term. It all comes down to building a scalable process so that you can grow and not have to overhaul your whole system or process— or heaven forbid– “staff up” to handle more administrative tasks.
3.) Consider the number of touches: In my fellow attendee’s process, there were at least 7 physical touches on that expense report before the check got processed. Think about how much time it cost everyone to create, check and enter that piece of paper– and I didn’t include follow up calls in case something got lost or there were questions! How often do we not consider the inefficiencies and the opportunity for error when we look at these “free” processes?
4.) Consider the payback horizon: In the case above we’re talking about an AP and expense reporting system. It could be any system or investment that you are considering. It’s hard to see beyond the upfront costs, both in dollars and in disruption to your organization to implement something like this. Many people consider these improvements “not worth it” and then go back to business as usual. I encourage you to stop and take a look at what the investment means for the long-term for your business. If you think of things like this as a long-term investment where the payback would be measured in years, scalability and organizational efficiency you may reframe the issue so you can see the “dollars” you are about to step over.
5.) Think opportunity cost: For my fellow attendee, she wasn’t thinking about all the opportunities that she was missing in her current process. For me, I’d rather have that salesperson out selling, rather than taping receipts to a sheet of paper. I’d rather free up my AP clerk’s time to help with collections, and I would rather that the approving manager working on strategy rather than paperwork. When you start to think of the “redeployment” of resources away from administrative activities and towards activities that drive the business forward, you start to look down and see the dollars.
It happens too often with many small businesses– they step over the dollars to grab the dimes. Frankly, I think they don’t realize what they are doing. So I encourage you– take a look “down” and see what opportunities you are passing over to “save” some money. You may find a gold mine right under your feet!