Traditional vs Modern Spend Management - Which is better?

Melanie Tan |

Switching from traditional spend management

Simplifying spend across the company is challenging, as is digitalising the organisation. The solution to these overlapping challenges is to take advantage of digitalisation momentum and approach spend management as an aspect of digital transformation. 

Traditional businesses may manually reconcile employee expenses, employ an in-house expense tracking system that isn’t fully integrated with their IT stack, or use legacy programmes that are inaccessible from mobile devices. Purchase orders and invoices might be tracked with pen and paper; employees such as couriers may not be able to upload expense claims on the go. Lack of insight into invoices can also lead to missed payments, late payment charges, incomplete orders, and mismanaged stock. Ultimately, companies with poor spend management are less efficient than their digitalised counterparts. 

For most businesses, the accounting department is responsible for general bookkeeping and finances. However, traditional accounting has revolved around internal reconciliation of costs and compliance with domestic and international rules and regulations. After all, small and medium businesses wish to avoid the potential fees and reputational harm that non-compliance might bring.

Extracting learnings and actionable next steps from the data is an increasingly critical business activity that helps the company emerge ahead of competitors. Cloud-based spend management software is the best way to unify existing processes and gain the level of insight needed into spending. The learning is no longer pooled at certain points of the organisation with the most expertise, but shared across all relevant teams and departments.

Spend management software

Due to the increasing complexity of spend management—and business management in general—third-party software solutions are growing in popularity. These products are designed to automate the most time-consuming tasks, such as manual expense recording or invoicing. 

Most businesses now do this through a cloud-based platform. Each department can follow standardised operating procedures (SOP) when uploading spend-related documents onto the platform; relevant people can then get a bird’s-eye-view of spending across the organisation. 

Online platforms allow businesses to embrace an agile, flexible approach that is in line with modern demands. When someone spends money, relevant people in the organisation will immediately be notified. Everything is trackable and available online for the right people-in-charge to access.

Why is spend management useful?

As a business scales, seemingly small expenses can suddenly have huge significance. Take in point the American Airline olive. In the 1980s, head Robert Crandall delivered the instruction to remove a single olive from every salad served to passengers. Though customers didn’t notice, the airline did—in the form of tens of thousands of dollars saved per year. 

This is a short, yet impactful example of the power of spend management. Another example of a potential change that businesses could make with responsible spend management includes switching to another, more affordable vendor or rewriting contracts and payment terms. 

The businesses that partnered with SAP® Concur® also saved on costs within months after implementing their own spend management processes. In some cases, they were able to cut costs by up to 40%.

The business benefits of spend management

1) Spend management improves understanding of the business

Most spend data in an organisation is scattered and fragmented based on payment method and type. After all, not all expenses are one-time purchases. Some are paid over an extended period of time with a corporate card or cash instalments. Financial documents such as budgets, forecasts, and invoices might be stored in many different places or only accessible by a few people.

Digital spend management consolidates all of these different sources of information into one platform, and allows you to save time on collecting and cleaning the data. Reports and records can be adjusted in real-time, and teams reduce the possibility of a document getting stashed away where no one can find it. Organisations that can accurately identify leaks, waste, and inefficiencies are more likely to emerge post-pandemic in a sound position.

2) Spend management helps businesses reduce bloat 

At some companies, multiple contracts might exist with a single agency. The company might even be engaging multiple agencies to do similar work, with little awareness of these redundancies. Once expenditures and their sources have been correctly identified, businesses can determine which processes or departments overlap and can be consolidated. This drives cleaner execution and reduces the number of handoffs and onboardings.

Prior to switching to SAP® Concur®, Changi Airport Group (CAG) employees submitted expense-claim forms and receipts to support documentation. This paperwork was stored by the finance department in an expenses archive—difficult to store and even more difficult to search. 

Using a combination of SAP® Concur® solutions, including Concur® Expense and Intelligence, Changi Airport Group was able to cut down on storage costs, reduce time spent organising and searching paper receipts, and completely eliminate the need for a paper-based archive.

3) Spend management supports business agility

Spend management is intricate, and senior management is unlikely to have the specific domain expertise needed to help each department make cost-effective spend decisions. By equipping teams with a single platform and the right tools to achieve common goals—reduced spend, improved results—businesses can become nimble, yet still maintain centralised control.

Clear spend management also helps businesses more clearly delineate the business’ relationship with different agencies. After spend management is implemented, managers can assess the progress that has been made in an engagement, eliminate infighting, and drive accountability between all parties. Without it, organisations may lack clarity into who the decision-makers are and fail to capture maximal results.
Spend management unifies business processes from end-to-end
Many steps and people are involved in the operational and procurement processes. Spend management unifies these disparate steps and presents the information in one centralised place.

  • Businesses understand their bargaining position and use economies of scale to negotiate the best pricing
  • Contracts are written in real-time, stored transparently, and easily referred to when needed
  • Pricing points are assessed beforehand to guide the purchasing process
  • Vendor lifecycles and overall performance can be tracked
  • Invoice capture, workflow, and approval are automated to ensure adherence
  • Payment terms are negotiated to free up cash flow and capture early payment savings

4) Spend management saves time

Mitsubishi Estate Asia (MEA) wanted to automate expense-claim management for employees, who were spread across different countries and claiming expenses in different currencies. The company needed a solution that was intuitive and easy for employees to adopt. They also hoped to gain valuable insights that could save even more time on expense claims.

MEA switched to SAP® Concur® at the same time it established new subsidiaries in Indonesia and Vietnam. The company was able to save approximately 50% of the time once spent on expense management; business travellers who make claims through their phone can enjoy automatic currency conversion and receipt organisation.

5) Spend management improves data accuracy and employee satisfaction

Cisco Systems is a worldwide leader in IT, networking, and cybersecurity solutions. Cisco adopted Concur® Travel and Expense solutions to manage spend across employees in over 88 countries. Before implementation, the firm suffered from poor user experience and lacklustre data quality. After going live, Cisco reported an increase in employee satisfaction from 48% to 77%.

6) Spend management improves cash flow

When spending is clearly understood, businesses can identify where cash is trapped and develop strategies that help the company become more liquid. Though business resources will always be limited, companies can more efficiently manage these resources—from cash to HR—to reduce waste and prolong runways.

Spend management can help companies understand how much they are paying for suppliers, partners, and vendors compared to their competitors. Businesses should review their agency partners regularly to ensure the best fit and foster the most conducive collaborations; the ability to view these relationships from a single dashboard encourages a more effective, insightful due diligence process—freeing up cash that can be invested into other initiatives.

Read on to find out more about the Modern Spend Management Process