A letter from Airbase founder/CEO Thejo Kote on how the challenges faced by his accounting team, when he started his first company, prompted him to solve the problem of non-payroll spend. He was surprised to discover that accounting operations in small and midsize companies did not have good tools to support ambitious growth plans.
Spend management applies three core pillars to support the efficient operations of accounts payable, corporate card spending, and employee expense reimbursements: approval workflows, accounting automations, and real-time reporting. It’s a solution for accounting managers, controllers, VPs of finance, CFOs, managers who are responsible for budgets, and employees who need to spend money to be productive.
Most accounting solutions offered to small and midsize companies are incremental and partial. As such, accounting teams cobble several systems together and then work hard to sync their data to the GL. Design thinking is an approach to problem solving that rejects incrementalism — instead, it seeks to rethink the problem to find truly holistic solutions. Spend management is exactly that. It consolidates spending operations and accounting into a single unified system that covers the full lifecycle of every dollar a company spends.
The rise in distributed spending by employees on travel, subscriptions, and other needs has become more pronounced with an increasingly distributed workforce. Limited visibility into this type of spending makes it difficult for companies to control and account for it. Payment tools like corporate and individual employee cards are expected to continue to create inefficiencies for companies.
Spend management applies its magic to three core areas of how spending takes place in a company: the normal accounts payable process, the use of corporate cards (both physical and virtual), and employee expense reimbursements.
Spend management supports its core functions with three distinct pillars. The first of these is approval workflows that can be customized to reflect a company’s policies. The second is accounting automation that captures data and syncs it directly to the GL, whether payment is made via cards, check, ACH, or even vendor credits. The third is real-time reporting of spend, regardless if done through cards, bill payments, or reimbursed payments.
Expanding a system’s utility via integrations with other software is essential to a good spend management system. Whether it’s for communication tools like Slack and email, payment tools like digital wallets, or human resource software for timely provisioning and deprovisioning of users, integrations help make the spend management experience better.
The return on investment of a spend management platform is calculated by subtracting the cost of a spend management system from the savings and earnings that it brings. See our model to calculate your own ROI.
There are software tools that address various aspects of spend management. These include corporate card programs, general ledgers, purchase order solutions, procure-to-pay systems, and travel management systems. They each address a narrow aspect of company spending.
Spend management will continue to expand its capabilities to include additional budgeting and FP&A functionality, as well as increasing its integrations with HRIS software. It will further expand to support cash management and eventually be combined with accounts receivable systems.
Our ROI model can be used to estimate your own return on investment, while our list of vendor questions can be used in your evaluation of different solutions, whether that is an informal questioning or a more formal RFP.
