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The Definitive Guide to Spend Management

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05

The structure of spend management.

The three functional areas of spend management, AP, corporate cards, and reimbursements are all supported by three pillars:

1. Approval workflows.

The idea of getting approval for spending company money before committing to a purchase is central to expense management, and spend management systems are built upon powerful approval processes. They enable companies to set up approvers, typically managers, to review committed spend (e.g., submitted invoices and employee expense reimbursements) as well as requested spend (e.g., purchase orders). When these settings are robust, they can handle more complex company approval policies and contingencies.

The process of requesting spend by employees should be intuitive and quick, no matter how elaborate the approval logic required for a particular purchase. Spend management systems are able to build sophisticated approval workflows, specifying who should be approvers and under what conditions. This is commonly used to establish second-in-line, or even third-in-line, approvers in the event that the main approver is unavailable. And, to identify categories or amounts of spend that require additional approvers.

Spend management systems’ radical contribution to non-payroll spend is to link approval processes to card spend. Wrapping the pre-approval process around spending using virtual cards means that the request and approvals are executed before a transaction occurs. Prior to spend management, card payments created a huge blind spot for finance and accounting teams. The pre-approval process for virtual cards solves this problem. It gives visibility to budget owners, who serve as approvers, so they can control their budget. And, because the transaction syncs directly to the GL, accounting has the information it needs.

While these workflows help to protect companies’ bottom lines, they also help to protect employees from inadvertently breaking company policy.

A strong request and approval workflow is a paramount capability of a fully integrated modern spend management system.
Qualities of strong approval workflows:
  • As simple or complex as required.
  • Easy to navigate.
  • Clear transparency for employees and managers.
  • Consistent across all use cases (cards, purchase order requests, or employee reimbursements).
  • ‍Easily managed from within a single platform.
  • Reflective of company policies.
  • Flexible enough to change workflow parameters as circumstances change.
  • Able to create and archive an audit trail of approvals tied to each transaction.
  • Integrated with communication tools (e.g., Slack or email) to minimize time between request and approval, as well as time between follow-up communications.
  • Able to avoid bottlenecks in productivity (e.g., setting up a replacement approver should the primary approver be unavailable).
  • Able to construct an audit trail of the approval process, both for posterity and to identify where in the workflow an item needs to be addressed.
Benefits of strong approval workflows:
  • Time savings.
  • Increased visibility and control for budget owners.
  • Compliance protections for employees.
  • A better, healthier spend culture.
  • Audit trails of approval.
  • Flexible, adjustable budgeting.
Robin Washington, Board Member,  Alphabet,  Honeywell, and  Salesforce
Robin Washington
Board Member, Alphabet, Honeywell, and Salesforce
Read more
The complexity of running organizations and the speed of decision-making have increased tremendously from a decade ago.

2. Accounting automation.

The automation of accounting work was one of the earliest applications of modern technology. Yet manual work persists for accounting professionals, arguably becoming even more burdensome in recent decades, with rising expectations for up-to-the-minute data for decision-making. An astonishing 38% of survey respondents report that a quarter or more of their time is spent on manual work! Much of the manual work that accountants are saddled with has evolved into reconciling information across multiple systems and coding it to the GL.

The holistic approach to spend management solutions is a consolidated one, designed to eliminate the need for cross-system reconciliations. The benefits of automation are clear: it reduces human error, allows companies to act more quickly, and frees up time for higher-value work for finance and accounting teams. And automation will continue to evolve, especially with the assistance of machine learning and deeper integrations.

Three pillars of spend management support its three functional areas of accounts payable, corporate cards, and expense management:
  • Accounting processes: Basic AP features, such as bill amortization, payment scheduling, and payment execution, are fully automated as part of the core functionality of modern spend management systems, with others added in.
  • Approval workflows and receipt compliance: These are automations of operational workflows and are essential to ensuring adherence to policy and forming a clear, reliable audit trail.
  • Auto-categorization for GLs: Using machine learning to improve its performance, auto-categorization frees up substantial time for accounting teams.
  • OCR: This is used to extract data from physical documents so that manual inputs are not needed.
  • Compliance tracking: Additional oversight to ensure adherence to company policy.
  • Invoice management: Automatic routing of emails to an invoice inbox saves time and administrative work. An invoice inbox provides context for purchases, and can further automate the content of the inbox by using technology to scan emails to add in snippets of information found there.  
  • PO creation: When a customer requests a purchase order, the system should be able to generate one and match it against the invoice(s).
  • Alerts and reminders: Fraud, missing W-9s, approval request, duplicate subscriptions already being paid for by a company, and more.
Time Spent on Manual Tasks
Our survey asked respondents to indicate the amount of time their teams spent on manual tasks. (Source: The Airbase Annual Benchmark Survey of Finance Professionals)

3. Real-time expense reporting.

The opportunity for real-time data is a significant benefit of this automation, dramatically increasing visibility of spend and creating actionable insights in real time.

One of the greatest practices enabled by this is a continuous, or rolling, close: a company’s books updated and balanced as transactions occur. At face value, this turns an activity that can take several days, or weeks, into a manageable daily task. But this also has far-reaching implications across an organization, helping leadership move away from thinking in terms of month-end, or year-end, and supporting a more agile approach to planning and forecasting.
Days it takes finance/accounting teams for month-end close
61% spend more than a week on their month-end close, with 18% spending most of the month. (Source: The Airbase Annual Benchmark Survey of Finance Professionals)
Robin Washington, Board Member,  Alphabet,  Honeywell, and  Salesforce
Kate Bueker
CFO, HubSpot
The role of the CFO and of finance has clearly shifted. Now data is much more widely available. Your job isn’t actually calculating a number anymore. The job is about defining the right metrics for success, and making sure that the organization can manage to them.
Ultimately, real-time expense reporting empowers budget owners to better stay on top of KPIs and budgets, finance teams to better understand and construct key metrics, and leadership to make better strategic decisions about the future instead of reacting to the past. This is all possible because, on a spend management platform, data is captured from events as they happen throughout the entire workflow. More importantly, they capture this for all aspects of non-payroll spend so that the data provides a complete picture.

The consolidation of all spend data means that the GL can be synced regularly and that stakeholders are, again, not restricted by the end of the month for insights.

The records that are created and captured at each step in the process form an important audit trail. Clamoring for documentation to satisfy an audit can take days, or even weeks. When compiled as part of the process, there is no need to recreate events; instead, a simple report can be called.
Summary of spend

Guides and ebooks

The Definitive Guide to Spend Management

Trusted by finance teams at all stages

05

The structure of spend management.

The three functional areas of spend management, AP, corporate cards, and reimbursements are all supported by three pillars:

1. Approval workflows.

The idea of getting approval for spending company money before committing to a purchase is central to expense management, and spend management systems are built upon powerful approval processes. They enable companies to set up approvers, typically managers, to review committed spend (e.g., submitted invoices and employee expense reimbursements) as well as requested spend (e.g., purchase orders). When these settings are robust, they can handle more complex company approval policies and contingencies.

The process of requesting spend by employees should be intuitive and quick, no matter how elaborate the approval logic required for a particular purchase. Spend management systems are able to build sophisticated approval workflows, specifying who should be approvers and under what conditions. This is commonly used to establish second-in-line, or even third-in-line, approvers in the event that the main approver is unavailable. And, to identify categories or amounts of spend that require additional approvers.

Spend management systems’ radical contribution to non-payroll spend is to link approval processes to card spend. Wrapping the pre-approval process around spending using virtual cards means that the request and approvals are executed before a transaction occurs. Prior to spend management, card payments created a huge blind spot for finance and accounting teams. The pre-approval process for virtual cards solves this problem. It gives visibility to budget owners, who serve as approvers, so they can control their budget. And, because the transaction syncs directly to the GL, accounting has the information it needs.

While these workflows help to protect companies’ bottom lines, they also help to protect employees from inadvertently breaking company policy.

A strong request and approval workflow is a paramount capability of a fully integrated modern spend management system.
Qualities of strong approval workflows:
  • As simple or complex as required.
  • Easy to navigate.
  • Clear transparency for employees and managers.
  • Consistent across all use cases (cards, purchase order requests, or employee reimbursements).
  • ‍Easily managed from within a single platform.
  • Reflective of company policies.
  • Flexible enough to change workflow parameters as circumstances change.
  • Able to create and archive an audit trail of approvals tied to each transaction.
  • Integrated with communication tools (e.g., Slack or email) to minimize time between request and approval, as well as time between follow-up communications.
  • Able to avoid bottlenecks in productivity (e.g., setting up a replacement approver should the primary approver be unavailable).
  • Able to construct an audit trail of the approval process, both for posterity and to identify where in the workflow an item needs to be addressed.
Benefits of strong approval workflows:
  • Time savings.
  • Increased visibility and control for budget owners.
  • Compliance protections for employees.
  • A better, healthier spend culture.
  • Audit trails of approval.
  • Flexible, adjustable budgeting.
Robin Washington, Board Member,  Alphabet,  Honeywell, and  Salesforce
Robin Washington
Board Member, Alphabet, Honeywell, and Salesforce
Read more
The complexity of running organizations and the speed of decision-making have increased tremendously from a decade ago.

2. Accounting automation.

The automation of accounting work was one of the earliest applications of modern technology. Yet manual work persists for accounting professionals, arguably becoming even more burdensome in recent decades, with rising expectations for up-to-the-minute data for decision-making. An astonishing 38% of survey respondents report that a quarter or more of their time is spent on manual work! Much of the manual work that accountants are saddled with has evolved into reconciling information across multiple systems and coding it to the GL.

The holistic approach to spend management solutions is a consolidated one, designed to eliminate the need for cross-system reconciliations. The benefits of automation are clear: it reduces human error, allows companies to act more quickly, and frees up time for higher-value work for finance and accounting teams. And automation will continue to evolve, especially with the assistance of machine learning and deeper integrations.

Three pillars of spend management support its three functional areas of accounts payable, corporate cards, and expense management:
  • Accounting processes: Basic AP features, such as bill amortization, payment scheduling, and payment execution, are fully automated as part of the core functionality of modern spend management systems, with others added in.
  • Approval workflows and receipt compliance: These are automations of operational workflows and are essential to ensuring adherence to policy and forming a clear, reliable audit trail.
  • Auto-categorization for GLs: Using machine learning to improve its performance, auto-categorization frees up substantial time for accounting teams.
  • OCR: This is used to extract data from physical documents so that manual inputs are not needed.
  • Compliance tracking: Additional oversight to ensure adherence to company policy.
  • Invoice management: Automatic routing of emails to an invoice inbox saves time and administrative work. An invoice inbox provides context for purchases, and can further automate the content of the inbox by using technology to scan emails to add in snippets of information found there.  
  • PO creation: When a customer requests a purchase order, the system should be able to generate one and match it against the invoice(s).
  • Alerts and reminders: Fraud, missing W-9s, approval request, duplicate subscriptions already being paid for by a company, and more.
Time Spent on Manual Tasks
Our survey asked respondents to indicate the amount of time their teams spent on manual tasks. (Source: The Airbase Annual Benchmark Survey of Finance Professionals)

3. Real-time expense reporting.

The opportunity for real-time data is a significant benefit of this automation, dramatically increasing visibility of spend and creating actionable insights in real time.

One of the greatest practices enabled by this is a continuous, or rolling, close: a company’s books updated and balanced as transactions occur. At face value, this turns an activity that can take several days, or weeks, into a manageable daily task. But this also has far-reaching implications across an organization, helping leadership move away from thinking in terms of month-end, or year-end, and supporting a more agile approach to planning and forecasting.
Days it takes finance/accounting teams for month-end close
61% spend more than a week on their month-end close, with 18% spending most of the month. (Source: The Airbase Annual Benchmark Survey of Finance Professionals)
Robin Washington, Board Member,  Alphabet,  Honeywell, and  Salesforce
Kate Bueker
CFO, HubSpot
The role of the CFO and of finance has clearly shifted. Now data is much more widely available. Your job isn’t actually calculating a number anymore. The job is about defining the right metrics for success, and making sure that the organization can manage to them.
Ultimately, real-time expense reporting empowers budget owners to better stay on top of KPIs and budgets, finance teams to better understand and construct key metrics, and leadership to make better strategic decisions about the future instead of reacting to the past. This is all possible because, on a spend management platform, data is captured from events as they happen throughout the entire workflow. More importantly, they capture this for all aspects of non-payroll spend so that the data provides a complete picture.

The consolidation of all spend data means that the GL can be synced regularly and that stakeholders are, again, not restricted by the end of the month for insights.

The records that are created and captured at each step in the process form an important audit trail. Clamoring for documentation to satisfy an audit can take days, or even weeks. When compiled as part of the process, there is no need to recreate events; instead, a simple report can be called.
Summary of spend

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Jason Lopez, Controller at Lattice
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Jason Lopez, Controller at Lattice
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