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The Definitive Guide to Spend Management

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07

Evaluating the ROI on business spend management.

A good business spend management platform is a sophisticated piece of software that is relied upon to make secure, accurate, timely payments to vendors, and to efficiently, and faithfully, update the GL. As such, the fees for this type of tool can be assessed based on the considerable value that it creates for a company. Fees will vary by provider, and the level of functionality purchased. Some providers have a tiered pricing system based on features, while others charge a per-seat fee. Some offer their software for free but return little or no cashback on card purchases. Beyond the utility value, it’s possible to calculate the return on the investment of any platform fees, and to do so it’s helpful to break out the various places where money can be saved, and where it can be earned, by switching to a spend management system.

One of the largest contributors to the ROI of a spend management system is the costs saved on wasted spending; money that, with true visibility and control, the company would not have incurred. This includes:
  • Purchases that would not have been approved if such approval was required before a charge was made.
  • Zombie spend, which is when recurring charges continue even when a service or product is no longer needed, like a subscription paid for an employee who has left the company, or for software that is no longer necessary.
  • Duplicate spending.
  • Missed price breaks.
  • Elimination of fraud and the time that it takes to address it.
Time savings from automating workflows can be translated to a monetary value. Spend management saves time for:
  • Employees and leadership, who no longer have to submit expense reports.
  • Accounting managers, who no longer have to chase down those reports.
  • Budget owners, who have an easier time tracking expenses against their budgets.
  • Accounting teams, who save time on, or no longer need to, complete repetitive tasks:
    • Coding transactions.
    • Correcting errors in categorizations.
    • Reconciling across platforms.
    • Reconciling bank and credit card statements.
    • Having to pull interim reports of spending for department heads or other leadership.
Replace several software tools with one.
Spend management adopters commonly save by removing software that is supplanted by a spend management platform, like Expensify or Bill.com.
Estimated savings with full visibility and control over spending
745 finance professionals were asked to estimate how much could be saved on wasted spend if they had full control over it before it occurred. Almost one in five indicated that their companies could save 10% or more. (Source: The Airbase Annual Benchmark Survey of Finance Professionals)
Mike Dinsdale, Former CFO,  Gusto, DoorDash,  and DocuSign
Mike Dinsdale
Former CFO, Gusto, DoorDash, and DocuSign
The finance role has become much more data driven. The expectation now is that you need to be strategic in driving your business.

Beyond saving... making money.

In addition to saving money, time, and wasted spend, a spend management platform can generate additional revenue for a company. When payment types are consolidated onto a single platform, it’s easy to substitute one payment type for another. By switching from an expensive one, like checks or ACH, to virtual cards, a company will earn cashback. This type of shift means that the accounting team can save on fees charged for other payment types and generate revenue — we refer to this as monetizing your AP.

Considering intangibles in ROI.

We include our ROI model at the end of this section for more details on the savings, and the income that can be earned.

There are also intangible benefits that are important to consider. Chief among these is the development of a spend culture where all employees have greater accountability to the budget.

Other intangibles referenced here include making finance teams more valuable to their companies by freeing up time from repetitive manual labor for higher-value analytical and strategic work. Taken together, the benefits of an efficient finance infrastructure offered by a spend management platform typically far exceed the subscription costs paid.

Calculating the ROI on a spend management platform.

Below is an example worksheet to calculate the ROI on a spend management platform. The example shows a 100-person company with $3 million of annual non-payroll spend. If you are interested in access to the model to run your own numbers, please contact Airbase.
The summary table below compares a hypothetical company’s current estimated spend management costs to what they would be if using Airbase. In the case shown, the ROI is $80,534, which is the expected savings of switching from current practices using a spend management system.
*
Fees vary a “freemium” version would increase ROI significantly, The conservative estimate is to help show that even for a more expensive system, the ROI is still positive.
Based on our built-in assumptions, we estimate the ROI for a variety of company sizes and amounts of spend in the table below.

Guides and ebooks

The Definitive Guide to Spend Management

Guides and ebooks

The Definitive Guide to Spend Management

07

Evaluating the ROI on business spend management.

A good business spend management platform is a sophisticated piece of software that is relied upon to make secure, accurate, timely payments to vendors, and to efficiently, and faithfully, update the GL. As such, the fees for this type of tool can be assessed based on the considerable value that it creates for a company. Fees will vary by provider, and the level of functionality purchased. Some providers have a tiered pricing system based on features, while others charge a per-seat fee. Some offer their software for free but return little or no cashback on card purchases. Beyond the utility value, it’s possible to calculate the return on the investment of any platform fees, and to do so it’s helpful to break out the various places where money can be saved, and where it can be earned, by switching to a spend management system.

One of the largest contributors to the ROI of a spend management system is the costs saved on wasted spending; money that, with true visibility and control, the company would not have incurred. This includes:
  • Purchases that would not have been approved if such approval was required before a charge was made.
  • Zombie spend, which is when recurring charges continue even when a service or product is no longer needed, like a subscription paid for an employee who has left the company, or for software that is no longer necessary.
  • Duplicate spending.
  • Missed price breaks.
  • Elimination of fraud and the time that it takes to address it.
Time savings from automating workflows can be translated to a monetary value. Spend management saves time for:
  • Employees and leadership, who no longer have to submit expense reports.
  • Accounting managers, who no longer have to chase down those reports.
  • Budget owners, who have an easier time tracking expenses against their budgets.
  • Accounting teams, who save time on, or no longer need to, complete repetitive tasks:
    • Coding transactions.
    • Correcting errors in categorizations.
    • Reconciling across platforms.
    • Reconciling bank and credit card statements.
    • Having to pull interim reports of spending for department heads or other leadership.
Replace several software tools with one.
Spend management adopters commonly save by removing software that is supplanted by a spend management platform, like Expensify or Bill.com.
Estimated savings with full visibility and control over spending
745 finance professionals were asked to estimate how much could be saved on wasted spend if they had full control over it before it occurred. Almost one in five indicated that their companies could save 10% or more. (Source: The Airbase Annual Benchmark Survey of Finance Professionals)
Mike Dinsdale, Former CFO,  Gusto, DoorDash,  and DocuSign
Mike Dinsdale
Former CFO, Gusto, DoorDash, and DocuSign
The finance role has become much more data driven. The expectation now is that you need to be strategic in driving your business.

Beyond saving... making money.

In addition to saving money, time, and wasted spend, a spend management platform can generate additional revenue for a company. When payment types are consolidated onto a single platform, it’s easy to substitute one payment type for another. By switching from an expensive one, like checks or ACH, to virtual cards, a company will earn cashback. This type of shift means that the accounting team can save on fees charged for other payment types and generate revenue — we refer to this as monetizing your AP.

Considering intangibles in ROI.

We include our ROI model at the end of this section for more details on the savings, and the income that can be earned.

There are also intangible benefits that are important to consider. Chief among these is the development of a spend culture where all employees have greater accountability to the budget.

Other intangibles referenced here include making finance teams more valuable to their companies by freeing up time from repetitive manual labor for higher-value analytical and strategic work. Taken together, the benefits of an efficient finance infrastructure offered by a spend management platform typically far exceed the subscription costs paid.

Calculating the ROI on a spend management platform.

Below is an example worksheet to calculate the ROI on a spend management platform. The example shows a 100-person company with $3 million of annual non-payroll spend. If you are interested in access to the model to run your own numbers, please contact Airbase.
The summary table below compares a hypothetical company’s current estimated spend management costs to what they would be if using Airbase. In the case shown, the ROI is $80,534, which is the expected savings of switching from current practices using a spend management system.
*
Fees vary a “freemium” version would increase ROI significantly, The conservative estimate is to help show that even for a more expensive system, the ROI is still positive.
Based on our built-in assumptions, we estimate the ROI for a variety of company sizes and amounts of spend in the table below.

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With the new tools coming out now, things can be automated more efficiently. And this frees up time for more analysis, more of the fun stuff, moving forward.
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