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The top five challenges caused by decentralised employee-initiated spend

Businesses used to be able to manage corporate spend relatively closely because most purchases were managed centrally through purchase orders and company cheques. In the digital economy, employees are spending money across more categories, and using more payment methods than ever before. This creates challenges for businesses to manage spend strategically, according to Concur.

Matt Goss, managing director, ANZ, SAP Concur, said, “Employees expect a consumer-like experience in their professional lives for booking travel and making purchases. This makes it harder for finance departments to get a handle on spending. Employee-initiated spend will continue to diversify and create challenges for organisations as they grow and as technology continues to evolve.”

Concur has identified five key challenges created by employee-initiated spend:

1. Spend is hard to manage

Because employee-initiated spend is decentralised, it’s difficult to predict and, therefore, hard to manage strategically. The 2017 Concur ANZ spend management index revealed that, while 77 per cent of respondents have a formal spend policy in place, only 59 per cent agree that their employees always comply. 21 per cent didn’t even know whether employees were complying or not. These numbers are unlikely to improve unless businesses can see exactly how employees are spending.

2. More payment methods create complexity

Company cheques and credit cards are no longer the only way to pay. Employees use corporate, ghost, virtual, and P-cards, as well as personal cards. When multiple payment methods are managed by multiple systems that aren’t connected and don’t share data, it’s hard to track.

3. Non-traditional booking channels add more options

Managed travel programs are complicated by new ways to book and alternative types of accommodation such as Airbnb. This gives consumers more freedom in how they travel and employees want the same for business travel. This means the number of spend categories will continue to grow, continuing to challenge organisations because of the complexities of tracking and managing this spend.

4. Employees reap rewards directly from suppliers

Vendors and suppliers now market directly to employees in recognition of employees’ new spending power, offering them incentives to purchase from them. This creates disconnected silos of information, contributing to ongoing challenges around accurately tracking spend and negotiating supplier discounts.

5. Finance departments can’t keep up

Finance departments that don’t automate and integrate their spend management processes and tools will find it impossible to keep up in this new era of decentralised, employee-initiated spend. All data needs to be captured for complete control over spend. Without this, finance teams will be in the dark about how much is being spend on what, and by whom. This information is critical to manage an organisation for growth.

Matt Goss said, “Managing company finances is about understanding how travel and expenses, and invoices, intersect with each other, and with the apps and payment methods employees are using to make purchases. Being able to understand, connect, and control these factors is the only way to effectively manage spending in the organisation. Automation is crucial. Businesses also need to digitally capture all spend whenever and wherever it happens. They can then strategically manage cashflow and spend throughout the organisation.”

The 2017 Concur ANZ spend management index results suggest that more organisations are considering automated expense management systems, which can largely mitigate the challenges created by decentralised spending. In 2016, the proportion of index respondents that had never even thought about automating expenses was 24 per cent. In 2017, that number dropped significantly to eight per cent. The number of organisations with an automated expense management solution has grown from 27 per cent in 2016 to 51 per cent in 2017.

Matt Goss said, “An automated, cloud-based expense management system improves visibility into spending and can dramatically reduce the ancillary costs of spending. It makes it easier to track expenses and identify unusual or out-of-policy spend. With employees continuing to lead company spend, an automated and integrated solution is the only way for businesses to keep on top of their finances.”