UK businesses lose £37 billion every year through poor spending controls


This article is brought to you by Retail Technology Review: UK businesses lose £37 billion every year through poor spending controls.

Soldo, the European pay and spend automation platform, has unveiled a new Coleman Parkes study it commissioned which found that the UK economy loses around £37 billion a year through poor business spending controls¹.

While an astonishingly high figure, the UK is not alone.   Weak spending controls were reported to be costing European businesses £301 billion, with businesses in Germany losing £54bn a year, while France and Italy also reported sizeable figures (£37 billion and £26 billion respectively). 

Against a backdrop of low productivity and the economic impact of the pandemic, this concerning figure is equivalent to 2% of revenues for every business in the country – with losses starting at around £50,000 for small businesses, rising to around £12m for the biggest UK firms.

“Although many businesses in the UK are struggling to manage cashflows in this exceptionally challenging economic landscape, we see that many are losing significant revenues on an annual basis simply through poor management of spending”, said Carlo Gualandri, CEO. “Looking at this loss of revenue at a macro-level, the numbers are quite staggering.”

Inefficient practices threatening business stability 

Conducted by Coleman Parkes, the study ‘A Brighter Future: better Spend Controls Key to Economic Recovery’ of 900 finance and business leaders across the UK, France, Germany and Italy highlights how poor visibility, over-spending and duplication of spend are the biggest contributing factors to limiting organisational growth.

The research also reveals that over £19 billion is lost each year in unclaimed VAT across the UK, of which around £3.8 billion is lost due to errors in the way receipts are processed. In the face of extraordinarily challenging trading environments, it is remarkable to see companies not claiming back money that is rightfully theirs which could be reinvested into company growth.

“Finance functions need to transform to drive business results, too much time and revenue is being wasted because of inefficient practices that are holding finance teams back. After all, it is these teams who are ideally placed to provide the strategic insight that will enable the company to thrive (or survive), in the wake of Covid”, comments Gualandri.

Finance teams losing the battle against admin

UK businesses are losing out due to inadequate spending controls, with only 14% deeming current measures “very effective”. The challenges span multiple areas, with finance teams reporting over-centralisation causing slowdowns, excessive paperwork and poor visibility on spending.

The impact of these inefficiencies is stark. The Soldo report demonstrates that inefficiencies within spending processes are damaging organisations. 40% of UK businesses say that bad financial practices have led to unnecessary spending, and 29% report the duplication of costs.

Effective time management is also something that UK finance teams are struggling with; Soldo’s research shows that senior UK finance staff lose over 350,000 hours each week performing unnecessary admin tasks – worked out to a staggering 15.4 million hours being wasted each year.

“The road to recovery is long but digitising the processes that free up valuable time and resource is the starting point every business needs to be looking at. The pandemic itself has given us lots of food for thought on how we can ‘build back better’ in our own teams and is something we will focus on as we start to emerge and recover from 2020,” says Matt Emerson, Chief Financial Officer at Atrium.

The shift to digital is galvanising recovery 

“This study clearly demonstrates the dual challenges businesses have of reducing costs, while enabling a route to recovery. While cash is leaking at a staggering rate from within organisations, they have to find ways to optimise and speed up spend management practices, as well as patching up the holes within organisations to ensure they are better positioned for future growth,” comments Stephen Saw, Director, Coleman Parkes.

Soldo’s analysis also reveals how UK finance teams have largely not yet digitised core areas of their work – 45% of payroll tasks, 49% of receipts/invoices obtainment and management and 41% of data copying into accounting systems are still paper-based processes and demand some kind of physical process.

“Businesses that create efficiency and help teams to delegate the responsibility for spending to anyone in the businesses will be key to a swift return to growth. 

Technological adoption will empower business leaders, armed with better data and real-time information around spending, tech-enabled businesses are much more confident in their ability to invest for future growth.” concludes Gualandri

About the research 

Soldo commissioned Coleman Parkes to conduct a detailed analysis on the impact of digital transformation on the finance function in small to large organisations in the UK, France, Germany and Italy. To achieve this objective Coleman Parkes designed and executed a highly targeted and representative quantitative research study surveying 950 senior finance decision makers (400 in UK, 400 in Italy, and 75 in each of France and Germany). The respondents were either owner/managers or finance directors as of November 2020. 

Market representation was key in order to calculate the micro and macro impact of poor spending controls on businesses and economies as a whole. Coleman Parkes conducted all calculations in-house.

¹To calculate the macro impact of poor spending controls, Coleman Parkes identified through this research the baseline revenue loss of 2% across all markets surveyed, and applied this calculation to the GDP of each market (and Europe as a whole) to establish the total economic impact of poor spending controls in business.

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