jump to navigation

Corporate Expenses: A David vs. Goliath Story January 27, 2007

Posted by robzel in Banks, Business, Expense, financial companies, growth, small business.
trackback

Corporate ExpensesIf you work in a large corporation, chances are you have come across systems for expense administration. Now, I have a lot of years of experience working in the corporate world and more recently running my own business. What I am about write below is not to refute the importance of expense management. In order to run a successful business, one must keep are careful eye on unnecessary expenses (although this lesson seems to be forgotten when it comes to executive compensation; think Home Depot). What I am going to illustrate through my personal experience is how the creation of corporate bureaucracy can sometimes cloud what are good intentions. By creating inflexible systems with non-thinking bureaucratic employees the goals of any corporate project can be defeated by negative externalities created. In this story I am cast as David. Goliath is played by a senior finance department employee. The setting is one of the world’s largest diversified financial institutions (one of my past employers).

One day the King (the head of the large diversified financial institution) says to his most senior and trusted financial adviser named Goliath, “Expenses are getting out of control. We are spending millions of dollars worldwide on travel, entertainment and other frivolous expenses. I need you to do something about this!” Goliath goes back to his lush office (no cube for Goliath) and thinks about how he can solve this vexing problem. “I know!” he declares, “We will build a new expense system.”

Goliath gathers all the best systems folks from throughout the organization. Never mind that they were engaged in projects that had huge revenue potential. After all, expenses are real right now not possibilities for revenue in the future. Of course since Goliath was so senior in the organization, project prioritization was not necessary. Goliath did not care that his project bumped countless other projects out of contention. That was a small price to pay for saving expenses! Little did he know (or care) about the hundreds of employees who had toiled on their projects over countless hours. Little did he consider the impact on morale or the opportunities lost for future revenue. Goliath was only focused on one thing, saving expenses.

After only 9 months Goliath sat down with the King and exclaimed, “We are done!” Goliath went on to describe the system to the King. “We have built the best expense tracking system in the world as would only befit the world’s best financial institution. I am so proud of the system and the way we built in measures and controls. Let me give you some examples.” Goliath goes on to explain how every item on the expense report needs to be itemized and entered into the system. Each travel and entertainment item has set limits where if the employee exceed the limit the excess comes out of their own pocket, unless of course the employee gains permission from two levels above them in the organization for the excess expense. All receipts get faxed over to a central processing center (newly set up of course) where the receipts are reconciled against the expense report. All reports need to be electronically approved by the employee’s boss and will not be processed until then. And the kicker as Goliath described to the King is that, “I have actually created revenue opportunities for the company from our own employees. Since all expenses are charged on our own corporate credit card, we can collect late fees and interest on unpaid charges. We have actually tracked the amount of time it takes to process expenses on average and it is in excess of 30 days! That means that unless the employee pays the outstanding balance out of their own pocket, we will be able to charge late fees and interest! The King was so pleased with the system and declared, “This is good!”

So the system was rolled out to the corporation. Almost immediately the expense savings were realized (as well as some revenue)! However, unbeknownst to the King the amount of time required to process expenses increased from 30 minutes to 90 minutes. Not only that, but employees got frustrated with the system and morale began to suffer. Important trips were cancelled or never contemplated just because of the hassle of going through the expense process. Overall productivity began to decline and with it so did revenue. Unfortunately, the King had no way to associate the decline in revenue with the new expense system.

About a year after the new system went on-line a new employee named David (aka me) joined the organization. David had never seen such an abominable system during his time in the corporate world. Unfortunately, David was so much lower in the organization than Goliath that there was no way he could change the expense system or make his voice heard. In order to avoid paying interest and fees David used his own money to bridge the gap in time between bills arriving and expenses being processed. The King received no revenue from David!

After two years, David decided to part ways with the company. Unfortunately, in bridging the gap on his credit card for expense processing David had a credit balance on his account. David sent notes to the company explaining the situation and trying to get his money back, but never got any response. After many months David got mad. He thought, “I no longer work for this company and I am no longer afraid to make waves!” In his last correspondence to the company he threatened to contact his State Attorney General.

Well I am happy to report David got a check yesterday for $230 (OK it’s a little victory). The company is in the headlines a lot recently. It seems they can’t seem to organically grow their business. In the latest article the King declared, “We are going to cut expenses by $1B”. It seems the King still has not learned his lesson.

About these ads

Comments»

1. time and expense tracking - June 30, 2007

time and expense tracking

Hi. Very nice blog. I\’ve been reading your other entries all day long..lol.

2. Ruth - July 11, 2007

Interesting experience. I am sure its one of many in the corporate world. There does not seem to be anyway to head these types of mistakes off. It would have been very beneficial for the company if they had some type of forum where somebody that is not as high up could have provided some feedback. Oh well.

3. Sage - February 25, 2010

Sounds like a story with lots of parallels.

Nice blog

4. london olympics - March 21, 2010

I think that I’ve been there too

5. Josh - December 5, 2010

very interesting, glad i ran into your posting. קידום אתרים

6. בניית אתרים - October 31, 2012

My brother recommended I may like this blog. He used to be entirely right. This put up truly made my day. You cann’t consider just how much time I had spent for this information! Thanks!

7. business money software - August 3, 2013

There is certainly a lot to know about this topic. I love
all of the points you’ve made.

8. community philanthropy - August 3, 2013

It’s going to be end of mine day, but before end I am reading this great paragraph to improve my knowledge.

9. budget planner - August 3, 2013

Today, I went to the beachfront with my kids. I found a sea shell and gave it
to my 4 year old daughter and said “You can hear the ocean if you put this to your ear.” She placed the shell to her ear and screamed.
There was a hermit crab inside and it pinched her ear.
She never wants to go back! LoL I know this is completely off
topic but I had to tell someone!

10. nco financial - August 3, 2013

Do you have a spam issue on this blog; I also am a blogger, and I was wanting to
know your situation; we have created some nice methods and we are looking to trade solutions with other folks, please shoot me
an email if interested.

11. short courses in finance - August 3, 2013

My partner and I stumbled over here from a different web address and thought I should check
things out. I like what I see so i am just following you.
Look forward to exploring your web page yet again.

12. music played during - August 5, 2013

Yes! Finally someone writes about soothing music.

13. civil aviation safety - August 19, 2013

Thank you for some other fantastic article. The
place else could anyone get that type of info in such a
perfect way of writing? I have a presentation next week, and I am on the
look for such info.

14. k-1 visa process - September 7, 2013

It’s very simple to find out any matter on web as compared to textbooks, as I found
this post at this website.

15. Thomas - February 2, 2014

Way cool! Some very valid points! I appreciate you writing this
article and also the rest of the website is extremely good.

16. Franchesca - February 8, 2014

It is perfect time to make a few plans for the long run and
it is time to be happy. I have learn this submit and if I may just I want to recommend you few fascinating things or suggestions.
Maybe you can write next articles relating to this article.
I wish to read even more issues about it!


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: