Finance and procurement departments aim to optimise company spending to avoid waste and maximise ROI. Cost-cutting is crucial, but spending management has other goals. Spending more can boost efficiency and quality, making your firm more profitable. Business spend management lets procurement and finance departments optimise firm spending. Read on to discover about corporate spend management, its impact on profitability, and four useful methods for controlling and optimising firm spending.
Business spend management
Collaborative business spend management (BSM) finds ways to optimise company spending.
Finance and procurement departments must collaborate for BSM success. Decentralised purchasing demands department leaders’ input and commitment, especially if procurement is not fully responsible.
Profitability is the main goal of company spend management. Cost reductions like renegotiating contracts or revenue-driving activities like sourcing a new software platform to offer an additional service boost profitability.
Business spend management has three types.
1. Purchase management
Procurement management oversees sourcing and purchasing new goods and services, including:
- Market research, analysis
- Potential vendor screening
- Analysing supplier risk
- Contract talks
- Manage vendor relationships
2. Managing staff expenses
cost management tracks and processes employee cost claims. This includes cost control measures like expenditure approval protocols and efficiency measures like automated expense claims systems.
3. Invoice handling
Processing and paying vendor invoices is invoice management. Effective invoice management uses tools to speed up and improve invoice approval and payment. This programme can also detect and prevent fraud.
Business spend management benefits
Lower costs, higher ROI
Effective corporate spend management cuts expenses and boosts ROI. You may be paying for two similar software tools. Eliminating one relationship and consolidating usage onto one platform reduces software costs.
Enhanced efficiency and productivity
Spend management identifies ways to automate or streamline tedious operations to boost business productivity. Invoicing processing software could aid with accounts payable. Set up unique automation rules to save time on invoice processing and prevent vendor late payment costs.
Better spending compliance and risk reduction
Businesses that prioritise business spend management guarantee that staff obey spending guidelines and limit the risk of fraud and other security issues. You can need a senior leader to approve purchases over a specific cash threshold and the CTO to approve new software acquisitions by creating and publishing explicit purchasing standards.
This distribution reduces fraud by double-checking large transactions. Integrating a software solution with poor data management reduces the risk of an employee causing a tech or security issue.
Challenges in Business Spend management
Decentralised expenditure
Decentralised procurement makes controlling corporate spending difficult.
Decentralised purchasing allows business unit or branch leaders to buy without IT, Finance, or Procurement clearance.
Thus, expense tracking becomes more complicated and expensive.
Business credit cards
Corporate credit cards, like decentralised spending, can make business spend management difficult.
Cardholders can subscribe to software without IT stakeholders’ consent, which is a major risk. Data security issues and unmonitored (often unutilized) subscriptions that drain cash flow might result from these dangers.
Bad data handling
Many teams still process expense reimbursements using spreadsheets or handwritten forms.
This outmoded operation reduces data visibility and management. A spend management tool is useful for controlling spending and centralising data.
Low spend visibility
Finance teams find it hard to track corporate expenses in real time without a centralised spend management system. Without visibility, forecasting and financial reporting fail.
Resistance to change
Finance teams face resistance from individuals who like the current quo when they try to tighten spend management.
Goals clash in this resistance. Department heads may care less about savings than finance team members. Their preferred purchasing method is one that streamlines and reduces red tape.
Business spending categories
Companies that transparently define and categorise company expenses have better spending insight and may make better spending reduction decisions.
These are frequent company spending categories:
- Payroll
- Marketing, and advertising
- Rent Utilities
- Taxes, interest, loan payments
- Entertainment and employee benefits
- Spending capital
- Dues, subscriptions
- Banking fees
- Software licences
- Legal and professional fees
- Communications
- Office costs
- Travel maintenance and repairs
- Client gifts
Four useful software solutions for company expense management:
Strong software platforms that provide real-time insights into company spending behaviour and automate efficiency improve business spend management.
1. SaaS vendor management
Vendr, a SaaS buying platform, sources, buys, and manages software agreements. Finance and procurement departments use Vendr to optimise contract spending from strategic vendor selection to contract renewals and negotiations.
Strategic sourcing aid
Vendr’s SaaS buying experts use the largest software purchase data set to benchmark vendor pricing and get the best upfront price to assist you locate suppliers who support your business processes.
Analysis of overlapped spending
When purchasing is decentralised, departments often buy identical software without consulting each other. Vender identifies overlapping spending and consolidates licences to save money immediately.
Managing contracts
Procurement teams may track vendor performance and receive automated renewal reminders to never miss a renewal opportunity with built-in contract management.
Real-time spending analysis
Real-time spend visibility shows how spend control affects the bottom line. See how much each vendor costs and dive down by category or department.
Manage supplier relationships
Vendr’s strong procurement software platform manages relationships beyond sourcing. Visualise your tech stack and spending, including maverick spend, and track contract renewals with automated approval systems.
2. PayEm automates invoices
PayEm helps large and small organisations manage spend and procurement. PayEm helps you pay service providers and prevent late penalties by managing invoices. Key features:
- Automating invoices and payments
- Faster invoice processing with AI-assisted optical character recognition
- Integrations with various ERP tools
- Plan and schedule transfers easily
3. Manage employee expenses with Expensya
Automated expenditure management tool Expensya tracks employee expense claims. Teams streamline expenditure management and reimbursements using automation and employee portals. Expensya uploads finance team expense reports. Key features also include:
- Company payment cards to improve staff expense management
- Uber, Quickbooks, and SAP integrations
- Centralised BI reporting and AI insights
4. Oracle NetSuite—ERP
ERP platform Oracle NetSuite helps finance teams control business spending from different aspects. It includes:
- Price benchmarking to help finance chiefs avoid expenditures
- A purchase order management suite that automates and controls approvals for procurement teams.
- Financial process integration platforms for accounts receivable and payments
