Spend management is the process of ensuring a company’s procurement, sourcing, and end-user spend is properly tracked and efficiently accounted for. The spend management procedures of an efficient finance team can save a company time, help control their spend, and automate purchasing processes.
How to Improve Spend Management in Your Company
While traditional spend management mainly concerns itself with procurement and sourcing spend, the rise of distributed workforces means end-user and individual employee spend are more complex than ever. It is up to progressive finance teams to ensure that company spend is managed efficiently from top-level to end-user purchasing decisions, which can be greatly assisted by spend management software and automation.
Top 7 Spend Management Challenges & Solutions
Teampay’s State of Spend Management report details the top spend management challenges straight from the mouths of finance leaders themselves. Read on to learn some of the top ways in which finance leaders can streamline spend management within their companies.
#1 Aligning employees with company spend policies
There is often a disconnect between what employees think they should do and what the finance team actually needs them to do. This means employees may spend outside of policy without meaning to.
“It’s really easy for us, as members of finance, to see the simplicity in what we’re asking,” Drew said. But other departments might not find it so simple, so offensive errors are often just honest mistakes. Employees who spend out of bounds don’t intend to act maliciously in most cases. They are simply doing what they believe needs to get done.
To solve policy misalignment, finance teams need to take the burden of remembering policy off of employees. By embedding the spend management policy into the process itself, and inserting the process into employees’ existing workflow, finance teams can guarantee compliance.
#2 Reducing unexpected and unapproved spend
Due to the use of shared corporate cards, as well as personal cards, it may be difficult for finance teams to maintain control over employee spending. They only become aware of purchases after receiving credit card statements and expense reports at the end of the month, without a clear trail showing who was responsible for each transaction.
A lack of firm controls and compliance often results in unexpected and unapproved spending. This puts finance teams in a tough position: they either have to reimburse out of bounds purchases or refuse to do so, which means awkward conversations with employees. As Peter explained, “it adds friction and causes animosity between finance and the rest of the company.”
It is necessary to enable controls that guarantee compliance and prevent employees from going over budget, without putting the onus on them to do additional work. Establishing clear links between an individual employee and payment method holds employees accountable for their purchases.
#3 Eliminating best-guess accounting
The finance team has to spend time hunting for receipts and other information, and they frequently code transactions using their best guess, instead of data.
According to Drew, best-guess accounting is more of an occupational hazard than a trend. “Anytime there are humans involved, there will always be discrepancies,” he said. That’s why he’s turned to automation to carry out many of his accounting functions.
Peter agreed, describing accounting as both “an art and a science.” Automation can take over the “science” piece, freeing up the finance team to focus on the “art.” They can spend less time on tedious spend management and analysis and more time strategically applying that data to financial decision making.
Try Spend Management Software for Yourself
#4 Improving spend transparency
Finance teams often don’t become aware of transactions until the corporate credit card statements come in at the end of the month, which limits their ability to deliver accurate reports and forecasts. “This lack of transparency forces finances teams to be reactive instead of proactive,” Drew stated.
With real-time visibility into their company’s spend, finance teams can pull reports and conduct analyses at any point in time, not just at the end of the month. They have awareness of purchases that have been made and the requests that are coming in, which means they can stop duplicate spending before it happens.
Real-time visibility in spend management is equally important for managers and employees. When they can see what purchases have been made from their budgets, they can make better decisions about what expenses to approve in the future.
#5 Eliminating manual spend management tasks
Finance professionals spend hours, if not days, each month on manual work, including data entry, back-and-forth with employees, correcting codes and categories, and transferring data from one system to another.
“A lot of finance has not caught up to the way business is done today. They get stuck in ‘we’ve always done it this way, so we’ll keep on doing it this way,’” Peter said. “It takes a certain type of finance leader to be a systems thinker and build a process that enables their staff to be analytical and thoughtful accountants versus paper pushers and number crunchers.”
The key here is to implement systems and technology that integrate with each other, unifying previously disparate workflows. This connectivity allows data to flow seamlessly across the organization, reducing tedious manual work and allowing finance teams to dedicate their time to more strategic initiatives.
#6 Building interdepartmental relationships
In many organizations, the finance department may appear to be at odds with the rest of the workforce. Finance knows why expense reports need to be filled out a certain way, for example, but other employees may have no understanding of why it needs to be done.
“They just feel it’s a burden on them,” said Peter. “They’re just trying to get their job done in marketing or sales or engineering, and not realizing or caring that filling out expense reports correctly has a huge impact. It’s easy for finance to forget that other people might not understand.”
Drew named “education and partnership” as his two biggest guiding principles for better spend management. He seeks to make finance accessible for his employees and position himself and his team as a partner for the other departments instead of a siloed function.
#7 Empowering employees to spend
For both Drew and Peter, empowering employees is always top of mind when deciding to implement new systems at their companies.
- Empowering employees to buy the things they need to do their jobs well
- Empowering managers to make better spending decisions
- Empowering finance teams to be more strategic and analytical
Drew recalled an experience at goop when a junior employee was planning a business trip to Paris. She was excited about the opportunity, but concerned because she could not afford to front the money for travel. He realized that something was wrong with this situation. Finance teams should establish spend management procedures that enable employees to succeed, not hinder them.
With technology, he can spend more time providing employees the support they need. “Automation actually allows us to work closer with people,” Drew said. “Robots can do the tedious work, and we can focus on the human aspects, the emotional intelligence piece of financial decision making that robots will never have.” At the end of the day, employees are a company’s most valuable resource. Giving them the tools they need to thrive is the best thing finance can do to fuel company growth.
Top Spend Management Software
Spend Management software can help alleviate or eliminate many of the challenges that finance teams face when it comes to managing their company’s spend. With Teampay’s spend management software, you can:
- Make it easier for employees to submit purchase requests and request reimbursements
- Utilize digital corporate cards to track all company spend in one place
- Automate reporting, manual coding, and reporting tasks
- Gain accurate and real-time visibility into company spend
- Set your team up for financial success
Learn more about Teampay’s features and improve your spend management processes today.