By Bill Vergantino, President and CEO of ExpenseWatch
As organizations grow, management is often forced to contend with once effective business processes that have now begun to buckle under the strain resulting from their growth. Identifying and evolving such processes is critical in order to maintain a balance between organizational oversight and a dynamic and efficient workforce, without compromising the growth that everyone has worked so hard to realize. This is especially true when it comes to spending.
What we’ve seen is that the degree of growth that causes strain to one organization’s processes may be very different than where the challenges present themselves in another organization. In the end, and based on more than 10 years of experience helping companies transform their spending processes, we see three main motivating factors that drive organizations to change how they manage company spending; Automation, Visibility & Control.
We see organizations of all sizes that are still using manual, paper-based processes to deal with spending. They are buried in Excel-based expense reports and paper receipts, piles of paper purchase requisitions and POs, and tens, hundreds or thousands of payable invoices (bills) that need to be processed every month. As paper piles grow, so too does the stress and strain.
That is why automation is the leading motivating factor we see that drives companies to resolve over-burdened spending processes, often followed closely by the need for visibility and control. Let’s drill into each of these to show you what we mean.
Without an automated system, it is extremely difficult to establish and enforce your company’s spend policies and it is almost impossible to compile, summarize or aggregate spending information such as who spent, what amount, on what items, with what vendor and when. It is equally challenging to get to the bottom of who approved the spending before it occurred.
Anytime you ask people to manually create spending documents (expense reports, purchase requisitions, purchase orders, payable invoices-bills), there is the potential for errors. An expense report, for example, might contain inaccurate categorizations of expenses, or incorrectly entered credit card charges. Purchase requisitions are plagued by incorrect naming practices for vendors, products and services, limiting an organization’s visibility into spending patterns and decreasing negotiation leverage with vendors. Spending data is often inconsistently captured because of misspellings, duplications, or the over use of “other” as a spend classification. Errors can also occur in the manual reconciliation or matching of purchase orders to invoices.
Manual processes are also time-consuming and costly. Manually filling out complicated expense reports takes traveling employees’ focus off core job tasks. Slow expense reporting processes also mean longer reimbursement cycles. At the same time, accounts payable managers lose valuable time either fielding inquiries on expense reimbursements from employees or inquiring about the reasons for, or explanations of, spending from managers.
Employee productivity is also taxed when expense reports and purchase requisitions are walked around the office to obtain the required signatures. The “sneaker net” becomes even more of a burden when documents need to be shared among people in multiple locations. Shipping documents is unnecessarily costly, especially considering how often they are shipped at the last minute at premium rates.
When you can automate processes, you enable your employees to do more with less. Your organization can process more transactions with fewer people, while substantially reducing processing costs. Many of our customers tell us they have been able to manage significant growth in spend transactions, such as processing more expense reports and payable invoices, without having to add additional staff.
Automating company spending processes also reduces overall costs. Many analysts who cover the travel expense management space report cost savings of $7 to as much as $20 to process each expense report using an automated system, while reducing reimbursement times from weeks to days. Cost savings for processing POs and invoices can be equally enticing.
Another key factor that motivates companies to change spending processes is the need to have visibility before spending occurs and as it navigates stages of the approval process, as well as in summary form after spending has been approved and paid.
Gathering information from a manual system for the purposes of analyzing spend is a tedious process that leaves little time for analysis and takes much longer to identify any problematic spending areas. And, many times problems are identified after it is too late to take any action at all. In my career, I’ve yet to see an organization succeed at manually summarizing spending across excel based expense reports, purchase orders, or invoices. If they do, given the business doesn’t stop while they pull it together, it is out of date the moment they’ve completed their manual analysis.
An automated system to manage spending enables you to quickly interact with spending data through meaningful reports to see who is spending what money, with whom and when, while at the same time analyzing employees’ performance of staying within the role-based spend policies and expectations put in place.
Another key benefit to an automated spend management system is the ability to make educated and informed approval decisions throughout the day. Organizations with a budget may also choose to incorporate company budget data into an automated spend management system, giving approving managers the tools required to actually oversee the money they manage. As spend requests come through the system, managers can see and analyze in real time how approving a requisition, invoice or expense report will impact their departments and the business. Bottom line: With this kind of visibility, you can stop overspending before it can occur and legitimately expect management to share the responsibility of controlling spending.
The third factor that drives organizations to find a better way to manage spending is the need for control. As I said in our last article, organizations often look to modify their processes to enable a more efficient way of maintaining control, while not slowing the business down. Automating company spending processes is often the answer to make that happen.
No matter what size your company is, there are regulatory compliance guidelines that have to be followed. An automated system provides electronically organized records formulating an airtight audit trail which can significantly reduce auditing costs.
What’s more, you can configure company specific spending policies to take effect as your employees fill in expense reports, purchase requisitions or payable invoices. Because financial policies can be enforced at the point of spend, the chance of fraud is greatly reduced or frustration by employees who didn’t know there was a spend policy. Automation also ensures that employees are able to make informed purchasing decisions, by ensuring they are receiving the best prices and purchasing from a list of approved vendors to make the most of existing relationships.
Although our customers automate their spending processes initially driven by the need for efficiency, visibility or control, they quickly begin to see the benefits from the other factors coming into play as well. What’s more, they create a business culture that promotes spending control by empowering employees throughout their organizations to take responsibility for how company money is spent.
In fact, in our next article, we’ll talk more specifically about how individuals in your organization struggle trying to perform their role in the spending process within the confines of strained processes and what motivates each of these roles to push for better ways to manage company spending.
If you are experiencing any of the spending challenges described here, rest assured, you are not alone. Fortunately, as we’ve seen over and over, these challenges are often easily overcome by implementing an automated spend management system to resolve one or more of your most problematic spending areas. Our customers range from those with less than 50 employees to those with over 10,000. Growth is relative.
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HOW SMBS CAN MANAGE COMPANY SPENDING
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