Best Practices in International Assignment Cost Management: Projecting, Tracking, Budgeting, and Forecasting Methods

Transcription

1 Best Practices in International Assignment Cost Management: Projecting, Tracking, Budgeting, and Forecasting Methods Sean Raney VP, International Compensation Services Cartus Julie Johns Manager, Global Mobility Corning 2

2 Goals of this Session Gain an understanding of what the potential costs of an international assignment could be Review examples of formats for Cost Projections, determining the best format for your needs Set assignment budgets and learn how to track costs during the assignment Select tools to forecast remaining assignment costs Hear first-hand from our client panelist on how Cost Projections are used within their organization If you can t measure it, you can t improve it Lord Kelvin 3

3 Background The economic downturn of has put increased pressure on companies to proactively manage their expenditures, as well as accruals Depending on which data source one uses, the number of companies that utilize Cost Projections before an international assignment fluctuates between 46-86%* depending on assignment type Between 50-64% track costs during the assignment* Less than 33% compare Actual Costs vs. Estimated Costs* Only 3% report effectively measuring Return on Investment of an international assignment** Reduce the cost of business as usual and redirect expenditure to high volume business improvement activities Cheryle Jenkinson*** *2010 PWC IA Policy Survey and 2011 Brookfield IA Survey **2010 Mercer IA Survey *** 4

4 Largest Costs of an Assignment Base and Incentive Compensation: 40-50% Taxes: 20-40% Housing: 5-10% Cost of Living/Allowances: 0-5% Physical Cost of Moving: 5-10% 5

5 Cost Projection Samples 6

6 Assignment Budgets & Tracking Costs Start with original Cost Projection for the first year budget Best practice recommendation: Reexamine budget once a year, either anniversary date of assignment or calendar/fiscal year-end when submitting accruals Are original CP assumptions/numbers still valid? Any adjustments needed? To do this you have to be able to accurately track costs and compare to original CP 7

7 Tools to Forecast Online Cost Estimate Tools AIRINC ECA EQUUS All Big 4 Firms Cartus Budget to actual tool Forecast methodologies Average of each month s expense Most recent month s expense 12-month s average expense 8

8 Corning Problem Statement Voice of Customer feedback has indicated there is a strong need for the Business Units (BU) to have the ability to tie individual expatriate Cost Projections to actual assignment costs easily Global Mobility Group currently provides cost projections for all long-term assignments to each business; however, there is no ability to tie the actual costs being reported by Cartus to the cost projection or to forecast future costs This includes all costs, not just expatriate allowances, but taxes, vendor fees, etc. on a monthly, year-over-year basis BU Finance groups are not always aware of expatriate assignments, and therefore cannot respond to BU questions related to expatriate costs, charges, compliance, etc. The BU one point of contact currently has access to expatriate charges; however, the process to get expatriate costs to the proper entity and location is a cumbersome and time consuming process 11

9 Tracking, Budgeting, Forecasting Project Goals Provide a tool to business units that allows them to see actual spend for all expatriate costs against projected spend (Cost Projection) on a individual basis, year over year through the term of the assignment (including any residual costs in years following the end of the assignment) Enhance the Global Mobility Group s ability to engage with the business and be viewed as adding value to the process Ensure that the businesses are not surprised at year-end or following an assignment with expenses that they were not expected or projected; allows the business to see costs as they are happening on a monthly basis 12

10 Tracking, Budgeting, Forecasting Project Goals, continued Determine whether Cartus International Budgeting and Forecasting Tool (IBFT) can provide the needed insight into individual expatriate costs by tracking actual costs to the original assignment Cost Projection and forecasting future costs based on projected and actual data. Develop a new process to charge out expatriate s costs by assignment to the appropriate entity/project/division using the most effective and efficient process Key Success Metrics Value add to business allows for better cost forecasting for long term expatriates Reduced cost questions to Global Mobility Group Customer satisfaction response to VOC Streamlined approach to expatriate cost charge-outs 13

11 Anticipated Results International Budget to Forecast Tool will allow us to: Gain a more comprehensive understanding of costs for all assignment types Better understand cost levers Model potential changes in terms of impact on levers Understand how actual assignment costs are tracking compared with the original Cost Projection Will enable us to better advise the business on budgeting process at the beginning of an assignment (typical variance) Enable us to get to why with respect to greatest areas of variance Be able to gauge what costs have occurred vs. what are left to occur (i.e. better forecasting) Provide more accurate accruals at the time of repatriation Consult with business about future spend on new projects based on past actual experience/cost Better estimate cost/impact assessment of future policy changes Streamline the billing/charge-out process at the same time 14