The COVID-19 pandemic has changed the business world forever, with one of the drastic and more obvious after-effects being the shift toward remote work. According to this report from Global Workplace Analytics, 82% of employees in the U.S. want to continue working from home for at least one day per week. Finance and operations leaders at the firms embracing this trend have likely had to tweak how they approach budgeting for operating expenses (OpEx)--because while your firm might be saving money on rent, travel and promotional events, you're probably spending more on cloud technology, employee engagement initiatives and new digital experiences for your clients.
Individual companies will all have their own strategies for making remote work feasible based on their size, structure and industry. But in any case, managing changes to your OpEx budget while prioritizing your bottom line requires the freedom to look ahead and respond quickly when OpEx needs evolve. If you don't have the flexibility to analyze every single line item--or if you're managing your OpEx budget manually with offline Excel spreadsheets--you might miss out on opportunities to make your new remote work plans more efficient. You don't want to burn cash needlessly--especially after the last 12 months--and that's why you need to arm yourself with reliable, up-to-date OpEx data.
Read on to discover three important steps for optimizing your OpEx budget for a hybrid or fully-remote work environment. We'll also give you some examples of how organizations just like yours have navigated similar changes with a data-driven approach to OpEx planning.
Make OpEx Budgeting More Collaborative Across Departments With Workflows
As you make changes to your OpEx budget in preparation for remote work, you'll find that each of your departments have their own requirements for making it happen. For example: Your sales and customer service teams might have to invest in a new communications tool while your marketing team recoups sponsorship dollars from a cancelled in-person conference. Your department heads know better than anyone what their teams will need to adapt--and that's why OpEx budgeting needs to be collaborative instead of siloed in finance.
If your finance team is calling the shots on where to save money and where to spend it, departmental leaders and budget owners won't feel like they're part of the planning process. This will lead to business plans that might look good on paper, but probably aren't very practical or conducive to efficient operations. You can avoid this by building workflows for collaborative OpEx budgeting so stakeholders across departments can review remote work plans before they're finalized. That way, instead of having your finance team manage OpEx changes from the top down, your department heads can work together to deliver solutions that work best for the business.
Consider this example from Young Life--a nonprofit Christian youth ministry with a global summer camping operation. When the pandemic shuttered camps and forced Young Life's corporate team to work remotely, finance leaders teamed up with camp managers to adjust each location's OpEx budget. With detailed review and approval workflows already in place, it was easy to ensure the new budgets included input from department heads at each camp. According to Brandon Combs, Young Life's Director of Camping Budgets and Finance, this ultimately helped the charity "stave off some major losses because we were strategic, not reactionary."
"Our people feel a lot more valued because they're a lot closer to the business and I'd definitely say they're delivering more reliable budgets as a result," says Brandon. "When we're trying to make your business more sustainable in the face of change, it can't be a guy in finance telling you how much toilet paper to buy for your camp. It has to be the person who's actually making that purchase."
Model the Bottom-Line Impact of Potential OpEx Changes With What-If Analysis
As you iron out your plans for hybrid or fully-remote work, you'll need to understand how the changes will affect your financial position. Factors to consider might include:
Will you keep your office space, ditch it, or rent it out?
Will you provide remote employees with a stipend to cover their work-from-home expenses?
Do you need to invest in IT or software tools for data security?
Does working remotely mean we have to outsource production, distribution or fulfilment? What will that cost?
Are there any OpEx items we can cut or defer now that we're remote?
The answers to these questions should be included in what-if analysis as you explore all of your options and chart the best path for your business. If you don't test your assumptions and assess multiple different OpEx scenarios thoroughly, you won't be able to justify your remote work plans with reliable data.
Metro Supply Chain Group, a global third-party logistics provider, has helped a lot of growing companies optimize their fulfilment operations in the remote world. Given that supply chain costs are petty big line items in any firm's OpEx budget--and perhaps even more so as companies go remote--Metro always ensures their clients make the best decisions by helping them visualize the impact of potential changes to their plans.
"We can run multiple scenarios and use multiple forecasts to aid decision making," says Paolo Mari, Metro's VP of Business Analytics. "Operational metrics are important, but the story is not complete until you can see how they impact your costs, revenue and EBITDA margins."
Invest in OpEx Items That Will Drive New Revenue Streams in the Remote World
If your OpEx budgets are a team effort and you can support them with what-if analysis, you might even find opportunities to make some more money as your business goes remote. You could rent out your unneeded office space, for example, or enter a new geographic territory with a fully-remote team.
Global Workforce Analytics makes a strong business case for remote work in this report, citing increased productivity, reduced absenteeism, lower office costs and more. It's important to remember, though, that all of those things are circumstantial--because if you want to grow your business while adapting to a remote work environment, you need to look long and hard at what's really driving your revenue.Then you can align your OpEx budget to support those areas of the business and make changes proactively as you adjust to the new normal.
Meats By Linz, a food distribution company specializing in high-quality beef products, was quick to adjust their OpEx strategy when the pandemic shook their business last spring. With revenue from restaurant sales evaporating, CFO Bart Vittori knew he needed a plan to help mitigate the damage and to drive new revenue streams--all while tweaking OpEx budgets for remote office work and safer frontline operations.
After teaming up with sales and marketing leaders and modeling the impact of various revenue scenarios, Bart found that the company's B2C e-commerce channel--which usually wasn't given much attention from an OpEx standpoint--needed a serious facelift. So when he shifted OpEx on the fly and allocated resources toward advertising their B2C offering, revenue from e-commerce rose dramatically in a short timeframe. None of that would have been possible, Bart says, if OpEx budgeting was siloed and manual.
"I quickly analyzed, 'Okay, if we're down 80% in this segment, what will that mean long term? How can we keep our employees safe? What investments can we make to drive sales elsewhere?' That would have taken months if I was still using spreadsheets," he says. "The reports showed us that e-commerce was our only viable revenue segment through all this, so we doubled down on our marketing spend and started to make it work. We thought it would take three years to add this many B2C customers, but we did it in three months."
Simplify OpEx Budgeting With Vena Complete Planning
Regardless of your company's intentions for hybrid or full-remote work, optimizing your OpEx plans proactively is the key to making it successful. Working collaboratively, looking ahead and making data-driven decisions is crucial--and that's why you need to enable yourself with the right tools for the job.
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