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​In Pursuit of Profit

Read our expert article below or sign up to get articles sent to your inbox.​

11/6/2020

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How Does Remote Work affect your Business Expenses?

 
remote work
Since March, 62% of employed Americans have worked from home, which is more than double the previous figures from earlier in 2020. Furthermore, 59% of these employees want to continue to work remotely, moving forward even after public health restrictions are lifted. This sentiment has led businesses to examine the costs of maintaining a remote workforce closely. They are asking:
  • Which of our ongoing expenses have been reduced with employees working from home? Which have increased?
  • What kinds of new expenses do we have on our P&L statement now?
  • Should our company stay virtual even after employees can go back? Does it make financial sense to do so?
  • How do we reduce expenses while giving employees what they want?

​Reduced Expenses

Travel Reimbursements
With employees working from home, business mileage expenses have decreased significantly (or disappeared completely in some cases). With so many events being canceled, travel costs, and meals are also not expensed at the same rate as pre-COVID. In fact, mileage and travel expenses have fallen off so dramatically that if business travel reimbursements do not drop significantly on P&L statements for 2020, it will likely raise a red flag with auditors.

Office Leases
While office leases have not changed much themselves, many companies are re-evaluating their office space expenses. Companies that are not planning on bringing their workforce back into the office can consider letting go of costly leases on large office spaces – opting instead to rent a smaller space or forgo the office entirely. For important occasional in-person meetings, companies may choose to book meeting room space as needed instead of carrying the ongoing cost of renting office building space.

Increased Expenses

Security
Having employees suddenly spread across various locations and devices has created; IT challenges that many companies were not entirely prepared for, especially related to online security. Cyberattacks are on the rise, necessitating that businesses take additional precautions to protect their financial data and customers’ data. Cyber vulnerability increases because more people are spread out across various networks because employees’ home security measures may be different from their employer’s in-office environment. With limited IT acumen related to the scope of these new challenges, many businesses have had to outsource their cybersecurity. As a result, security service providers are busier than ever right now. The added cost of paying for an SECaaS (security as a service) company represents a new business income statement expense for many companies that had previously been handling these types of activities in-house on a smaller scale.  

Human Resources
HR teams are finding that they still have the same job functions regardless of where employees are located. As always, HR personnel still needs to hire, train, and let employees go, but the added effort required to do so remotely may increase personnel needs. Additionally, implementing and managing additional company policies related to technology use, reimbursement requests, and other remote work hot-button topics increases the HR staff's responsibilities, putting further strain on existing personnel. In many organizations, these added demands have led to increased staffing demands.

Undetermined Expenses

Technology
Companies are bearing the increased cost of keeping employees connected differently.

Some employees are now getting their internet and cell phone bills at least partially reimbursed since both are needed to work from home. While many companies already paid for employees’ cell phones, requiring to cover (or subsidize) the cost of home high-speed internet represents a new income statement expense.

Alternatively, other businesses choose not to cover any portion of these technology costs as a tradeoff because employees do not have to pay to commute to work. These companies are not only minimizing their added expenses but also simplifying their bookkeeping activities because they do not need to review, approve, and record numerous reimbursement expenses every month.

Subsequently, the effect of technology costs with work-from-home employees is going to be business-specific.

Office-Related
Similarly, office-related costs will differ from one company to another based on how the organization chooses to handle these expenses with employees working off-site. One report shows that office supply expenses increased 80% over this time last year, but that may not necessarily be true for all businesses.

Companies have always had office supply expenses for provisions like paper, pens, ink, break room coffee, etc. However, those economies of scale savings are lost when employees work remotely because they cannot bulk order these items and allow all employees to share or take what they need. Instead, they must reimburse employees for individual purchases of these items if they are still providing these in-office items to employees while they are at home, increasing office supply costs. The shrewdest companies have bought these items through their suppliers to get the best deal and then shipped them out to employees to prevent an influx of reimbursement expenses of more expensive products.

Additionally, some companies may be footing the bill for long-term home office solutions like headsets, computer cables, desks, chairs, and printers. These expenses can add up fast, creating a significant cost for businesses with more employees.

However, remote work has also encouraged companies to go paperless – pushing them to create electronic business contracts and develop online catalogs, help resources, and sales collateral. For companies that typically spend a lot on paper-based activities, these cost savings have been quite significant.

Individual business circumstances will determine whether office-related expenses are increasing or decreasing overall with employees working from home.

Perks
Fitness facilities, catering, and other on-site employee benefits that some companies had previously provided may be going by the wayside as fewer people are returning to the office. However, some companies are replacing these perks with a stipend for employees to spend on their own choice of wellness and leisure activities. Others partner with local providers like gyms and yoga studios to offer discounts for employees on these types of services individually. These new benefits represent a shift in business spending rather than an increase. Again, individual business decisions will determine the effect that these changes will have on the income statement.

Find out how to adjust your financial projections with new expense data to determine if it makes sense for your business to keep employees working remotely indefinitely.  
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