Survey: Mid-Sized Companies Beef up Cost Control, Invest in Productivity Tools as Economic Outlook Modifies

As CFOs at Americas mid-sized companies modify their view of the nations economic progress, many plan greater focus on controlling and reducing costs, according to a new survey by CFO Research Services and American Express (NYSE: AXP). At the same time, to keep growth on track, companies are investing more in on-the-road connectivity cell phones, PDAs and other technology designed to increase business travelers productivity.

Financial executives at mid-sized companies want to keep a tighter lid on costs, but, for the purchases they must make to keep business humming, CFOs want to see return on investment, said Tom Tierney, SVP, Sales, American Express U.S. Commercial Card. Implementing a sophisticated expense management program, including use of a Corporate Card, gives mid-sized firms the control and leverage needed to grow intelligently.

In the new survey, 78% of more than 300 senior financial executives polled said they planned some or many improvements to cost management methods over the next year; while another 13% considered cost-management their top target for improvement. The survey, conducted last December by CFO Research Services and commissioned by American Express, questioned 332 senior financial executives at U.S. mid-sized firms on a variety of expense management issues.

CFOs emphasis on adding muscle to cost management comes amid indications that theyre less optimistic than in previous years about the outlook for the nations economy. In the poll, slightly more than half (56%) foresaw economic growth over the next 18 months. That compares to 63% who felt the same way in 2005 and 68% in 2004. Meanwhile, 29% of CFOs in this latest survey predicted the economy would remain flat, significantly more than in 2005 (20%) and in 2004 (16%).

Strategies for Tightening

In line with their overall design for tighter cost management, nearly three-quarters (74%) surveyed said theyd improve monitoring employee compliance to spending policies; an additional 5% plan to make their greatest improvements to the tracking of spending.

Increasingly companies are relying on their spending data to spot and halt maverick purchases by employees, said Tierney.

In the new survey, 84% polled said a corporate card paid centrally by the company is an effective way to gather information on spending activity. In comparison, only 19% said that using an employees personal credit card offered up the same quality and comprehensiveness of data.

However, while many CFOs agreed that a corporate card produces effective data, the survey also revealed that a solid majority are dissatisfied with how they currently use spend information to manage some aspects of buying business travel and office supplies. Nearly two out of three (64%) of financial executives polled said there is room for improvement in the way their firms use information on employee spending behavior. And almost half (47%) offered the same assessment for their companies use of information on spending with vendors.

Investing in Productivity

At the same time that Americas mid-sized firms are turning up scrutiny of expenditures and trying to reduce costs, theyre also spending more on technology and services to boost productivity and sales.

Looking toward the next two years, 41% polled said they will buy more mobile technology, for example, cell phones, PDAs and other items, to help raise employees productivity while on the road. In addition, 43% said theyll purchase more office equipment including laptops. Also, 42% of CFOs predicted that their business travel will increase, as firms encourage employees to visit prospects and customers. Meanwhile, one in four polled also plan to invest in more meetings and conference services.

In 2007, TeleManagementForum, a global telecommunications industry association headquartered in Morristown, N.J., will continue to tighten cost-control efforts, but it also plans to boost productivity. For example, it has recently implemented purchasing and A/P workflow systems, and has set up approved vendors and a T&E expense-reporting system. We want to make sure our policies and procedures are followed, said James Metzger, CFO & VP of Finance and Administration.

At the same time, however, TeleManagementForum is looking at the best automated solutions to get everybody not just senior management connected throughout our organization, Metzger added. Were a dispersed international organization, and we always have to be connected 24/7. Its essential to our productivity.

A majority of companies polled reimburse employees for out-of-pocket mobile communications costs. In the survey, 83% reimburse employees for either limited or actual monthly service charges for wireless phone and data plans. In addition, 79% cover actual or limited charges for cell phones and PDAs.

Last year, our mid-sized Corporate Card clients in the U.S. charged 25% more than in 2005 on mobile communications, noted Tierney.

In contrast, 44% of companies surveyed reported that, over the next two years, theyll spend less on employee relocation; more than one-third (35%) foresee purchasing fewer gifts for clients.

About American Express Global Commercial Card

Through its Global Commercial Card group, American Express provides the Corporate Card, Corporate Purchasing Solutions, S2S SM and other expense management services to mid-sized, large and global companies worldwide. In the US, it is the leading issuer of commercial cards, serving more than 50% of the Fortune 500 as well as tens of thousands of mid-sized companies. American Express issues local-currency commercial cards in 40 countries, and International Dollar Corporate Cards in an additional 100 countries. More information can be found at http://www.americanexpress.com/corporateservices.

The American Express Company is a diversified worldwide travel, financial and network services company founded in 1850. It is a leader in charge and credit cards, Travelers Cheques, travel and international banking.

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