Let’s begin by tackling the first question above – what is tail-end spend? While the definition may vary from industry to industry, you can consider tail-end spend as those smaller, non-core purchases that are low in value yet still necessary for the smooth operation of your organisation. Some examples include:
- Office gear. This covers things like mobile phones, envelopes, pens, batteries, coffee cups, stamps, stress balls.
- Promotional items. Think of business cards, brochures, pads, T-shirts, water bottles, and tote bags.
- Monthly subscription services. You can’t get by without Microsoft Office, Zoom, Dropbox, and DocuSign in this virtual work environment, right?
In 2020, you may have also added to the list hand sanitiser, thermometers, Clorox wipes, and office furniture for employees working from home.
Now how much is all of the above costing you? Can’t say? Well, that touches on the second question – why should you care about tail-end spend? The answer: because it can create a big dent in your budget.
It’s true these types of expenditures cost substantially less than your big-ticket items, such as rent and payroll, but the cumulative effect of these smaller transactions can pile up quickly and represent a significant slice of your total spend.
Difficult to monitor
Some businesses, especially smaller ones, may devote little effort to managing tail-end transactions. Those that do may decide it’s more trouble than it’s worth.
We get it. Without the right technology, these expenses can be tricky to track. Purchases generally are spread across diverse vendors and product categories and may be charged via different payment systems. For instance, one employee may use petty cash to buy stamps for the business; another may use a personal credit card for a client gift basket; another may borrow the boss’ corporate card to pay for a single print job.
As a result, this kind of spending is often not accounted for until after a commitment has been made and ends up in the profit and loss statement. By then, it’s too late to do anything about finding a better deal, negotiating a better rate, or even deciding if it should have been purchased in the first place.
Reining in tail-end expenses
To carve out a spot in the budget for tail-end expenses, many companies apply the Pareto Principle, which specifies that 80% of spend will come from 20% of suppliers and 80% of suppliers will account for 20% of spend. While this can be a helpful general rule of thumb, we recommend that businesses do their best to get a precise figure and analyse these costs, particularly when cost-cutting is a high priority. Employee spend often is an area where you can unlock hidden savings opportunities, especially if you’ve already negotiated the larger, multi-year purchases to the fullest extent.
While management tools can help businesses gain visibility over employee spend, sometimes the cost, implementation effort, integration complexities, and change management required to get these systems operating can be prohibitive, especially for smaller businesses with fewer resources.
Now available at no cost in the UK, Neo1 helps businesses view and manage their employee spend all from one place. Since it is integrated with Amazon Business, every transaction made on the e-commerce site instantly gets captured and recorded. The tool also has a pre-spend approval feature to prevent undesirable purchases and fraud.
But that’s not all. Because Neo1 combines the capabilities of an expense management system, procurement platform, and online travel booking tool all in one place, it can help SMEs achieve their larger business goals – like driving employee productivity, establishing budgets, and pinning down your cash flow, so you can see where to save and where to invest. It’s also super easy to install – you can have it up and running within 48 hours.
To learn more about the ways Neo1 can help you manage your business’ tail-end spend and cash flow, read our “Taming Your Out-of-Control Business Expenses” and this Q&A with Fiona Hastings, who helped build the platform.