Intelligent spend management: How today's finance & accounting leaders balance fast-changing risks with responsiveness and responsibility.
Intelligent spend management uses automation tools and advances in machine learning to revolutionize how companies manage non-payroll expenses. This digital transformation results in more accurate, real-time data that empowers finance teams to make smarter decisions and to respond quickly to sudden changes.
The ability to gain actionable insights from financial data is essential for all businesses and, with modern spend management tools, doing so in real time is increasingly possible.
In addition to insights garnered, the right tools also provide the levers for control over company-wide behavior, so that budget and policy adjustments can be easily implemented. All told, in our fast-changing world, adopting spend management practices that reflect the realities of the 21st-century workplace is simply the only option, according to Orbital Insight CFO, Jim Cook.
“It used to be all centralized. So what's changed is that the financial leaders that are still stuck in centralizing everything are going to be dinosaurs. You have to embrace the fact that data is moving faster and faster, and you have to go there with it,” he said in a recent Path to Becoming a CFO talk with Airbase CEO and Founder, Thejo Kote.
What is intelligent spend management?
The practice of spend management involves requesting, approving, accounting, and reporting all business expenses outside of payroll. On the surface, this might sound straightforward, but the processes around non-payroll spend in a midsize company, especially one that is growing, are particularly onerous. That’s because employee spending is no longer centralized under a procurement department, so employees typically make their own purchases.
This transfer of purchasing power into the hands of employees has many benefits, but it also creates a myriad of problems for the finance and accounting teams. The biggest barrier often lies in the technology available. Simply put, the tools used by finance teams haven’t kept pace with the evolution of workplace spending.
The impact of shifting spending patterns on spend management.
A significant change in how employees spend money has further complicated the difficulties in managing expenses. SaaS subscription models are just one example of these challenges. Because SaaS purchases are, by design, easily made, employees from all departments can buy a software subscription in a matter of minutes. Furthermore, those purchases are usually made across an organization. In fact, although IT departments used to make most software purchases, the International Data Corporation predicted that about half of software spending would be by departments other than IT.
The decentralization of SaaS spending has made spending controls harder to manage. Companies typically have more than one subscription for the same software, for example. And because SaaS offerings often operate on an auto-renew model, many organizations continue to pay for subscriptions that are no longer used – sometimes for years.
The ease with which subscriptions and online services can be purchased also makes corporate credit cards more vulnerable to fraud. One Airbase customer’s finance team discovered that prior to adopting a more comprehensive spend management system, fraudulent charges for grocery deliveries had been undetected for over a year. Unfortunately, decentralized spending patterns can make it easy for expenses like this to slip under the radar, since it’s difficult to know exactly who owns each expense. Today’s intelligent spend management software reduces risk because it provides an audit trail, ownership, and approvals for every single expense.
Rethinking spend management platforms.
Effectively managing this decentralized approach to spending requires tools that provide visibility and control. The area of spend management remains, for most companies, the most operationally burdensome aspect of accounting and finance because the adaptations have consisted of manual processes and various disconnected software solutions. The spend management tools used for purchase requests and approvals alone often include (but are not limited to) Google forms, Slack, and email. Purchases themselves could be made with personal or corporate credit cards, checks or ACH transfers, or a payment-processing platform. Receipts must be collected and presented through a system such as Expensify. Finally, those expenses must be represented in the GL, which requires a manual upload of information to the ERP. Coordinating all of the moving pieces is a time-consuming task, and the manual processes involved easily lead to errors.
A more sophisticated or intelligent spend management solution provides numerous customization options that protect against fraud and “zombie spending,” like duplicate subscriptions.
For example, a virtual card can be specific to a certain vendor, and assigned a limit in accordance to budgeting needs. The system flags a spending request if the same service or subscription has been purchased by others within the organization, so the possibility of redundant charges is eliminated. (This visibility can also help companies negotiate for better subscription rates.)
The process of replacing a lost or stolen card is much easier if the card is tied to a specific vendor because they won’t have to go through the stressful and time-consuming process of replacing the card for multiple services. And the option to automatically lock a card if the card holder isn’t compliant with a company’s expense policy helps to keep employees accountable.
As purchases are made, machine learning helps to ensure that all expenses are properly categorized. Proper categorization is one of the areas of friction that slows down finance and accounting teams. As the system develops an understanding of spending patterns, it can anticipate the right category for spending, saving both the purchaser upfront time and the accounting team hours of auditing and adjusting incorrect categories.
Beyond the GL: Far-reaching benefits of intelligent spend management.
Obviously, more sophisticated spend management can lead to improved savings and better adherence to budget and cash-flow management. But organizations who have implemented automated, customizable spend management practices say that the changes go even deeper.
Perhaps most importantly, however, streamlined, automated spend management practices give finance teams more time and energy to focus on value-added activities, instead of doing more tedious tasks, like chasing down receipts and reconciling credit card statements. With more visibility into spend as it happens, analysis can take a bigger-picture approach and truly drive policy decisions.
Dmitri Litin, Controller at AspireIQ, has noticed that the increased accountability of a unified spend management solution created a new culture of transparency that enables him to play a more proactive role. “I’ve been able to shift my function from accounting enforcer to financial analyst,” he says.
Look to the future.
Finance teams can’t predict the unexpected forces that could shape spending requirements in the future. Instead of relying on multiple scenarios for budgeting and planning, intelligent spend management can show how the business is performing in a specific environment. Its real-time data can better inform companies to make decisions about changes, whether those are increased risk or new opportunities.
As workplaces implement more intelligent business processes, the advantages of embracing innovative spend management tools should not be overlooked. By gaining control over corporate expenses through intelligent spend management, an organization improves its ability to adapt and thrive.
Airbase offers a one platform solution to manage all non-payroll spend. It provides oversight and control over spending with real-time reporting and automatic syncing directly to your general ledger. Control all payments – physical cards, virtual cards, ACH, and checks – from one place. Close faster. Empower employees. Control spend.