From budget holders to procurement leaders there are many employees within businesses who manage spend activity, and with all these employees managing and spending their own budgets, finance have a tough job ensuring they stay in control of approval and invoicing processes to guarantee that financial stability remains intact.
At the heart of any strategy to control spend comes spend visibility, and this is often achieved by implementing sophisticated processes that help finance professionals source approvals and requisitions quickly and easily – in a lot of cases a lack of spend control is due to a financial process that has been overlooked.
Taking back control of spending can make a significant difference for an organisation, not just for finance, but for budget holders, procurement, and executives as everyone knows what they are allocated to spend and where the budgets are going.
The thought of adopting a spend control strategy may sound daunting, but the good news is it doesn’t mean a huge overhaul for your finance team or a large financial investment. We are going to look at 4 quick ways you can control company spending.
Director of policy at IBM, Javier Urioste, estimates that on average companies are only capturing 40% of their total company spend under purchasing, and this is due to so much indirect spending occurring. Much of a companies spend is not captured by finance such as employee expenses, so these costs are often unexpected until an unambiguous invoice lands in the finance department. In many instances, the indirect spend is for small amounts but these small amounts add up to larger sums over time and often finance are left needing to chase for evidence of these spends taking place so as not to let indirect spend fall through the cracks.
Implementing clear processes to bridge the gap between budget holders and finance will help overcome some of the issues that arise due to small, indirect spends and provide finance departments with the information they need.
Another plus-side to using one system is that you’re able to aggregate purchase data in one place. This historical supplier data is then available on demand for budget holders and procurement to help them make informed decisions on future purchases.
It may be harsh to say but manual paper processes have no place in modern businesses, yet 57% of businesses are still processing invoices manually. Why is there no place for manual processes I hear you ask? A reliance on manual processes causes inefficiency and errors within your invoice processes, plus combined with existing issues like tracking indirect spend mean finance are having to spend more time and money chasing information to process invoices.
Introducing an automated system means everything is captured which is great for finance, but even procurement professionals and budget holders can utilise the real-time data from an automated system. It gives budget holders real-time data for a full view of where their budget is going and how it can be better spent, and procurement can benefit from historical data and supplier information to make more informed decisions for their purchasing activity in the future.
It’s estimated that purchasing fraud impacts 1 in 4 SMEs every year and invoice fraud alone is responsible for 55% of money lost to organisations. These figures make for sobering reading and highlights how important fraud detection activities should be within your business. A common way of purchase fraud occurring is through maverick spend which, as we have discussed, can be difficult to track and is often only visible to finance once the purchase has been made. The finance function within any business is responsible for keeping the business safe and keeping the cash flow under control, which is why it’s vital that clear procedures are put in place. One way to take control is with Online Buying software which allows finance professionals to approve spend before it actually occurs and gives finance teams overall control of spend.
Making sure your organisation has an efficient strategy in place is one the first ways to manage spend, but when it comes to long term processes, adopting the right tools can help ensure everyone in the business has the data they need to make a decision that avoids overspending. Electronic, automated systems are ideal to save time and equipping all employees with real-time information and streamlining workflows to drive efficiency, but the biggest benefit is having all purchasing data (both new and historic) aggregated in one place to unite all departments in the business. Finance can be safe in the knowledge that budget holders and procurement have everything they need to make smarter spending decisions, therefore maintaining control on spend.
Managing company spend can be a challenge to say the least, especially in organisations where there is little joined up communication between teams, namely finance and procurement. To maintain in control of spend it is vital that all departments have visibility and unity, so purchasers know exactly what budget allowances they are allocated to spend, and finance know precisely where spend is occurring and when. By implementing strategies to keep on top of indirect spending and introducing automation, a large amount of time can be saved chasing approvals and requisitions. Only once there is visibility into company spending can any true level of control be obtained.
For more information about Online Buying and AP Automation software from Pegasus, or to discuss your challenges managing your company spend, please contact us today for a friendly chat.
Posted On: April 18, 2024
