You’re beginning to understand your company’s food spend. But just because you know how much you have been spending, that doesn’t mean it’s clear how much you should be spending. How do you even begin to rein in your T&E budget when your food expenses run the gamut from on-campus catered lunches to breakfasts for sales meetings, lunch and learns, board meetings, and everything in between? With all of these different options, each with a different purpose, you need to determine a reasonable food spend budget for each month. In order to create your budget, you must understand the return on investment (ROI) of your food spend, set budget goals based on that information, and find ways to maintain those goals over time.
Determining the ROI of Your Food Spend
Like any other expense in your business, food spend is all about the return it delivers. When that return is tangible — and financial — you can use it as a guideline for setting the budget. The way to do this is to get a feel for the ROI on your past food spend, and then apply those lessons to your future budget.
The general formula for determining ROI is to divide the benefit (or the gain of the investment minus the cost) by the cost. Multiply by 100 to find the percent. If you spend $500 on a lunch and learn, and over the next year you find it earns you $1,000 through better compliance and efficiency, that amounts to a $500 profit or a 100 percent ROI. But if you spend $500 to cater a sales meeting, and it brings in revenue of $5,000, your ROI is $4,500, or 900 percent. Obviously, the higher your ROI, the better for your business. Either way, you can use this information to set expectations for future lunch and learns or sales meetings.
Using ROI to Set T&E Budget Goals
Once you have a handle on the ROI from past events, you can set a T&E budget by itemizing different types of events in your food spend. In the previous example, a lunch and learn and sales meeting had a 100 and 900 percent return, respectively. Both of those events are bringing in profits, but clearly the sales meeting has more potential than the lunch and learn. You can use that information to set a more aggressive cap for your lunch and learn expenses than on your sales meeting expenses.
ROI and past performance of food spending can also vary based on region, district, and team. As Business Travel News reports, it sometimes helps to compare the performance and spending of similar departments and sales people. As you analyze the data, use this as a basis for both your budget and ROI expectations. You may notice similarities when you start to compare your sales reps. Maybe you note that the food spend for reps in a certain region isn’t directly impacting ROI, while another team is having more success when their average spending is higher. If a certain team is bringing in a higher ROI from food spending, then certainly it makes sense to budget accordingly.
Something else to consider is a budget for events based on the price per person. Say your lunch and learn is for 25 people. In order to keep to your $500 budget, you know that means the price per person has to be $20. As you are adding items to your ezCater cart, if you notice that your order is closer to $10 per person, or if you choose an assorted package that averages out below your rate, you’ll immediately know you’re within your budget.
Maintaining Your Budget Goals Over Time
To maintain your budget goals over time, think about the objectives of the different types of food spend. Adjust your limits based on these objectives so that money is spent deliberately rather than to randomly adhere to a dollar limit. Consider Google, as an example, who is well known for providing ample food for their employees. The goal of providing this much free food is to keep employees on campus, encourage them to meet people in other departments, and help spur innovation. They spend significantly, probably more than your food spend budget. But so long as your food spend is keeping up with your business goals, that’s all that matters.
You may also want to tie your food budgets to sales goal periods. Whether your sales associates have daily, weekly, or monthly goals, breaking their food spend budget down into a similar period may help them better manage it.
Setting a T&E budget is a fundamental step for every company. When you understand the ROI on your food spend, you can get a better handle on your budget goals. And it gives you the opportunity to maximize returns. At the end of the day, isn’t growing profits what every company is looking to do? As long as you continue to analyze your spending and the returns over time, your organization can quickly adapt to changing trends and behaviors with a budget that keeps your food spend in check.