Increase your bottom line: how to effectively manage company spending

Your organization’s expense management practices could be costing you more than you think.

There’s the inefficiency due to manual expense reporting processes that’s well documented. The Global Business Travel Association (GBTA) found that on average, it costs $58 to process an expense report. 

But what about overspending and expense fraud? Cash could be slipping through your fingers due to lack of spending control as well. The Association of Certified Fraud Examiners (ACFE) found that reporting organizations lose 5% of revenues to fraud each year. 

And then there’s the lost opportunity to be proactive. If you can’t see spending happening instantaneously, you can’t pivot to prevent budget overruns or forecast accurately – which could really impact access to working capital.

In order to effectively manage spending, finance teams need expense management policies and processes that drive productivity, control spending and enable real-time visibility. But first, organizations must examine their unique spending habits to find the necessary problems to solve. 

5 steps to establish strong spending policies

Review your existing spend policy

Before making any changes, orient yourself to your organization’s spending policy. Go over it in detail to make sure you have a clear understanding of how it works. 

Once you’ve done that, compare it to a few internal inputs. What are your financial goals? What kind of budget do you have, at both an overall level and for specific departments?

Make a note of anything that’s in conflict. For example, let’s say that every department has a cap on per-night hotel spending except sales, and you’ve got a tight budget this year. Note that in your list of conflicts for future review.

Interview staff to get feedback

Take some time to understand how your current spend policy functions in practice. Meet with employees who use it to understand what works and what doesn’t. 

Business travelers might not mind submitting receipts when they return, but finance teams may hate the follow-up to get them. Procurement employees may dislike the credit approval process, while finance staff love it because they have more control. 

Armed with these real-life scenarios, you’ll be equipped to keep the well-functioning parts of your spend policy and improve the problem areas.

Make policy changes based on learnings

After reviewing spend policies, comparing them to financial goals and getting feedback from staff, you’ll have a master list of conflicts. Where is your spend policy in conflict with financial goals, budgets or the employee experience? These are the areas to focus on.

Consider the optimal scenario with zero constraints, even if you know it isn’t possible today. In an ideal world where anything is possible, how would you address these conflicts? Brainstorm ideas and consider running them by staff and peers to get their perspective. They might have input that could improve on your potential solutions.

Automate manual work wherever possible

The key to solving these problems is automation, and you are now equipped to start evaluating options. You might have access to in-house developers who can build automations for you. If not, you may want to look into external spend management platforms and what automations they have available. 

Either way, it’s important to walk through your specific problems to see what’s possible. For chasing receipts, check to see if you can enable receipt capture on a mobile device. If there are different spending allowances, check into spend controls per department. Look into automated approvals and/or faster virtual card creation for procurement.

Whether you go with in-house development or choose a spend management platform, make your decision based on careful review. 

Review regularly to ensure alignment

Once your automations are running, it’s critical to maintain oversight and refine as you go. Maybe capturing receipts via mobile device is great, but that still leaves finance staff matching GL codes and transaction details. How can you address that problem with automation?

It’s important to evaluate regularly. Expense management has lots of layers – once you solve one problem, that solution reveals another problem to solve. 

How automation transforms spend management

Increasing efficiency and productivity

Automation’s most visible impact is time savings for anyone who spends or manages spending. 

Let’s say your current business traveler has to make purchases, keep track of paper receipts, create an expense report and wait for approval. On the other side of the equation, finance staff have to chase receipts, review and correct expense reports and nag managers for approval.

With automation, the burden of work is transferred from people to systems. Each time a cardholder makes a purchase, an automated workflow prompts them to upload a picture of their receipt via their mobile device. The workflow suggests GL codes and matches the receipt to the corresponding card transaction. Expense submission is immediate, with the workflow requesting manager approval.

The bulk of the work is done for finance teams – with automation, they only need to review exceptions. It’s a total game-changer that returns hours (if not days) to staff.

Controlling corporate spending

The next big transformation is the ability to prevent unapproved spending and expense fraud. It’s harder to quantify given that manual expense management just doesn’t allow for proactive practices.

Finance staff have the ability to look at past transactions. Their only option is to go back to the employee, alert them to out-of-policy spending and request future compliance. They may bill-back the employee for unapproved charges or take disciplinary action if it is egregious fraud.

With spend controls, finance teams can pre-program a rigid spending framework that dictates how cardholders spend. They can tell the system which merchants are approved and unapproved, spending thresholds that apply to specific teams and even timeframes for spending. 

Any transactions outside this framework are declined. That leaves the employee unable to violate the policy – and removes all reactive follow-up work. As spending habits change, finance staff can update the framework to allow or disallow new types of transactions.

Creating real-time visibility and oversight

A third benefit of automation is that it speeds up expense management so finance teams can see a 360-degree picture of real-time spending. 

Automation transfers the burden of work from an employee to a machine – which is many orders of magnitude faster than a human. That speed, combined with pre-programmed integrations, enables instantaneous syncing between expense management platforms and accounting software. 

Finance staff can see charges as employees make purchases. They can analyze data to understand spending patterns, prevent budget overruns before they happen and make accurate forecasts for future planning. 

A finance leader might look at spending patterns and notice repeated purchases, prompting them to negotiate a volume discount. They might view spending by project in order to stop potential overruns or transfer funds from under-budget projects. And so on.

Financial controls are your competitive advantage

Effectively managing your financial operations can mean the difference between staying open and closing your doors. Of the many businesses that close each year, over ¾ of them fail due to cash flow problems.

Leveraging automation can help you slash unnecessary costs, stay on top of spending, and retain precious cash flow. These benefits not only help your business stay afloat: they give you opportunities to grow.

The PEX expense management platform has built-in automations that help companies achieve financial control and leverage it to drive strategy. Contact us for a tailored demo – we’d love to show you how PEX’s features can support your financial goals.