The end of 2019 is coming up fast. For most people, that means pushing through the last few months of work, eyeing vacation days, and making holiday plans. For finance teams, it means all those things, plus something more: planning for the year ahead.
In addition to wrangling the company-wide budget, matching business objectives to resources, and negotiating the “we’ll give you this if you give us that” horse-trading that is part of every budgeting process, finance departments are also taking stock of their own budgets and objectives and asking themselves: “Where can we improve in 2020?”
There’s a powerful opportunity for improvement waiting right under many finance teams’ noses: spend management. As the pace of work accelerates, and company spending is increasingly distributed across the organization, digital-first companies are putting tools in place to help monitor and manage that spending—and empower their employees to move at the speed of business.
But the data shows that not every business is taking full advantage of the benefits that spend management solutions have to offer. According to one survey, 43% of businesses still rely heavily on manual processes for expense tracking; 60% still do expense reconciliation by hand. Just 27% of organizations “have a system that automatically flags out-of-policy expenses” — even though the technology is there, waiting to be used.
At a time when the speed of business is “right now,” technology-enabled spend management is not just a “nice-to-have”—it’s an essential. So as finance teams work toward putting the finishing touches on their own 2020 budgets, here is why why spend management software should be at the top of your list.
The way companies spend money has changed
For years, company purchasing was a centralized process, overseen by dedicated purchasing departments. But that’s not how businesses actually buy in 2019—and it won’t be how they’re buying in 2020 or beyond, either.
More and more, buying decisions—from plane flights and hotels to software subscriptions and office equipment—are being made all across the organization, by employees themselves. In this End User Era, 81% of non-C-suite workers have a say in purchase decisions, according to a Google report.
This shift to employee-driven, distributed spending is a net positive for companies. It makes teams more flexible and agile, and removes layers of bureaucracy that don’t need to be there. But it’s not without its challenges for the finance teams who are now tasked with managing the distributed spend.
Chasing down receipts, conducting “best-guess” accounting, discovering forgotten “zombie” subscriptions that the company has been paying for months without realizing—these are just a few of the challenges that have arisen due to distributed spending.
65% of businesses still rely on manual methods to enforce expense policies. [Source: Certify]
High-performing finance teams know that effective spend management is all about finding the right balance between employee empowerment and company control. Distributed spend management helps businesses do exactly that, by putting employees in the driver’s seat of their purchasing decisions, while maintaining the transparency and control that finance needs to keep the budget on track.
Technology is essential to winning the war for talent
Modernizing your spend management process for 2020 isn’t a gift for just the busy finance professionals tasked with keeping up with the pace of spend; it’s a gift to the rest of the team as well.
As it turns out, most employees dislike their current purchasing process. In fact, 53% of employees said their company’s expense claim process was worse than doing taxes. The antipathy is understandable; 79% of employees spend hours each week just filling out expense reports—not exactly what they had in mind when they specialized in sales or computer programming or HR.
With employee turnover at a decade-high and unemployment at similarly low lows, top performers have their pick of companies to work for. A great employee experience can make or break a company’s ability to compete in the war for talent—and technology is a key piece of the puzzle. In fact, 41% of employees say they consider up-to-date technology essential to job satisfaction.
Up-to-date technology ranks as one of the top things employees look for at work. [Source: HBR]
By investing in spend management technology, finance teams can eliminate friction from the purchasing process and ensure that employees get what they need, when they need it. Purchase requests and approvals can be completed in seconds, so your finance team can maintain full financial control—without strangling your company’s growth and culture in the process.
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Manual finance processes leave money on the table
Including distributed spend management software in your 2020 budget will set your company up for success in the years to come. In one survey, 57% of organizations that invested in automated spend management software achieved an ROI for that investment in one year or less, and almost 70% achieved an ROI in two years or less.
One example: spend management technology can help finance teams catch and eliminate zombie subscriptions, unused subscriptions that companies unknowingly pay for each month. U.S. businesses waste $28 billion per year this way, often because they don’t have the visibility into what subscriptions have been purchased and whether or not they are being leveraged.
Distributed spend management software makes these kinds of surprise costs a thing of the past. Automated reconciliation means purchases are uploaded to the company’s general ledger as they happen, and intelligent payments allow you to put limits on how much can be spent with any card or any vendor—stopping rogue spending in its tracks.
Automated spend management is an advantage today—but it will be standard practice tomorrow
For years, experts have been heralding the Fourth Industrial Revolution in finance: how digital technology would make its way to finance and transform the way companies manage money and unlock new levels of efficiency, transparency, and growth. As we get closer to 2020, it’s clear that the Fourth Industrial Revolution isn’t coming—it’s already here.
In fact, a PwC report on the accounting practices of top-performing finance functions identified “improving technology” as the single most important change a business can make to its finance function. The report highlighted how technology makes finance teams more agile and responsive than their peers, citing evidence that “the cost of finance as a percentage of revenue is 40% lower” and budgets “are delivered 15 days faster” in top-quartile finance functions than in average ones.
Top-performing companies are increasing the efficiency of their finance function through technology. [Source: PwC]
Technology is a competitive advantage today, with half of businesses still handling expenses manually, but that won’t always be the case. A 2018 Bain and Company survey found that 75% of finance decision-makers expect to adopt robotic process automation (RPA) in the next two years. In an era of intense competition, when the imperative is to move fast or die hard, companies that think they can “afford” to push the decision to implement distributed spend management software until next year or even later risk being left behind—and paying the price as a result.
Plan for distributed spend management in 2020
Although budget planning can be a lot of work, it is a great opportunity for finance teams to look forward, and ask yourself: What if?
What if you could see a real-time report of all purchases? What if you could see at-a-glance which vendors your company is spending the most money with and which you barely use at all? What if you could manage the company’s spending, not reactively, but proactively instead?
Investing in a distributed spend management platform has the potential to completely change how finance teams and the companies they work for approach spending in the digital age—which, in turn, will impact reporting, forecasting, and financial strategy. And that is something to look forward to.