Five steps to strategic spend management

Most organisations know they need to spend money to survive so they sometimes take a fatalistic approach to expense and invoice management. However, these organisations could potentially realise significant cost savings that contribute to the bottom line by taking a more strategic approach to spend management, according to Concur.

Matt Goss, managing director, ANZ, Concur, said, “Most companies have at least some spending guidelines in place to keep costs down. But just sticking to the guidelines isn’t enough. Being more strategic about spending, and identifying areas to invest more wisely as well as cut costs, will help businesses meet current demands and future growth more successfully.”
Concur has identified the five essential steps organisations must take to go from passive, tactical spend management to proactive, strategic spend management:

1. Understand spend management processes

Even companies with strong cash flow need clearly defined policies for travel, entertainment, and procurement. Cash flow is essential to fuel growth; unnecessary spending cuts into that cash flow. Anyone in the company who travels or makes purchases should be bound by a well-defined and clearly-communicated policy that is closely-governed. When companies don’t have expense management strategies, they can find employees dramatically overspending on items and costing the company by using non-preferred suppliers. So it’s essential to understand what’s happening with regard to spend management so the business can, if necessary, tighten existing policies or add new ones.

2. Build in flexibility

Once there are strong spend management processes and policies in place, the business will have a framework for managing expenses and invoices but sometimes that doesn’t accommodate the situation. It’s important to build in flexibility to let employees meet business needs on the go. For example, the company may have a preferred airline or hotel but sometimes it makes more sense to deviate from those suppliers. There should be a reason for bending the policy and a recognition that, if employees bend it too often without justification, they may lose negotiated discounts or other benefits.

3. Hold business leaders accountable

Spend management, handled properly, should be a source of growth for the company rather than just a cost centre. To achieve this, there must be an open line of communication between business leaders and the finance team. Systems that provide deep visibility into budgets and spending levels are essential. Sharing information is critical to understanding why costs may be rising or where savings could be achieved. The finance team must be able to have the hard conversations with business leaders when spending patterns are out of the norm or decisions aren’t in line with policy.

4. Communicate the spend policy regularly

It’s not enough to have a strong spend policy; it must be enforced. This means making sure employees are regularly reminded of the policy beyond their original on-boarding process. When employees have been in the role for some time, they can forget about certain policies. Reminding them helps ensure compliance. It’s also important to review the policies at least annually and then communicate any changes to employees immediately.

5. Align spend management strategy with business goals

Given the direct correlation between spend management and cash flow for growth, it’s clear that spend management policies must map to organisational goals such as growth and expansion. As the business’s objectives change, the spend management strategy should also change in lockstep. With better spend management, and better understanding of the role of spend management in managing cash flow and supporting growth, companies can better position themselves to achieve those goals.

Matt Goss said, “Any spend management policy needs to be backed up by the latest technology that automates processes and helps companies run more effectively. With automation to enforce policy compliance and streamline processing, staff can focus on value-adding activities rather than on administrative tasks. This helps keep the whole company on track towards achieving its goals.”