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If you’re looking for ways to boost your bottom line, spend management could be the solution. By controlling company expenditure, businesses can potentially cut costs and spark growth. What is spend management, how does it differ from expense management, and which spend management systems are right for you? We’ll take a closer look in this guide.
What is spend management?
The term “spend management” refers to any process a business uses to control spending. This spending might involve purchasing equipment, procurement, travel, and incidentals. However, it usually doesn’t include essential expenses like the cost of goods sold (COGS) or payroll. The primary goal of business spend management is to improve purchasing efficiency with the best possible value for your money. This might involve performing extra research, improving relationships with suppliers, and reducing overall financial risk.
To get started, a spend management system uses existing expenses as the starting figure for analysis and improvement.
Spend management vs expense management
While they are related, spend management and expense management are different systems. Expense management systems track, process, and audit employee expenses incurred during sales and travel. Spend management looks at the entirety of a company’s variable spending.
Why is business spend management important?
If you don’t understand where your money is going, you might run into difficulties with cash flow. As a business grows, its spending is spread out over multiple departments such as HR, IT, operations, and marketing. A spend management system gathers these expenditures together into a single, visible platform for greater tracking and control.
Here are three ways spend management saves money:
1. It helps employees stick to a budget.
Clear spending policies and controls ensure that both individual employees and departments understand how much they’re allowed to spend. Organized systems allow departments to submit purchase requests for approval, all in the cloud.
2. It helps improve profit by cutting costs.
Improved visibility over expenditures means your company can negotiate for lower prices and discounts. You’ll improve relationships with suppliers by preventing late payments that might get lost in the shuffle otherwise.
3. It helps reduce financial risk.
Without a system in place, unapproved purchases can add up in cost. Yet spend management also helps you battle fraud by tracking vendor performances, identifying risks, and catching fraudulent invoices.
Using spend management software gives your business real-time visibility by tracking and reporting each payment across the company. With more accurate financial data, it’s easier for the management team to make responsible decisions based on past, present, and future spend.
Is spend management software right for you?
Without an efficient spend management system in place, it’s likely that your business is wasting unnecessary time on manual paperwork and filing. Automated spend management software helps with:
Real-time expense tracking
Secure document capture for invoices, purchase orders, and receipts
Customizable payments for employees
Generating financial reports
Central dashboard for on-the-go analysis
If you want to save time and money with automation, spend management software fits the bill. There’s a wide selection of spend management tools on the market to choose from, including the following:
Xero is accounting software with real-time tracking, cloud-based document storage and ongoing analysis.
Spendesk automates recurring expenses and matches invoices to claims for easier approval.
FreshBooks accounting software offers an automated expense tool to help employees and accounting teams record and track company spend.
Wave bookkeeping is ideal for solo business owners and freelancers, accepting card payments, assisting with invoicing, and balancing the books.
Be sure to think about your company size, industry, and spending habits to find the right solution. It’s also helpful to choose software that integrates easily with third-party apps for payment. GoCardless integrates with over 300 partners, including accounting apps like Xero, to put a comprehensive invoicing workflow and spend management at your fingertips. Whether you’re a freelancer or owner of a growing business, this offers heightened flexibility and control over your accounts.
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.