Last editedApr 20232 min read
A good spend management system can be a complete game-changer for small businesses. It frees you from the burden of admin, tracking and analysing expenditure with growth as a goal. Here’s what you need to know about the potential that spend management strategy holds, from cutting costs to automating accounting processes.
What is spend management?
First things first – what is spend management in business? This refers to the processes used by a business to track and control its expenditure. As an umbrella term, spend includes any costs related to procurement, purchasing, incidentals, and subscriptions. It excludes necessary operating costs like cost of goods sold and payroll, focused more on the money spent by your employees.
A spend management system tracks your existing expenses and then uses these as the jumping-off point for analysis and research. The goal of spend management is to improve your purchasing efficiency, ensuring your business puts its money to best use.
Expense management and spend management are often used interchangeably, both referring to the processes used to control employee expenditure. However, expense management focuses more on employee expense claims and their reimbursement. Spend management looks at the wider picture of company-wide spend, including company cards and subscriptions as well as these employee expenses.
Why is business spend management important?
Tracking expenses is a fundamental part of sticking to a budget. If you don’t monitor cash outflows, this can lead to a negative cash flow. This is particularly important for growing businesses with an increasing number of employees and departments. As your business grows, it will require more expenditure. A spend management system offers the following benefits:
It helps your employees stick to an organised, predefined budget.
It reduces financial risk by tracking vendor performance and monitoring invoices.
It improves company profit with greater visibility over supplier relationships and payments.
It offers real-time tracking of company expenses, with accurate data leading to more responsible financial decisions.
Challenges in small business spend management
Any business spend management strategy comes with its own challenges. Managing expenses shouldn’t be complicated, but without an efficient system in place your employees could be prone to confusion. Approved expenses should be clearly outlined in the system, with appropriate guidance given. Required expense reports help boost transparency for more accurate reporting and expense auditing.
Spend management processing also runs the risk of human error. Even the most competent employee can sometimes make a mistake when filling out expense reports. A small typo is carried over into finance reports with inaccuracies that need to be tracked down and corrected later. Paper expense claims can take weeks for processing and reimbursement without spend management tools in place.
Spend management tools for small businesses
Fortunately, automated spend management tools make short work of all the challenges listed above. By automating your small or medium enterprise spend management system, you can streamline tracking, payment, and approval. Look for software with real-time expense tracking to help with your spend management. Additional features to look for include secure document capture, automatic financial reporting, and custom payment options for reimbursement. Data analysis is also a key component of the best spend management tools, which help you track spending habits and create a more realistic budget for growth.
Consider your company’s industry, size, and department spending needs to find the right fit. It’s also a good idea to choose software that integrates with your existing systems. For example, GoCardless integrates with over 300 partners including many of Australia’s best accounting apps like Xero and others. This merges your payment processing, accounting, and spend management for a birds-eye view of company finances. Choosing an all-in-one platform lets you deal with spending and payments in a more holistic, accurate manner.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.