While large, one-time expenses typically take center stage in budget discussions, controlling smaller, recurring expenses can be a more significant opportunity to protect the bottom line.
“But wait,” you’re thinking, “they don’t seem particularly monumental.” After all, how can your monthly Slack subscription or monthly vendor payments possibly affect the entire organization? Have you ever heard the term “small but mighty”? That’s the best way to sum up your recurring expenses because across every department within the organization, they’re a significant operational burden.
Look no further than a recent study of 1.5 million global businesses that found they’ll spend $3.7 trillion on recurring costs in 2023 — and that’s just on IT software, services, hardware, and communications. Add in things like fleet vehicle payments and monthly inventory deliveries, and you end up with a mighty mountain.
Taking control of recurring expenses doesn’t mean spending more time on them. We consider time-consuming and unnecessarily manual processes to be a form of financial fallout. Instead, you need a strategy to make processes around them faster, easier, and more accurate for everyone involved.
Here’s your action plan:
1. Start with pre-approvals
Any expense can drag down your bottom line if it’s a surprise. The best recurring expense management strategy starts with a pre-approval process. Whether it’s approving a fixed cost — like a monthly software subscription, for example — or giving employees virtual cards with built-in spending restrictions for specific recurring needs, you won’t have to worry about getting caught off guard.
2. Get updates in real-time
Why wait until the end of the month to see your recurring expenses? That’s the old-school way. Instead, take advantage of technology that automatically captures expense details at the point of purchase so you can see the current month’s spend anytime you want.
As an added benefit, this automated data collection eliminates human errors — which are more common than you might think — plaguing an estimated 19% of expense reports. But with automated data collection, you get to take advantage of pre-filled information, like business purpose and type of spend.
3. Automate your reconciliation
Paper doesn’t scale. Reviewing and processing a pile of receipts is frustrating, inefficient, and no longer necessary — and it’s especially maddening when you’re checking off recurring monthly costs. But when every expense detail automatically feeds into your system at the point of purchase, it also immediately reconciles the transaction. This saves finance teams valuable time they can dedicate to other projects.
4. Make smarter decisions about your expenses
With automation comes opportunities to streamline recurring expenses. And because you’re automating previously manual processes, you’ve saved plenty of time to spot them.
Start with the lowest-hanging fruit: automating recurring payments to capture discounts and eliminate penalties for late or missed payments.
Now, let’s take it a step further. Is there a subscription you’re paying for but don’t need? A whopping 74% of consumers say it’s easy to forget about recurring monthly subscription service charges — and if they’re blanking on their Netflix subscription, they may have forgotten about a long-lost business subscription. Make it part of your strategy to check in with managers quarterly and ensure they’re still getting value from the tools you’re paying for.
Another question: Can you use better expense analytics to renegotiate your recurring vendor payment terms? The right technology won’t just automate processes; it will also have comprehensive real-time data insights. Take a page from Dealer Tire’s playbook, dig into your analytics, and use them to drive new vendor negotiations.
4. Boost morale with empowered employees
Pre-approving your recurring expenses or setting limits for new ones – like a per-user cost limit for each new tech subscription, for example – makes employees feel like they have greater control over their spending instead of constantly asking for permission.
Another big empowerment tool is eliminating mundane tasks. Automation isn’t just a gift to the finance department. It saves the entire team time – time they can use to do more meaningful work. Or the freedom to log off at 5:00 pm instead of 8:00 pm.
That happened at Buddle Findlay when they transformed their paper-based expense management process into a simpler, centralized, automated strategy. Suddenly, their AP team had an extra 24 hours per week, making them feel like their daily work was “more human.”
Recurring expenses are often underemphasized, but they are critical to your organization’s financial health. With this action plan, you can open up a new world of operational efficiency and opportunity.