6 Steps to Improve Your Spend Management Process
As difficult as it may seem to fathom, the secret to long-term financial stability lies in spend management. A business’s spend management strategy should never remain static, especially if the company in question is undergoing growth or change. With that in mind, here are seven tactics that a business can take to improve its spend management process, outlined below.
This article will cover the following topics:
- Expense Identification
- Expense Centralization & Category Creation
- Data Verification
- Spend Analysis & Strategy Implementation
- Approval Processing
- Data Forecasting
1. Expense Identification
Spend management isn’t working if a business doesn’t know what it’s spending money on. Without an ongoing, real-time breakdown of an organization’s spending, no other aspect of spend management can effectively take place. This breakdown includes everything aspect of a company’s financial status, from internal expense reporting to vendor invoices, purchase orders, and more. Sure, it may sound mind-numbing to get all the information together, but without it, estimates suggest that businesses can leave up to 55% of their financial potential untapped.
2. Expense Centralization & Category Creation
Sure, identifying your expenses is nothing short of essential. But, without a central repository for a business’s spending data, it will not be easy to manipulate for extrapolation. Luckily, this centralized form of record-keeping can be automated. Creating and maintaining a secure and centralized expense database with the right spend management software can be as easy as a few button clicks (or even none at all!).
Additionally, when organizing your expense data, separating items into categories is critical. These can include expense reimbursement, salary payments, supplier purchase orders, vendor contracts, and beyond. That way, spend management can yield actionable insights focused on particular aspects of a company’s spend, should the need arise.
3. Data Verification
Even for the pros, numbers can get messy. That’s why we suggest recalling the principles of an early math class. Just like when dealing with simplification and lowest common denominators, the centralized expense database you created must be consistent, for example, in terms of currency, formatting, and duplicate entries. Without clean and consistent data, businesses may make decisions based on faulty analysis - hence why proper spend management is so crucial.
4. Spend Analysis & Strategy Implementation
If the steps until now have been to ensure that spend management lives up to its potential, then the conduction of spend analysis may be the climax to those efforts. If a company’s expense data is identified, centralized, verified, and categorized correctly, spend analysis will provide insight into a business’s finances’ past, present, and (projected) future.
Having said that, though spend analysis may provide much information, without a plan to implement its suggestions, it will forever remain in the realm of theoretical curiosity. That’s why the results of spend analysis lead to the formation of an actionable spend management strategy.
5. Approval Processing
It’s one thing to form a new spend management strategy and another entirely to implement it. If your business continues to engage in a manual approval process, this may require eons of communication with decision-makers and stakeholders before implementation can begin. However, ‘getting permission’ will take hours instead of quarters when a company automates its approval process. This saving of time and money will result in a refocusing of resources towards ensuring that the spend management strategy goes off without a hitch.
6. Data Forecasting
When a spend management platform presents analytics, it will indicate how past spending history and patterns may inform future trends and opportunities. As a result, it can help businesses identify points for growth, areas for savings, and a projection for the bottom line in upcoming quarters. In turn, spend management can assist with the preparations and changes required to keep the future looking bright.
After Improving Your Spend Management Process
A few short years ago, technology related to spend management was nothing short of dismal.
However, times have changed, and, now in the 2020s, the market is flush with spend management tools.
One such company that has found a space for itself in this new environment is PayEm. Our connected finance platform takes spend management to its logical next level by integrating real-time data capabilities with related corporate financial concerns. These include procurement, corporate card issuance, supply chain administration, and vendor management. To learn more about PayEm and how we can improve your business’s spend management process, feel free to schedule a demo with us today.
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