We live in a capital-driven business world, where every penny spent by a Company should be justified and linked to the revenue it generates. The need for spend management for businesses arises from the responsibility of creating a fruitful strategy for managing company expenses and increasing the bottom line in the form of savings.
Just like humans, companies need to save more money than they spend. Irrespective of the industry they belong to and the scale at which they operate, companies use spend management to control cash outflow and protect their treasury.
However, in 2023, companies worldwide are blessed with robust digital tools to help them manage their expenses. This is where a spend management platform comes in.
What is A Spend Management Platform?
A spend management platform is a software solution dedicated to recording, tracking, and analysing your company’s expenses. It helps you centralise your spend data and obtain valuable insights into your purchases. Procurement is arguably the most expensive activity performed by a company. A spend management platform allows you to streamline procurement by preventing you from spending more than you should.
Modern spend management platforms enhance spend analytics with the help of technologies like artificial intelligence and machine learning. They help you identify trends and patterns in the way your company incurs expenses.
According to a PwC report, around 70% of an average company’s revenue is spent in dealing with third-party suppliers. The report also specifies that effective management of third party spend can help companies release savings of 7% to 12%, having a significant impact on the borderline. Especially in the case of manufacturing companies, spend management platforms assist in choosing the right suppliers and analysing their buying position in the market.
Controlling Your Company Expenses with A Spend Management Platform
Now that we know what a spend management platform is, let’s dive a little deeper and understand how it can be used to control your company expenses:
Digitizing Spend Management Processes
According to a recent survey conducted by PwC involving over 800 Procurement and supply professionals from 64 countries, 77% of the companies have implemented source-to-pay digital solutions to streamline their processes. The report states, “The digitization of processes is no longer a nice-to-have, but now a necessity.”
The most basic yet important way in which a spend management platform helps you control your company expenses is by digitising your spend management processes. Gone are the days when companies used to gather, record, and analyze spend data manually.
A spend management platform helps you digitise processes like expense reporting, subscription management, accounts payable monitoring, etc., to help you control your expenses better. In the age of digitisation, managing your expenses using a software solution gives you a comprehensive look at the cash outflow within your organization.
Considering The Smallest Details
This is another major contribution of a spend management platform toward controlling your company expenses. It helps you consider the smallest expenses incurred by your company on a daily basis. Manually, you may miss out on recording expenses that seem too trivial. However, they do have a significant impact on your budget if you look at the bigger picture.
A spend management platform ensures that you give all your company expenses their due and obtain holistic insights into the same.
Improving Negotiations
Agreeing with your suppliers on the purchase price right away may prevent you from saving substantial funds. It is always advisable to explore negotiation opportunities wherever possible.
A spend management platform uses your business data to assess your buying power in the market. Understanding your buying power helps you negotiate with suppliers and procure goods/services at the best price. By identifying where your expenses can be aggregated and consolidating your supplier base, these software solutions ensure that you don’t spend a penny more than you should!
Controlling Tail Spend
Tail spend refers to uncategorised purchases and ad hoc spending low in volume, value, or frequency. It leads to unplanned and unnecessary leaking of your business revenue, adding to your financial burden.
A spend management platform allows you to uncover these areas that increase your tail spend, helping you control the same. Modern spend management software has a holistic understanding of your vendors and knows exactly what unsolicited tail spend.
Tracking Payment Terms
Your payment terms are likely to be different for different suppliers. Modern spend analysis platforms help you consolidate and track these terms to provide you with a bigger picture. They give you a bird’s eye view of your relations with all your suppliers, helping you understand your spend landscape better.
This lets you model your cash flows effectively by optimising on-hand cash and knowing when the balances should change. If you change your payment terms with your suppliers, the software will update the same in the system and keep you updated regarding your spend landscape in real time.
Auditing and Reporting
To control your company expenses, it is important to have a clear Understanding of every element that triggers cash outflow. A spend management platform helps you perform comprehensive audits and uses artificial intelligence to find insightful trends therein. The use of AI and machine learning also allows the software to contextualise your expenses, giving a personalised touch to the audits.
Along with auditing, modern spend management software helps you create Customisable reports that can be shared with your stakeholders at any time. From identifying the biggest leaks in your treasury to comparing company expenses over time, these reports allow the management to make the right decisions at the right time.
Forecasting and Scenario Planning
Activities like forecasting and scenario planning help you answer major “what If” questions regarding your company expenses. With the help of a spend management platform, you can peek into a potential future and see what specific company expenses may yield for your business.
This allows you to manage risks and create a failproof spend management strategy. Spend management solutions analyse your business’s existing financial position, consider historical data, and help you with seamless forecasting using AI-driven tools. Using such tools lets you equip your team members to deal with potential roadblocks without letting your operations take a hit.
The Final Word
These were some of the many ways in which you can use a spend management platform to control your company expenses. These software solutions act as Virtual financial advisors for your company and guide you every step of the way As you manage the expenses.
By implementing a spend management platform Within your organisation, you can leverage your savings while allowing your Team to focus on more pressing issues instead of performing repetitive tasks manually!
Also read: All You Need to Know About Effective Warehouse Management
