Finance teams and Accountants are the first people who come to mind when discussing business finance management. However, it is a function in which all employees play a crucial and active role.
Think about it, if employees fail to submit compliant expense reports on time, there is no way Finance can process reimbursements on time. This results in unhappy employees and delayed financial reporting.
Say you manage payments manually and miss a payment from the spreadsheet to a software subscription critical for Marketing and Sales. A simple slip-up like this can disrupt their entire process until the subscription is active again. That’s nothing short of a disaster that might take a toll on company revenue.
With its many variables and dependencies, business finance management can be tricky and painful for the Finance team and the entire company. However, there is a simple solution to this - spend management automation.
What is Spend Management?
Spend management is the process businesses use to track, control, analyze, and optimize organization-wide spending to protect their financial bottom line. This includes procurement costs, supplier/vendor relationships management, tools and software subscriptions, business travel and entertainment expenses, etc. This excludes costs like payroll and employee expense reimbursements.
Why is Spend Management important?
According to a report by McKinsey, external spending comprises the lion’s share of 40-80% of a company’s total cost. We don’t have to paint a picture of how disastrous inefficient spend management can be for your business; the stats speak for themselves.
Without company's having real-time visibility and control over spending, they may leave the doors open for financial leaks and loss of revenue in the long run. Thus businesses that understand and want to mitigate this risk now use a spend management software to do the heavy lifting. The software not only helps Finance teams identify cost-saving opportunities but also curbs unnecessary overspending.
Benefits of Spend Management Automation
Spend management is important not only for enterprises that have large amounts of expenses but also for SMBs aiming for scalability, sustainability, and profitability. Some common benefits spend management automation reaps irrespective of business size are:
- Efficient budget management
- Eliminating out-of-policy and fraudulent spending
- Real-time control over company-wide spending
- In-depth analytics for all spending
- Easy tracking and processing of payables
What's more? Finance teams see all expenses on a unified spend management dashboard, so they are always on top of where money flows. This helps them make better data-driven decisions to help your business scale!
Is Spend Management Automation the right choice for your business?
In simple words, spend management is the art of controlling, managing, and analyzing all external spending to ensure your business gets a bang for every dollar it spends. Additionally, spend management software runs on a robust business rules engine that allows employees to spend from allocated project/department budgets without waiting for prior approval.
In other words, spend management offers businesses more agility and flexibility while ensuring continuous compliance and enhanced control for admins and employees.
Additionally, it might be beneficial to run through some common problems with manual spend management processes to evaluate if you need spend management automation.
Common challenges businesses face with manual spend management
Spend management is critical to maintaining the financial health of your organization. It includes all aspects of spend categorization, financial data management, spend analysis, and spend performance management. Unfortunately, traditional spend management processes, especially in the age of remote work, are simply not up to the task and can cost your business time, money, and resources.
Here are some challenges that could hurt your business if not tackled right and in time:
- Planning based on outdated spend data: Spending data is always at least a month old with traditional means of managing spend. This makes it difficult for Finance teams to identify and correct any unnecessary spending before the damage is done.
- Manual mapping of spends to budgets: Finance teams have to manually match spend to budgets long after the spend has happened. This eats into many productive hours and, of course, leaves a chance for data entry errors.
- Lack of real-time visibility into spend: Finance teams have no insight into real-time spend, leading to overspending and budget non-compliance. These costs can quickly add up to create trouble not just with overspending but also with tax authorities.
- Missed cost-saving opportunities: Often, companies go on budget-saving rampages when they see overspending in the previous month/financial year. However, this might hurt your overall business process efficiency rather than optimize spending. Real-time spend data is essential to understand where to cut costs and where to optimize.
- Multiple financial software that don’t talk to each other: If your Finance team has to move data between multiple software and map spend manually, the chance for data entry errors skyrockets! Further, this could lead to delays in financial reporting.
- Spending process not optimized for remote employees: If remote employees need to pay for other business expenses, it better happen quickly and adhere to compliance requirements. Shared corporate cards and lengthy approval processes, which are characteristic of traditional spend management systems, simply can’t keep up!
If you’ve faced any of these challenges in your business, it might be time to think about getting a smart spend management solution.
What to look for in a Spend Management Software for maximum finance efficiency?
Ask any successful business; they’ll preach about the importance of real-time data visibility. With the right spend management software, businesses get complete control over how and where their money is being spent. Further, they can see the spend as it happens, instead of forecasting spend at the beginning of the month and hope they haven’t gone over-budget by the end of it.
The right spend management software will help leverage real-time spend analytics to adjust and optimize spend as and when it happens.
Here are some must-have features you should look for in a spend management software:
Flexibility for admins
Pick a tool that allows admins to automate your existing or preferred financial management processes as they are. Tools with rigid or limited functionality might complicate processes for both teams and Accountants. It can also pave the way for a lot of manual work, defeating the very purpose of automation. Understand the unique requirements of your business and take into account the concerns of key stakeholders before you shop for a spend management software.
Superior customizability and control for Finance teams
There is not much that real-time data can do for your business unless your Finance teams have complete control over spending at all times. Superior customizability and control over workflows help admins truly streamline and automate processes to achieve seamless business finance management. In addition, this freedom allows admins to change or optimize workflows as the business/process scales.
Real-time and in-depth spend analytics
Your spend management software should also turn all the data it gets into meaningful insights and analytics for your Finance team. This is a crucial feature, especially if your goal for automation is to cut costs and optimize spending. However, without detailed analytics, your Finance team will have to sit through heaps of data and make sense of it, making it difficult for them to take timely and appropriate action to drive meaningful change.
Ease of use for all
Software, no matter how advanced, is worthless if no one uses it. Therefore, ease of use should be a priority when shopping for essential business software like spend management. Say, for instance, employees find your chosen spend management software clunky and difficult to navigate; they will not use features that may genuinely be useful. Instead, they may simply pass on the job to their colleagues in accounting. And that’s the recipe for a time-consuming, error-prone manual spend reporting process.
Pick a software that requires no training and offers a ridiculously simple way for employees to do their part. This helps the whole process move along smoothly, quickly, and in real-time.
Whichever spend management tool you choose should be able to automate your existing processes as they are - no compromises.
For instance, consider corporate cards. Spend management software providers are notorious for pushing their own cards on clients, forcing them to abandon their existing or preferred corporate card vendors, and changing their process from top-down for a better spend management experience. The easier experience is worth it. However, forcing businesses to change their processes to adjust to the spend management softwares’ capabilities is hardly the ideal solution. It delays implementation periods and faces resistance from employees when they’re asked to switch to an entirely new manner r of doing things.
Fyle is building out a spend management software on a Bring Your Own Cards model to solve this problem. Essentially, Fyle will facilitate direct feeds from your existing or preferred corporate card vendors and make all spend data available to admins on a unified spend management dashboard.
Further, with features like easy business expense tracking, card spend tracking, automatic corporate card reconciliations, and tight-knit integrations with all major accounting software, Fyle helps businesses create smooth-flowing, fully automated spend management systems.
Neat, isn’t it?
If you’d like to know more about how Fyle is revolutionizing spend management in 2022, feel free to schedule a demo with us!