Managing a profitable company is all about controlling costs enough that revenues outpace expenses and margins are strong enough to weather slower sales. For many businesses, this cost-control starts with basic, universal costs, such as employee wages and space rental. But you need to dig deeper. In addition to the standard overhead expenses that every firm experiences, there are a range of other expenses that are more dynamic and variant than bills like utilities. These expenses are known as the “Three T’s” and they include telecom, travel and technology costs.
Understanding the Three T’s
Managing expenses is an important part of controlling your company’s finances, but the task can be a daunting one when you lump all of your expenses together. Costs like wages or the company phone bill are standard costs of business. Whether you make sales or not, you will still have those costs to endure. The Three T’s are completely different in that these costs relate directly to your sales. You will see your expenditures for telecom, travel and technology increase as your revenues increase. As such, the Three T’s need to be managed separately from your regular overhead.
Defining and Managing Telecom
Telecom is the expense related to any telecommunication tools. This category of expense management includes wired and wireless telephone fees as well as the costs of phone and communication devices. The telecom category may seem to be fairly straight-forward—it is the cost of the company cell phone plans and Internet—but in actuality, it can be one of the most challenging expense categories to manage.
Telecom expense management (TEM) is challenging because the industry itself is fairly complicated. Plans shift and technologies evolve. Companies need to have someone who is current on the telecom industry to oversee the company’s expenses. And then there is the issue of pervasiveness. Most employees will use their telecom devices and plans for personal use, at least occasionally if not as a full-on perk. This changes the accounting of the devices and could cause overages in some cases.
Managing travel costs is another issue. U.S. corporate travelers take over 1.3 million business trips every year, and there is no standard. Reasons for trips vary, as do the hotel, flight and overall costs. Pricing fluctuates, changing with the seasons, frequency of events in the area, timing of the purchase, and general desirability of the location—and that makes setting estimates for travel expenses difficult. Also, clients may have different expectations of what your company will do to wine and dine them, and that can change your travel cost budgets as well.
Requiring employees to book through a corporate travel agency or through a single point of contact within your company helps, but even that policy hits snags as it may be cheaper for an employee to book directly and be reimbursed. Ultimately, travel expense reports are a necessity, regardless of booking methods, but clear expectations need to be placed as well. For instance, is taking a taxi acceptable? How about an Uber? When, if ever, is flying business class an option?
Finally, there is the cost of technology to consider. “Technology expense management refers to the management of technology inventory resources, contracts, invoices, and billing,” explains CrowdReviews. Unlike the two previous types of expense management, this one is easier to manage since these technology assets are controlled by the management. They also rely on management deciding whether to buy new technologies or not, thus, there is a greater degree of transparency and control.
However, it is still a slippery slope, especially if the people overseeing the purchase of new technology are not readily involved in the use or understanding of the needs related to the technology. The purchase of new equipment and software could result in major efficiency gains, but if there is a disconnect between the decisionmaker and the end user, this information could be lost or misinterpreted. Keeping both voices "at the table" will help make decisions more productive.
Preventing Abusive Spending
Aside from the dynamic nature of the Three T’s, you will also want to track them separately because of the propensity for abusive spending in these categories. It happens easily and often. Executives need to ask whether their telecom, travel and technology expenditures reflect the way they would spend money if it were their personal bills as well as what the firm is willing to define as normal costs of doing business. This means that a receipt for a five-star restaurant or a ticket for a first-class flight can be called into question or become a cause for disciplinary action if it is above the standard the company wishes to establish.
Any expenses deemed unreasonable, such as an expensive bottle of wine at dinner, can then be referred back the charging partner and reimbursed by that individual appropriately. Transparency measures, such as requiring a detailed receipt, helps to combat these issues as does a consistent policy throughout the company so every employee understands the rules that apply company-wide as well as any position-specific rules. For example, a senior partner may have a higher expense budget or discrentionary spending ability than a junior associate.
Managing telecom, travel and technology expenses is inherently different from overseeing other types of overhead. As such, these expenses require a different management system. Universal standards and established policies for upgrades help, but they have to be quantified and fully understood, both from an operational and a technology standpoint. Outside accounting services can also help your internal HR and operations team develop, implement and manage a comprehensive expense management and tracking system.