UAE companies are investing in more comprehensive expense management practices as part of efficiency drives resulting from the global financial crisis, according to research released by American Express Middle East.
The American Express Middle East Corporate Spending Survey was conducted by YouGov which surveyed corporate expense managers in the UAE. The survey found that, following the financial crisis, 70% of study participants say their companies are now more financially conservative, but rather than spending less, they are spending smarter, placing importance on cost management.
When asked to what extent their company’s interest in improving different business processes has changed as a result of the financial crisis, 87% report that planning, budgeting and forecasting have become a higher priority. Other processes that have taken on greater importance for UAE businesses include internal cost management reporting (70%) and cash management (70%).
The adoption of smarter business practices is evident in the actions of UAE business over the last six months. Half of participants (53%) say they have renegotiated contracts with suppliers, a third (33%) have introduced new corporate expense policies, and 27% have reduced the number of expense activities which can be billed back to the company.
Cost reduction has also been important, with a third (33%) of respondents switching to less expensive suppliers, 27% have reduced executive travel, a fifth (20%) have reduced business class travel, and the same number (20%) have per diem allowances. However, only 3% of respondents reported they have cut back on corporate hospitality in the last six months, indicating the continued importance of corporate hospitality in the UAE.
The trend to spend more smartly is evident in business appetite to introduce more transparent and efficient expense management processes which give them the transparency over spending needed to drive savings and control. 67% of participants say they now have a clear, company-wide corporate expense management policy in place, while another 7% have an intention to develop one.
Additionally, among companies that have become more conservative since the financial crisis, 53% say they are implementing new expense management tools to give them greater visibility over outgoings, 44% new have introduced new tools to help with liquidity, and 35% are introducing simpler expense management processes.
“A clear consequence of the financial crisis is that companies in the UAE have become much shrewder and more informed when it comes to controllable expenses,” said Mazin Khoury, Chief Executive Officer of American Express Middle East. “It is not so much that companies are solely focused on reducing their costs, rather, their overriding objective post the crisis appears to be a desire to extract the maximum value out of every dirham they spend,” he added.
Asked about their outlook for corporate expenditure for the coming year, 47% of UAE participants said they expect expenditure to increase, compared to 20% who anticipate a decrease. 33% of respondents say they are likely to maintain their current corporate spending level in 2013. Of those expecting an increase, the areas of IT equipment (53%), business travel (40%), employee training (37%) and logistics (37%) are where companies expect to see most growth in controllable expenses.
“UAE companies are still spending, but they are now spending smarter and for the long-term,” added Khoury. “The events of recent years have led finance managers in the UAE to master control of their outgoings. As they look forward to a much improved economic outlook, it appears they are once again willing to loosen their purse strings, but only to invest in those areas they believe will deliver real long-term value, such as IT infrastructure and employee training,” concluded Khoury.