Rising Inflation Increases Expenses: How Stampli Can Help You Manage Costs as Expenses Increase

As businesses begin 2022, company management must consider the financial impact of inflation on expenses and profitability. 

• At the end of December 2021, U.S. inflation advanced 7% year-over-year, marking a 39-year high since June 1982.
• Prices for wholesale set an annual record at 9.7% in 2021, which provides further evidence that inflation is still present at all levels of the economy.

Inflation increases the costs to make and deliver a product or service. Rising inflation also motivates your customers to comparison shop in order to pay lower prices. Managing expenses becomes critical as inflation increases, and Stampli’s AP automation and invoice management services make the process much easier.

Starting with the Budget

Many businesses include budgeted amounts in the accounting system so that management can compare budgeted results to actual results. To stay within budget, you need to monitor and approve spending before the dollars go out the door. Monitoring the budget is particularly important in periods of inflation. As this podcast episode points out, planning is the key to successful business growth.

As the example below shows, you must control both the price paid for a particular good or service, and quantity purchased. 

Managing material purchases

Treeline Mountain Bikes creates an annual budget which includes material costs and labor costs for bike production. Treeline has a $600,000 budget for steel, a raw material used to make bike frames. 

Inflation increases the cost of steel by 5% and Treeline increases the steel material budget to $630,000, which equates to 1,260,000 pounds of steel at $0.50 per pound. Monitoring steel costs becomes more important as the budget increases.

Reviewing purchase orders

The budgeted cost per pound must be communicated to the production manager (who orders steel and other materials) and to the COO, who approves each purchase order (PO). POs for steel should list a unit price of no more than $0.50 per pound, which is the budgeted cost. 

Confirming product shipments

Treeline confirms that each order is received and matches the purchase order. The number of pounds ordered and the price per pound listed on the PO must match the shipping receipt from the vendor. If the documents do not match, the production manager contacts the vendor. The invoice is not processed for approval until the issue is resolved.

This process ends when the accounting department sends a PO, shipping receipt, and the vendor’s invoice to an approver. If the data on all of the documents match, payment is approved.

Many businesses incur expenses using company credit cards. If inflation increases costs, the  higher level of credit card spending must be controlled.

Managing Credit Card Spending

Assume that Treeline Mountain Bikes distributes bikes through retailers and the company employs 10 salespeople who call on retail shops. The Washington Post reports that travel costs were predicted to increase in late 2021, and the higher costs would impact the salesforce. Businesses are paying more for gas, hotel rooms, and restaurant meals.

If salespeople pay for travel costs on company credit cards, you need systems in place to approve and control spending.

Addressing shadow spend

Shadow spend refers to bypassing company policies and procedures that require purchase approval. Without proper controls, an employee with a corporate credit card can make an unapproved purchase on their own. 

Automation can help you avoid shadow spend issues. To learn more download the ebook: 5 Proven Strategies for Controlling Shadow Spend. One strategy is to carefully control who has access to credit cards, and the dollar amount of spending.

Controlling spending approval

Julie, Treeline’s VP of Sales, is responsible for reviewing and approving travel expenses that are charged on each salesperson’s company credit card.

Ideally, each salesperson’s credit card should have a credit limit based on the salesperson’s budgeted travel expenses. Julie should be able to monitor and approve spending as it happens. With this system in place, the accounting department will post far fewer adjustments for travel expenses.

Minimizing accounting adjustments

Some accounting departments make dozens of adjusting entries after reviewing the credit card statement. If credit card transactions aren’t reviewed and approved in advance, some card charges aren’t coded as expenses until the statement is reviewed. This system is time-consuming and requires more communication between the salesperson, VP of Sales, and the accounting department.

Dealing with the impact of inflation is a challenge, but Stampli’s automation tools can help you control costs and stay within budget

How Stampli Helps You Manage Costs

Stampli offers complete AP automation that makes it easier for AP teams to collaborate as they verify invoices and gain control over the invoice lifecycle. You’ll use a single platform to process invoices and payments, including control over credit card transactions.

Save time and speed up invoice approvals 

Stampli’s end-to-end platform gives you full control and visibility over all your corporate spending:   

• Stampli syncs to your ERP system, which provides real-time data capture and machine learning. Your GL accounts, vendor data, and open POs are posted in Stampli.

• Stampli uses machine learning to capture and code invoice data, so that your staff spends less time on coding.  

• Use a dynamic approval process to identify the right people for faster decisions. Stampli sends messages to the approvers directly, in order to speed up approvals.

• Work with a central communication hub to answer questions and provide updates. Everyone involved in the review and approval process can see all relevant messages on one screen. Users have easy access to supporting documentation, past invoices, and activity history.

• Vendor portal: Each of your vendors can access the portal to see the status of their invoices in Stampli. Vendors can view each invoice and payment date, and ask questions.

With Stampli, you can eliminate manual AP processes and speed up approvals. You can also use Stampli to manage business credit cards and control spending.

Manage credit card spending

Stampli provides complete automation for issuing credit cards and approving transactions:

• Request, approve, and create cards in Stampli.
• Automatically capture credit card transactions & process as invoices with sync to ERP.
• Stampli sends auto-alerts to cardholders, requesting documents to verify card transactions.
• Card transactions are coded, reviewed, and approved using the same AP process.
• Managers with Stampli Card Manager permission can view all transactions across all active cards. The cardholder users only see transactions from their own cards.

Higher inflation presents a number of challenges, but you can take steps to manage your spending and stay on budget. Don’t just manage spend, control it with Stampli. Use Stampli’s AP automation to operate more productively, and prepare your business for growth.