There are many business benefits of spend management. For example, it can help executives, teams, and individual employees reduce business costs, redirect savings to drive growth, and improve the bottom line.
What is spend management?
Spend management is the process a company uses to control its spending. Effective spend management can help a business reduce costs, redirect savings to drive growth, and improve the bottom line.
Although spend management accounts for any spending related to procurement, purchasing and discretionary costs (things like travel expenses, subscriptions and tools, and incidentals), it typically doesn’t include payroll or costs of goods sold.
Why is spend management important?
Business spending tends to happen in silos. While marketing is busy spending money on advertising, other departments like IT, HR, and Operations are also chipping away at the company budget.
Without a clear understanding of how its money is being spent, it’s easy for a company to run into trouble—and run out of cash.
Spend management is important to companies of all sizes because it provides a level of transparency and control over spend that can be used to reduce risk, drive growth, increase profits, and introduce operational efficiencies across the board.
When a company has full control over its spending, everybody wins.
Better spend policies and spend management software can help executives, teams, and even individual employees save time, drive growth, and improve the bottom line.
In this guide, we’ll explain the basics of spend management and outline the far-reaching benefits that it can bring to an organization.
- What is Spend Management?
- Why is Spend Management Important?
- Is Spend Management the Same as Expense Management?
- How Spend Management Supports Fast-Growing Companies
- 7 Benefits of Spend Management
Is spend management the same as expense management?
Expense management is not the same as spend management. Expense management is the system that processes, pays, and audits employee expenses such as travel and entertainment expenses, whereas spend management is the system that an organization uses to control all discretionary and variable spending.
Read more about the difference.
How spend management supports fast-growing companies
Startups and high-growth companies spend a lot of money to fuel their expansion. If this spending isn’t monitored or managed well, opportunities are missed and problems arise.
An effective managing spend solution makes it easier to deal with the high volume of admin and analysis that goes hand in hand with increased company spending—everything from procurement, purchasing, invoicing, vendor management, expense management, and real-time reporting.
With a sophisticated spend management solution in place, and real-time visibility into company spending, fast-growing businesses are better placed to catch small issues before they become big problems and make smarter spending decisions that drive growth.
And startups can access the accurate financial data and performance metrics they need to attract investors.
7 benefits of spend management
Businesses usually get serious about spend management when they need to rein in their spending. And that’s a good thing. Spend management is great for keeping spending in check and improving profits over time.
But what many don’t realize is that managing spend can also help executives, teams, and employees save time, reduce risk, avoid headaches, and make data-driven decisions that move the company forward.
Here are some of the major benefits that managing spend can bring to every level of an organization.
Real-time visibility into company spend
Do you know where every single dollar in your company is going? Spend management software tracks and reports where payments are being made across a company in real-time and analyzes how that expenditure compares to previously approved budgets.
Reports can be filtered to provide detailed views of your spend data, making it easy to see how departments, roles, and individuals are responsibly managing company expenditure.
Accurate financial data
Spend management software collects and categorizes a company’s spend data before reporting it in real-time.
Because the data is housed securely in one centralized platform, spend software acts as a single source of truth—a place where companies can perform real-time spend analysis and get the data they need to see exactly how money is being spent across the company.
A clear expense process and spend policy
With the right system in place, it’s quicker and easier for employees to purchase everything they need while sticking to set company budgets.
Companies can create spend policies and approval process controls that fit their unique structure, stage of growth, and business goals.
Employees can quickly submit purchase requests on the go, via secure cloud-based software.
And approvers get real-time alerts whenever they need to approve a purchase request for someone on their team.
Improved risk management, better internal controls.
Typically, unapproved purchases or an unforeseen mishap with a vendor will only make up a small percentage of company spending. But in extreme cases, these issues can cause a company to fail.
The right software can help your finance team:
- Stop maverick spending before it goes too far
- Catch fraudulent invoices before they’re paid
- Ensure purchase approvals always happen before the expense occurs, not after
- Keep track of each vendor’s performance and identify any potential supplier risks
- Ensure compliance with internal control policies and external audit requirements
Spend management software saves teams across the company a huge amount of time. And time, as we know, is the most valuable currency!
For finance and procurement teams, better workflows and automation can result in lower cycle times, eliminate duplicate payments and purchase requests, avoid late payments and fees, and provide complete spend visibility across the entire procure-to-pay cycle.
For employees and teams, clear spend policies and spend systems that also work on mobile devices reduces bottlenecks and makes it easier to request and obtain approval for purchases, even while people are working remotely or on the go.
Lower spend and increased profits
Spend management software directly contributes to a better bottom line by helping companies:
- Eliminate unnecessary purchases
- Catch duplicate invoices
- Avoid late fees
- Negotiate lower prices and volume discounts
- Secure lower prices by improving supplier relationships
- Reduce costs by canceling unwanted contract renewals
- Optimize working capital
- Identify price arbitrages
Insights to drive business decisions
Even if a company’s executive leaders know their way around financial statements, the spreadsheets that a finance team uses aren’t always helpful for performing detailed, real-time, and valuable spend analysis.
Spend management software provides the level of detail and functionality that executive and department leaders need to:
- Forecast spend scenarios
- Benchmark internal performance
- Identify and leverage trends in spend data
- Increase profitability by discovering untapped cost savings
- Effectively allocate savings to scale up the business
These insights can help all leaders understand the value of their spend relative to the operations of a business.
Managing spend is essential for forward-thinking companies
Interested in trying a modern spend management platform? Book a free, customized demo and see how Procurify can help drive company growth.
We give companies the real-time spend analytics and tools they need to regain control of their spending, with cloud-based software that integrates perfectly with any accounting system.