ROI on Expense Spend

How can a company’s expense spend help its team with sales budget planning?
by Tim Wheatcroft

Sales team travel and entertainment (T&E) is a major expense. But do companies know how this spend actually contributes to revenues, and which expenses don’t? While sales teams generate huge amounts of data based on their activities, and wins and losses are highlighted in their respective CRM systems, finance teams can often only view granular spend details in their expense management system. Without the ability to tie specific activities and spend back to sales results, it’s impossible to deliver any meaningful analysis. The big challenge behind this is that sales data and travel and expense data are held in two silos, which can’t communicate. Therefore, the volumes of data they contain have no context and are, in this case, meaningless.

Given that just 11 percent of sales professionals say the cost of T&E expenses is tracked and compared to new revenue they generate, this means that billions of dollars in travel spend is made “blind,” leading to huge cost inefficiencies in sales organizations. This key challenge faced by many corporate sales and finance leaders — actually knowing precisely which T&E spend has the biggest impact on driving new revenue and which expenses do not positively impact financial results — often results in companies being unable to make informed budget choices and, therefore, initiating cost cuts across all areas of the organization.

Most people in the corporate finance and sales world are quite familiar with the statistic that 80 percent of a company’s sales are derived from 20 percent of a given organization’s sales people. When budgets are tight and companies cut spending, they frequently hurt themselves by reducing the T&E budgets of their best sales people. This one-size-fits-all approach can backfire and negatively impact sales, because the result is that companies tend to restrict the spend of their most productive employees.

To solve this challenge, companies need keener insight into their T&E spend, by employee and by customer. Directly connecting T&E spend data with sales data along with gaining actionable insight into how those expenses translate into revenue will help companies directly access and address the ROI of their T&E spend.

Siloed T&E Spending

Where does travel and entertainment fit into your controllable expenses?

Where it is allocated

Percentage of companies

It’s a top controllable expense

35%

It’s in the top 3

47%

It’s in the top 5

16%

It’s not in the top 5

2%

How much expense spend is for sales activities?

Number of companies

Their expense spend

From 1 to 20 percent of companies

9%

From 21 to 40 percent of companies

19%

From 41 to 60 percent of companies

43%

From 61 to 80 percent of companies

23%

More than 80 percent of companies

7%

Source (top and bottom chart): 100 senior finance executives at large/mid-sized U.S. companies surveyed by YouGov/Chrome River

Does your employer track the return on investment for business travel spend?

Response Percent
No, we don’t measure return on investment for business travel spend.

35%

I don’t know if we measure return on investment for business travel spend.

35%

We do measure return on investment but not for my role.

19%

Yes, the cost of my travel and expenses is tracked and compared to new revenue I generate.

11%

Yes, the cost of my travel and expense is tracked and compared against other metrics.

1%

Source: 1,450 frequent business travelers across U.S./Canada/UK/Australia surveyed by SurveyMonkey/Chrome River

Chrome River Technologies developed PROSPER to address the disconnect between data on T&E expenses and data on new revenue that spend generates. It combines data from the CRM and expense solutions, allowing sales team members to allocate all T&E spend to specific prospects or clients. This, in turn, enables sales and finance leaders to easily visualize the revenue generation outcomes of each type of activity and spend. As a result of this insight, managers can make smarter analysis of both where to increase spend and where to reduce spend on activities that don’t deliver an adequate return on investment.

Tim Wheatcroft is the head of communications at Chrome River Technologies.

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