No matter the size of your business, it’s always important to stay on top of your finances. That’s exactly what business spend management is all about.
Business spend management (BSM) is all about boosting your operational efficiency and getting the most out of your savings.
In this article, we’ll cover what business spend management is. We’ll also give you 5 steps to implementing an effective business spend management strategy.
Key takeaways:
- Business spend management (BSM) is about tracking, analysing and automating a company’s spending patterns and processes.
- BSM helps you control costs, boost financial visibility, make data-driven decisions and much more.
- To implement an effective BSM strategy, you should take stock of your spending, set clear goals, pick the right BSM tools for your business, automate repetitive processes and monitor and adjust your strategy as you go.
What is business spend management (BSM)?
Business spend management (BSM) refers to the processes, tools and strategies companies use to manage, track and optimise their spending.
From expense management and invoicing to procurement and supplier management, the purpose of BSM is to gain visibility and control over all types of expenditures.
BSM is about tracking, analysing and automating a company’s spending patterns and processes to reduce risk, improve profitability and boost operational efficiency. It’s all about ensuring businesses allocate their resources efficiently while maximising savings – without compromising on compliance.
The term ‘business spend management’ is often used interchangeably with ‘expense management’. In reality, however, expense management is a subcategory of business spend management which covers things like out-of-pocket expenses and travel expenses.
Business spend management covers those and many other areas, including:
- Product development
- Sourcing
- Procurement
- Supplier management
- Inventory management
- Invoicing
- Office supplies
- Software
- Marketing
- Cash management
In short, BSM covers all company spending – both direct and indirect costs.
The benefits: Why business spend management is important
Business spend management plays an important role for the financial health, operational efficiency and strategic decision making of all types of companies.
Here are some of the main benefits of BSM:
- Cost control and savings: BSM helps identify unnecessary costs and areas where it’s possible to save. It helps you negotiate better contracts, minimise waste and achieve economies of scale – all of which help you reduce costs.
- Better financial visibility: With BSM, you’re always on top of your company’s financial health – and that improves your forecasting, budgeting and strategic planning.
- Operational efficiency: BSM automates time-consuming and error-prone tasks, freeing up time for employees to focus on more valuable activities.
- Enhanced compliance: Through automation, BSM ensures you’re compliant with internal policies and external regulations, reducing the risk of fines and penalties and keeping your reputation spotless.
- Data-driven decision making: BSM tools analyse the data you generate, helping you uncover trends and identify inefficiencies. This gives you actionable insights that allow you to make informed decisions to drive growth and innovation.
- Supplier relationship optimisation: Suppliers play a key role in the quality and cost of your goods and services – and through timely payments, performance tracking and effective negotiation, BSM helps you maintain strong relationships with them.
- Scalability and agility: As your business grows, managing multiple departments or regions becomes complex. BSM gives you a scalable framework that adapts to your changing business needs so you don’t lose control and oversight.
As you can see, the benefits are numerous. By leveraging business spend management, you can maximise the value of your spending while aligning your expenditures with your business goals.
5 steps to implementing an effective business spend management strategy
When it comes to implementing a business spend management strategy, it’s important to follow a structured approach to ensure a smooth implementation.
Here are five key steps to guide your process:
1. Take stock of your spending
If you don’t know where your money is going, you won’t be able to improve how you manage it. That’s why the first thing you should do is assess your current spending and processes.
Dive into your spending data to get a better understanding of where the cash is flowing. Group it into categories like office supplies, travel or vendor payments. The right BSM tools can help you with this, but more on that later.
Look at how you currently handle things like buying supplies, approving expenses and paying invoices. Pay attention to bottlenecks and problem areas – these are what you’re looking to fix.
2. Set clear goals
To measure success, you need to know what you’re aiming for. Decide what you want to achieve, whether it’s cutting costs, speeding up payments or keeping better tabs on expenses.
Pick a few key metrics to track – e.g. how much money you’re saving, or how fast invoices are getting approved. Make sure the goals you choose align with the company’s overall objectives.
3. Pick the right tools for the job
We mentioned tools above – and they’re important. Business spend management software can make everything smoother and more efficient, so it’s important to find the right tools for your business.
Check out different BSM tools. Look for ones that automate repetitive tasks and give you great insights. Make sure the tool integrates with your current systems, like your accounting software – bonus points if it comes with dashboards and reports to help you make smarter decisions.
4. Streamline and automate your processes
Consistency and automation save time and reduce operational headaches. Create simple, standardised processes for things like ordering supplies, submitting expenses and approving payments.
Automate repetitive tasks where possible – hence the importance of picking the right BSM tools. No more chasing paper invoices or manual data entry! You should also implement controls to ensure everyone complies with your spending policies.
5. Monitor and adjust as you go
A good strategy evolves with your business. Keep an eye on your strategy and adjust it when your business needs change.
Regularly check your progress against your goals – use your BSM tool’s reports to see what’s working and what isn’t.
Look for new ways to save or optimise based on the latest data. Get feedback from your team and tweak your approach as needed, and stay on top of industry trends to keep your strategy sharp.
Wrapping up
Business spend management helps you get on top of where your money is going, save more and work smarter.
By following the five steps above, you’ll set your business up for smarter spending and better financial control.
