Spend management for businesses
No matter what the size of your business, success requires keeping an eye on the income and expenses necessary to operate. That's where spend management comes in.
If you're not familiar with the term, spend management, also known as spend control, is a process of collecting, categorizing and evaluating spending data to reduce procurement costs, improve efficiency, monitor and control workflows, and regulate compliance. It extends to vendor management to ensure you're maximizing relationships and pricing through those channels, as well.
The goal of all this tracking, managing and analyzing company-wide expenses is to understand where money is being spent to avoid unnecessary spending, maintain bookkeeping, make payments and manage supplier relationships throughout a transaction (or recurring transactions).
Let's take a closer look at the spend management function, how it can be improved and why it's important to your business.
Ideally, a spend management program should provide insight about finances in all areas of your business.
Expenses should be separated into different categories that can be grouped together or viewed individually. This allows you to easily identify, evaluate and manage specific areas of your spending. Without this level of expense awareness, unanticipated costs could create problems especially as your business grows.
Effective spend management can save your business money.
By tracking and adjusting your expenses, the prices you pay for goods and services, and the cash flow related to your accounts payable, you'll be able to better control your overall spending and maximize every dollar, which can positively impact your profitability. These savings can then be more effectively allocated to other aspects of your business.
Spend management supports better financial decision-making.
An important aspect of spend management is creating a strategic system for financial control. A comprehensive spend management plan includes getting organized with orderly payment records, expense receipts, vendor contracts, and other initiatives that allow you to have accurate and timely reports on your expense activities. In doing so, you're able to see the true picture of your expenses, maximize tax deductions, and make better pricing and other business decisions, while also keeping suppliers and clients happy.
Implementing a solid spend management strategy also supports a proactive business model.
When you have full control and insight into your spending, procurement and cost structure, you'll always be ready to answer the demands of running a business. For example, your expense and vendor information will be at your fingertips whether you're preparing for tax season or need the information for audits or any other purpose, including your key accounting records.
A secure, cloud-based spend management platform allows your business to scale.
In addition to the strategic spend management controls, insights and analysis you can gain from working with an accounting firm to implement a spend management strategy, using a cloud-based platform to manage your expenses and other related data provides the structure for scaling your business. It will also allow your invoicing, payment processing, and transaction tracking to be scheduled and automated. This will save you time and energy that can be better used in other aspects of your business. The data from this system can also flow directly into your accounting system, which allows your accountant to access the data and amalgamate it with your other financial records.
Spend management can play a key role to help maintain supplier relations.
As your company grows, it's likely your product lines and service offerings will expand—and your supplier relationships may become more complicated. It's important to view spend data in real time to ensure you're minimizing expenses and properly managing your payment process for your vendors. Missed payments and delayed fulfillments can be damaging to both suppliers and customers and could result in dysfunctional vendor-customer relationships. A spend management system can help you avoid these negative impacts.
The primary goal of spend management is to provide insights and control, allowing you to plan for the future of your business. Spend visibility can help position your business to operate efficiently and have the flexibility to adapt for future success. Ultimately, the data related to the spend management function can help you forecast your business finances, which has a significant, positive impact on your business plan.
Our firm can help you put an effective spend management strategy and system in place, plus recommend tools to help you manage spending in your organization.Back to issue