Effective spend management begins with visibility, which most finance leaders admit they find wanting. Some 75 percent of finance leaders say that their businesses often exceed their expense, travel and invoice budgets.
You might say this is the inevitable result of a more decentralised spending model taking hold; 67% of IT leaders have admitted that at least half of their spend is controlled by individual business units.
This empowers end users, true, but it also removes necessary oversight that can moderate overspending, duplication, and compliance risks.
Pitfalls of purchasing practices
Modern purchasing practices have evolved, out of necessity, as individual business units have less and less time to wait out the legacy process (from requisition to purchase order creation).
Cohesive expense data, as a result, has become more difficult to collect. Whatever data is generated from today’s purchasing decisions tends to be siloed, filled with errors, or lost as a result of antiquated, manual processes—making it extremely difficult to create an accurate picture of the organisation’s spending.
As spending habits have changed, your internal expense infrastructure should also evolve with the times. Judicious changes in internal procedures—in concert with today’s machine learning and artificial intelligence tools—should allow you to more efficiently collect and analyse employee spend data across the organisation, helping you deliver savings without cutting your budget to the bone.
The following cost-saving measures can be implemented with the right internal infrastructure, allowing you to get a more complete picture of your company’s business expense data and take action based on these insights.
1) Gain visibility over processes
Lack of visibility is a persistent hindrance to controlling employee spend data: 81% of finance leaders admit to blind spots over company’s travel, expense, and invoice spend, while 65% of procurement leaders lack visibility beyond Tier 1 suppliers.
Considering that expense visibility is crucial to correct decision-making, this glaring blind spot is troubling. Legacy systems may contribute to this problem, with data siloes and long lead times contributing to a lack of real-time visibility over employee spend.
Addressing this blind spot calls for a blend of policy and platform. Corporate cards and purchasing cards (P-Cards) can be used in concert with an automated expense reporting system to give accounting staff advanced visibility into spend that hasn’t had time to appear in an expense report, facilitating management of accruals and cash flow in the process.
When coupled with a spend management platform such as SAP Concur, corporate card purchases can be matched to invoices, allowing faster and more accurate reconciliation, and drastically reducing the risk of out-of-policy spend.
2) Minimise non-compliance with expense policies
As companies grow, creating coherent expense policies can be a challenge; implementing them can feel almost impossible. 68% of finance leaders aren’t sure if employees comply with company T&E policies.
But can you blame them? The pain points of an interminable expense report process can hinder compliance; a GBTA study finds that processing a single expense report costs $58 and 20 minutes to complete; errors and missing information add $52 and 18 minutes to that cost. Apply that up to 51,000 expense reports compiled annually, and that’s a big drain on both labor and capital!
Using an expense management tool that clearly marks out-of-policy options to the user, and flags issues to the approver, can help flag noncompliance before it happens. Automation also takes much of the busywork out of filing expense reports, increasing compliance.
For instance, integration of Google Maps with Concur Travel & Expense allows users to submit accurate accounting of their miles driven, reining in mileage costs and reducing any opportunity for fraud or misrepresentation in the process. Once a risky expense category due to the lack of receipts, mileage can now be accurately tracked and accounted for.
3) Increase efficiency
It’s difficult enough to keep track of spend as an organisation; manual, paper-based and outdated processes can raise the cost significantly.
Legacy processes for tracking expenses opens companies up to the risk of human error, simple oversight, and outright fraud. Up to 54% of eligible value added tax (VAT) is often unclaimed by businesses. And expense reimbursement fraud accounts for 21 percent of fraud in small businesses.
These problems are not easily solved in a manual reporting regimen: staff can fritter away a significant amount of time dealing with manual processes, even as financial decision makers hit a wall trying to analyse and interpret the paper-based data.
Automated platforms like SAP Concur can help decrease time to process expenses, improve data visibility of spend and budgets, and efficiencies in staff time. Automation goes a long way to prevent fraud in particular, by restricting the ability to approve invoices and initiate payments to authorised individuals.
4) Get buy-in from all levels of organisation
Given the challenges of business expense control, businesses may propose policies like siloing T&E spend across different teams, or implementing restrictive business spend controls. While these may go a little way towards restricting out-of-control spending, they may actually create new problems (such as added paperwork for management), impeding the company’s growth in the long run.
An automated business spend platform can do more than remove busywork: it increases process transparency, helping persuade decision-makers to loosen their tight hold on spending policies.
Granted, it’s still a tough sell: many business leaders and other stakeholders need to be convinced that fixing expense reporting will positively affect many other aspects of the business.
But leaders can respond to the hard numbers provided by platforms like SAP Concur, whose overall cost over time is tempered by long-term savings. Concur Invoice, for instance, delivers a 505% five year ROI, and typically pays for itself in five months.
Reap the long-term benefits of spend management
Generating accurate, real-time employee spend data can help businesses reduce expenses and make better strategic decisions. Using automated expense software not only streamlines processes, but also expands your insight horizon: using existing data to generate benchmarks, find patterns in spending, and unearth areas for process improvement.
It’s the right time to look into your expense management process, and leverage automated solutions that can help your business see spending clearly and manage it proactively. Learn more about how to increase visibility into employee spend here.
For more on our #BusinessSpendManagement series, click here.