What Is Business Spend Management?

46% of CFOs lack complete spend visibility — do you know where every dollar goes?

Business spend management (BSM) is more than budgeting and paying the bills on time: it’s a comprehensive strategy to manage and optimize all spending business-wide. Managing BSM effectively protects your company’s financial health, operations, and future business growth.

Introduction to business spend management.

BSM encompasses a wide range of processes and practices designed to manage and optimize spending across an entire company. Equal parts monitoring, control, and analysis, BSM helps companies make smarter procurement decisions and ensure they have the resources and cash flow to meet business needs.

It’s sometimes referred to as expense management, but that term technically refers to reimbursable employee expenses, such as travel expenses. BSM is a comprehensive management solution that covers every aspect of company spending, both direct and indirect.

It’s easy to assume that a strategy like BSM is only necessary for big corporations and other large businesses but, in reality, organizations of any size benefit from comprehensive spend management. When you control and optimize your spend, you open up cost-saving opportunities, enable better resource allocation, and improve your financial performance and stability.

The importance of business spend management.

The average profit margin across all industries is 8.54% — that doesn’t give you much wiggle room to overspend. If you want to increase your profits (a foundational goal for all businesses), you have to manage your spending wisely.

But the problem is that as your company grows, you add new expenses here and a different accounting tool there. Before you know it, all of your financial processes are siloed and you don’t have a clear picture of your overall spend.

A strategic business spend management process unites all spend and all workflows associated with it, giving you a single source of truth and deep insights into your company’s spending data. You can track spending patterns, identify cost-cutting opportunities, refine your purchasing process, and highlight areas where you could increase efficiency.

Strategic benefits for business operations.

BSM is a key part of the overall business strategy. Think of it like a financial compass — it points you in the direction of your business objectives, and when your spending gets out of alignment with those goals, it nudges you back onto the right path.

And when you align your spending with business goals, you can allocate your resources more efficiently and cost-effectively. Strategic spend management leads to benefits like:

• Optimized procurement processes: BSM helps you streamline procurement and supply chain management, ensuring you have the resources at the right time — and for the right price.
• Enhanced supplier relationships: Robust spend management business processes lead to better invoice management, on-time payments, strategic sourcing, and consequently, satisfied vendors. And happy suppliers are more likely to offer you favorable contract terms and discounts.
• Improved operational efficiency: When you manage business spend effectively, you avoid setbacks like supply chain issues, cash flow problems, and approval bottlenecks that kill productivity.

Financial insight and cost savings.

The financial benefits of BSM are even more obvious — effective spend management directly impacts your bottom line. When you manage business spend right, you:

• Budget better.
• Control costs.
• Improve cash flow.
• Reduce wasteful spending.

Ensure that every dollar the company spends has a clear purpose and contributes to overall business goals.

BSM reveals insights into your past, current, and future spend to more accurately predict your cash flow needs, reduce risk, and make the right decisions now for a financially healthy future and consistent business growth.

Key components of business spend management.

We’ve talked about the benefits of BSM, now let’s dig into three components of a robust spend management strategy.

Planning and budgeting.

Effective business finance and spend management begins with an intentional, actionable plan and a detailed, realistic budget. Clear financial goals give you something to work toward, while a firm budget keeps spending in check and aligned with those goals.

A spend analysis is a great place to start. That will give you a detailed view of your business spend and highlight cost-saving opportunities. Use industry benchmarks to guide your spend management strategy, but since every company’s needs, processes, and finances are different, take time to develop a plan and budget that works for you.

Procurement process.

Robust procurement policies and BSM tools ensure that purchases are necessary, timely, and cost-effective. Your procurement approach should include:

• Supplier/vendor management and selection.
• Negotiation of favorable terms.
• Clear guidelines to ensure compliance.
• Robust contract management.
• An effective renewal process.

A comprehensive spend management solution that includes procurement software guides both your finance and procurement teams toward better cost savings.

Payment solutions and audits.

To ensure accuracy and maintain a healthy cash flow (not to mention keeping your vendors happy), install a streamlined payment system.

A modern solution like Airbase provides automated workflows that eliminate a lot of manual processes. Automation unburdens your accounts payable team and maximizes efficiency and accuracy.

Regular audits are also essential for ongoing transparency, accountability, and compliance with your spend management business processes and strategies.

If you’re unclear about the practical application, see how BSM works in real life.

Best practices for effective business spend management.

Effective BSM requires a strategic, intentional approach to track spending across the company. There are two best practices to follow when you execute a business finance and spend management strategy:

Regularly review and adjust your spend policy.

Implementing BSM isn’t a one-and-done project, it’s an ongoing process that requires continuous monitoring. Be prepared to adjust your process as business needs and goals change over time. Regular reviews will:

• Identify and eliminate inefficiencies or wasteful spend that crop up.
• Adjust budgets to reflect your current financial status.
• Ensure continued alignment with business goals.

Spend management software training and development.

BSM is an organization-wide initiative. Teams and management must be on board and understand the new processes and strategies to ensure adoption. A well-designed spend management system that is user-friendly with an intuitive UI will eliminate the need for a lot of training. In fact, you won’t even need to train people on your company’s policies when they’re baked into the system that prompts employees for information and documentation needed for compliance and guides every employee on how to comply with them.

Simplify your business spend management with Airbase.

No matter what your industry or company size, business spend management is essential for long-term financial stability and operational efficiency. Strategic BSM delivers cost savings, improved resource allocation, and greater financial control.

The right management tools provide the insights and oversight you need to manage every aspect of your company spend — and that’s where Airbase comes in.

Airbase’s comprehensive procure-to-pay platform covers the entire procurement lifecycle — from need identification to final payment. It gives you the universal, granular insight and control to streamline and optimize your spend — all from one user-friendly, highly integrated platform.

Schedule your demo today and see how Airbase delivers unparalleled spend management.

FAQ.

What is expense management in business?

Business spend management is about making smart procurement decisions and optimizing purchases and expenses. It aims to maximize value, reduce risks, and ensure you get the best return on every dollar spent.

How does business spend management differ from traditional expense tracking?

With traditional expense tracking, you simply log purchases and transactions, so you don’t get any real insight into (or control over) your spending. BSM, on the other hand, takes a holistic approach: it analyzes spending patterns, manages both direct and indirect expenses, and implements strategies to optimize overall spending.

What is a BSM platform?

A business spend management platform combines financial strategies with modern tools and technology to optimize spending business-wide. It includes things like analytics, automation, reporting, and other advanced features that help you save costs, improve efficiency, and better control your cash flow.

What are the key features to look for in a business spend management solution?

• Comprehensive analytics.
• Real-time expense tracking.
• Integrations with existing systems.
• Robust compliance workflows.
• User-friendly interfaces.
• Real-time visibility.
• Automation capabilities.

How can implementing a business spend management system benefit my company?

A BSM system gives you full visibility into your spending data, helps you optimize costs, and improves your financial control. It also saves your finance team time, enhances decision-making, and boosts efficiency and productivity by automating processes and reducing manual errors.