Over the past 10 to 15 years, there’s been a shift in spend management — the administration of approvals, payments and all the accounting and reporting for all non-payroll spend.
Spending used to run through a procurement department, so procure-to-pay processes were the norm. Today, however, spending is more decentralized, with employees using corporate cards for spend, engaging directly with services or vendors, and then the accounts payable (AP) department is expected to pay.
Despite this shift, little has been done to rethink the full operational requirements supporting decentralized spending needs.
Chaos Impacts Performance
The move toward decentralized spending has created a lack of visibility and control from the accounting and finance department and for the managers who are supposed to be controlling budgets. It has happened in a haphazard way, with different sets of rules applying to different departments in the company.
“It’s a rather chaotic process, and the downstream impact on the accounting and finance team puts them in a position where they spend a lot of time doing manual reconciliations, and it takes them a long time to close books,” Lamond said.
This chaos can impact the performance of a company because it means that managers have very little visibility into the spending that is going on and don’t have the data they need to make good decisions, especially in real time.
Spend management, on the other hand, takes all those processes and automates them into one comprehensive system so that all non-payroll spend has happened in one place.
“All the pain points that I described are addressed with a full spend management system,” Lamond said.
Corporate cards, a bill payment system and a reimbursement system will each solve one part of a company’s spending requirements but can still leave a disjointed system that has to be reconciled and pulled together.
“What a comprehensive system does is it includes cards, bill payments and reimbursements all within one system,” Lamond said. “By doing that, you’ve now eliminated the need for a lot of manual work.”
She added that it also improves visibility and control by automating accounting workflows and approvals.
Automation’s Side Effect
Another benefit of automating processes is that it enables accounting staff and chief financial officers (CFOs) to spend much more time on higher-value work. Rather than chasing down receipts or sending out payment notices, they can focus on negotiating contracts, managing cash, identifying funding gaps and ensuring efficiencies in how money is spent.
“There’s so much that an accounts payable group could be doing instead of this manual work,” Lamond said. “The way we like to think of it is, have them spend less time looking behind them on recording the history and more looking forward to the future of how to help make the company grow.”
Holistic and Efficient
To enjoy the greatest benefits, companies need a holistic solution, rather than the customary piecemeal approach using card companies, bill payment companies, expense management companies, travel expense management companies and other solutions for different aspects of company spend.
A unified approach allows employees to go to only one place when they need to request to spend money, request reimbursements, submit purchase orders or use a corporate card.
Similarly, for the finance team, a single command and control center carries numerous benefits too.
“Because it takes the entire flow of the spend, from the request-to-spend all the way to booking it to the general ledger,” Lamond said, it provides a “holistic, comprehensive approach that just makes companies much more efficient.”