Food is a crucial aspect of company culture and may even be considered a partial driver of profitability. From greasing the wheels of a sales call, to gaining highly-coveted lunchtime speaking slots in medical offices, to setting the tone of a company’s culture for new recruits, food is a tool that can help your business succeed. But without careful monitoring and tightly regulated controls, a company’s food spending can easily grow to exceed its potential return.
Placing limits on your food spending is an important way to manage costs and measure the ROI of these expenses. But don’t just set limits arbitrarily. Instead, you need to take the time to understand your company’s food spending, determine how effective it is, and then consider the limits to set on future spends.
A general accounting and compliance best practice is to record all expenses paid out to caterers, restaurants, and delivery drivers for food. This information gives you a great place to start when considering your current spending. To quickly estimate the costs, you need to consider:
Using expense tracking, you can track every credit card statement, submitted receipt, invoice, and expense report to identify those vendors that are providing food and catering services. Once you’ve identified the potential service providers, you can then categorize and total those expenses.
Using a software program like Concur can help automate this process, but be sure to double check for errors or missing entries, so you have the full picture. One survey conducted by Concur and reported by Reuters notes that almost half of responding employees admitted to losing receipts, and 36 percent admitted to not remembering the reason for a particular expense. Additionally, 60 percent of respondents admitted to making mistakes on their expense reports during the previous year. Traditional methods of expense tracking force you to enter information after the fact, so mistakes, lost receipts, and faulty memories are unavoidable. Another alternative is to use an online platform like ezCater to order food and track your accurate expense data from the start.
It’s not enough to simply know how much your food spending is. You also need to be able to determine how effective it is. Consider a pharmaceutical representative as an example. According to Pew Charitable Trusts, in 2012, face-to-face sales and promotional activities made up more than half of the pharmaceutical industry’s marketing expenditures — and a lot of that money was spent on food. If a pharmaceutical representative is continually buying lunches for medical offices and is closing deals, then the money is well spent. However, if your rep has little success in meeting sales goals, then the food spend isn’t helping — and it needs to be limited. To start analyzing this, further categorize food spending by person or role so you can measure costs against overall performance. You’ll also want to gather the number of attendees for each meeting or event so that you can break down your per-person spending and establish another important limit.
The time your team spends dealing with caterers and restaurants and coordinating food choices is also something that adds to your current spending. This is a difficult metric to track and measure, but it is an expense that adds to overall food costs, so it’s worth noting. Ask your food-ordering employees and sales professionals to estimate the amount of time they spend choosing meals, working with attendees on accommodating food allergies and preferences, and working with caterers.
Predicting which customers will be most profitable isn’t easy. Harvard Business Review notes that with the law of diminishing returns, acquisition, and retention costs can aggressively eat into profitability. This means that not only must you continue to measure the effectiveness of overall company food spend, but you also need to implement and monitor spending limits in order to protect profits.
The money your company spends on food impacts your overall marketing budget and your customer acquisition cost. Once you’ve tracked your company’s food spend long enough to notice trends, you can establish limits and focus spending toward areas where you know it’s most effective. Determining spending trends and customer preferences gives you the power to aggregate spending so that you can better position your company for savings — resulting in no change in service, quality, or variety while improving customer acquisition and other costs.
Find out how ezCater can help you track and analyze your company’s food spending.
Posted in: Managing Food Spend