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Future of Finance

Why automated spend management is the best thing since sliced bread

Where there have been some traditional barriers to moving into the digital age, the modern attitude has largely removed a lot of the friction towards onboarding new technologies and overhauling your core business processes. Like managing expenses. 

While there's a huge interest in the possibility of more intelligent spend management, only 4% of businesses have so far made the changes they say they need to remain economically feasible past 2023. Yikes.  

This probably means that most have stuck with the old expense policy that everybody knows and well, doesn’t love. The restrictive kind of business spend management that fosters an environment of suspicion and leaves the finance team blind to fiscal blows until it’s too late. 

But now, not only is faster, slicker and better business management easier to access, automated spend management is pretty much the best thing since sliced bread for businesses.

What is business spend management?

Business spend management is the term that encompasses all of your systems, processes and rules around controlling the expenses.

Some companies choose to have an incredibly detailed, fleshed-out spending policy that goes right down to the last penny.

Other finance teams simply “know what they’re doing” or play it by ear. Point is, most businesses have a predetermined spending arrangement to stop the funds just leaking away.

We’re not really talking about the standard operating costs, like salaries, as the focus is not to make cuts here. More like travel and mileage expenses, software subscriptions and the supply chain process.  

Even if there’s no official spending rulebook, your finance team will have their own methods of controlling business spend. But here’s the deal: the whole “if it’s not broke, don’t fix it” approach doesn’t really apply to spending management. The limit to transforming business finances from inefficient to lean is sky-high. 

Even if you’ve already got a good grip on the spending cycle, chances are that just a few small tweaks should help cut the fat and avoid wasted expenses. 

It would be silly to advise that you scrap all of the current practices and policies in place. But revamping your business spend management strategy (even down to improving the request and approval process), will lead to more transparency and encourage your people to better take care of company finances. 

Benefits of an automated spend management system

Approaching spend management with a clear strategy and building out the policies step-by-step is the most recommended way to control business spending.

Here are just some of the benefits of automation:

  1. Better risk management
  2. Ensure legal compliance
  3. Gain spending visibility
  4. Build a better employee experience 
  5. Faster processing times

Better risk management

Working with physical paper documents, or even Excel spreadsheets to manage the company spending can be potentially risky. These types of processes are easily subjected to:

  • Manual errors
  • Fraudulent entries
  • Misplacement and loss

When so-called "maverick spending", also known as "tail spend", isn’t managed properly, it can have a real impact on the overall company outlay. 

100% of procurement leaders believe it’s an issue in their organisations.

By going digital, you can build safety nets into the spend management process that will catch errors, even when we humans can’t. You wouldn’t see a trapeze artist without a net at the circus. Why leave your business exposed?

By working with an expense management program, your finance team can easily find spending records by simply logging into the online system. Likewise, the system can track who spends what, controls who can access each of the records and keeps a digital roadmap of who makes which changes.

Spending rules within your business card program are a great way to set boundaries. For example, you might create automatic expense rules on: 

  • Monetary spending limits
  • Specific times for card usage or withdrawals
  • Designated stores or suppliers to purchase from

This reduces the chances of fraudulent behaviour and loss, as well as holding team members accountable for their actions inside software programs. 

No matter the industry, every business must comply with certain tax and accounting standards – always ready for an audit. Without an online system, it’s much harder for auditors to find and verify your records. This drags out the tax process and puts even more unnecessary pressure on your finance team. 

In order to better comply with regulation, most digital spending programs have in-built integration with officially recognised accounting software, such as Xero or Quickbooks. This allows the finance team to essentially multitask, accomplishing two tasks at once without increasing the workload. 

Gain spend visibility

One of the key problems that occur with mismanaged spending is that finance won’t have a great oversight of employee spending in real-time. Instead, everyone goes their separate ways, makes purchasing decisions, and comes back with the receipt up to 30 days later. What a mess (and we’re not talking about crumbs here). 

This lack of spend visibility can lead to departments going over budget, accidentally ordering two lots of the same product, or waiting to replenish inventory until it’s too late. 

However, with automated employee spend management tools, there’s no need to panic. Software is able to give a real-time overview of your company's spending so that your finance team is up-to-date, all the time. 

Moreover, automated spend management systems reduce the confusion that comes with having multiple purchasers. Know who spent what and when with individual accounts that hold your people accountable. No more end-month guesswork. 

When the right people are aware of where the money is going, department heads can gain a better understanding of their budget limits and everything feels under control.

More accurate forecasting for the win.

Build a better employee experience

With automation, everything can run smoothly (like butter). No more stop-starting due to seniority complexes or managers who can’t communicate. Automated spend management systems also reduce the chances of a bottleneck.

With automation, you can build a better employee experience. For example, you can create an easy way for your people to record expenses through an app that automatically captures receipts. 

Instead of paper records and constant chasing up, everything is handled online, through smartphones (that almost everybody owns) with automated reminders. You can even create automatic mileage reimbursements just by inputting the start and end destinations. 

With these new ways of working, the employee satisfaction rate is likely to improve. Research has shown that this is one of the top indicators of motivation in the workplace

So while it’s probably not the primary reason to automate your spend management system, foregoing manual tasks might actually boost the entire workforce.  

Faster processing times

From our recent survey with YouGov, we discovered that 92% of employees pay for business expenses with their own money. Not great. 

Where the company policy is for individuals to make purchases on their personal accounts and then submit receipts, waiting for reimbursements can become tedious. In some cases, it can lead to financial pressure on your employees too. 

Reduce that burden by using a digital system. With Pleo, employees can add the expenses paid for on personal cards to their Pleo app. By also adding their card details, you can reimburse them from inside of the app, and they’ll get a notification as soon as it’s been approved. 

Tips for an automated spend management process

With processes like spend management, the high involvement factor is just the nature of the beast. But there are a few tweaks that you can make in order to simplify the workflow for finance and employees, such as:

  1. Get rid of shared credit cards
  2. Build supplier relationships 
  3. Automate expense requests
  4. Scrap the petty cash boxes
  5. Use analysis and reporting software

Get rid of shared credit cards

In many companies, it’s likely that more than one individual has the authority to spend company funds. This is normal, and a good way to prevent fraudulent financial practices. 

Problems tend to arise when multiple team members share the same credit cards. Without clear ownership, purchases can get lost and some costs might be unaccounted for. Making things even harder for the finance team to chase up on without knowing who to chase. 

It’s all well and good implementing a spend management policy to increase accountability, but if you can’t determine who made which purchase, it kind of defeats the purpose.

An alternative to shared credit cards is individual employee spending cards, like Pleo. In addition to setting spending limits, every member of the team is allowed to have their own pre-paid card. And since all cards are connected with Pleo’s automated expense management system, there’s no extra work for the finance department. Pretty nifty, huh? 

Build supplier relationships

The so-called “regular” and “budgeted” costs in your normal procurement process can vary without pre-negotiated rates. What should be a sure set cost every month or quarter becomes another unknown variable to add to the pack. 

You guessed it – having an automated spend management system enables better control over business costs. 

Put that to good use by building up strong relationships with suppliers, and negotiating a good trade price for repeated custom. Set up subscriptions and remove the need for your procurement team to re-negotiate every single month.

By knowing your suppliers and paying on time, not only will your costs be set every time you order, but you’ll often receive special rates that can’t be found elsewhere.

Automate expense requests

We all know how tiring it can be to manually work with expense requests. The back and forth between employees and the finance team agreeing on the budget, suppliers and the timeline can be exhausting. Even if it’s only for a few office pens from the corner shop down the road.

Expense approvals are a huge culprit for bottlenecks in the entire company. Employees are made to wait weeks in order to get that all-important “yes”, delaying the spending process. For time-sensitive purchases, like replacing inventory, late approvals can leave your business high and dry.  

Many modern companies choose to automate their expense request systems through mobile apps. This way, a simple ping notification to a mobile phone lets the decision-maker know the details, and they choose to approve, deny or edit the amount. By automating this request process through smartphone technology, requests can be approved in an instant. 

This is centralised business purchasing, where everyone feels responsible for the company balance sheets and won’t make silly spending decisions. 

Scrap those petty cash boxes

Petty cash boxes are a bad business decision when it comes to spending. The cash they contain is at risk of being skimmed from or stolen altogether – one Cardiff council worker admitted to stealing over £35,000 in petty cash. 

Even when crime isn’t an issue, the process of working with cash is notoriously prone to human error. 

Why not cut down the admin with an automated, cashless system? Remove the need for paper documentation, like petty cash vouchers, and go digital to track all of the transactions. This way, you reduce the risk of error and can more easily analyse spending data to create the most robust and efficient business spending patterns.

Use analysis and reporting software

Don’t waste days on complex mathematical modelling and KPI checks. 

These days the pros use automated software to churn out the numbers that matter. Leaving you to focus instead on: 

  1. Selecting KPIs that can be automatically tracked
  2. Creating a monthly report with the same variables
  3. Following trends over time

This way, your entire team won’t have to waste their time on complex calculations that a computer can do in seconds, and without the risk of mistakes. It’s one of the best ways to introduce automation into your spending management system.

Different spend types

When any business is looking at spend management solutions, breaking down the categories of cost is key. It’s important to note that there are expenses that you can’t avoid (mandatory), and those that are at the choice of the team (discretionary). 

Mandatory spend

Mandatory spending refers to those costs that are unavoidable. Things like paying your staff, and paying suppliers for products. This category of expenses is required in order to keep the business running. 

Some of these are fixed, which means they are the same from month to month, while others vary, such as utilities and energy bills.

🔥 Hot tip: one of the best ways to perform expense management is to make as many of these mandatory costs fixed. This way, they are predictable and leave no room for going over budget. 

Discretionary spend

Discretionary spend refers to non-essential purchases on behalf of the business. Like research and development projects, or entertainment expenses. Even if all discretionary spend is halted, the business should still be able to run at full capacity. 

Using expense cards is a good way to track and manage discretionary spending. Where more rigid spending rules have to be put in place (in case the finances aren’t looking so good), the automation on these cards can be adapted immediately to enforce a new policy. 

How to take your spend management digital

When considering spend management automation, a custom approach is best for most businesses.

An easy first step is to manage your invoices and bills electronically. By moving the invoice process over from manual to automated, you can set up alerts to ensure you never miss a payment again. This is key to building strong supplier relationships and cutting costs during the procurement process. 

Secondly, you can move mileage tracking over to online software. Online tools can automatically calculate the distance and fuel cost of work trips according to standard rates with a simple start and end destination. 

Finally, we recommend investing in an automatic receipt reconciliation and reimbursement system. And although a bit of a mouthful to pronounce, this benefits both small businesses and those at an enterprise level. 

By leaving the receipts and reimbursements up to a digital tool, you’ll free up finance to work on the more important things, like budgeting for Monday brunch meetings.  

Looking to the future

We know that transforming spend management is on the radar for many companies. But don’t just take our word for it – check out how 14 companies from across Europe overhauled their spend management practices.  

And when you’re ready to get the business running full steam ahead into 2023 and beyond,  feel free to reach out.

We’d be happy to hear from you.   

Expense reports? In the 21st century? No thanks!

Step into the future with Pleo. Smarter spending for forward-thinking teams.

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