Why does spend management take up so much time? In theory, a process that’s important to such a wide variety of businesses should have been perfected long ago. Instead, it is often an inefficient and unreliable use of company time. This task takes up so much time that it eats into other strategically important work, which can affect a company’s bottom line.
The problem with spend management is often a result of many smaller, unresolved issues. Because traditional invoicing methods don’t offer access to aggregated data, minor concerns can become major headaches. Properly collating and analyzing spending data requires dedication and resources that many organizations either don’t have or are unaware they need.
Unfortunately, many technology solutions for spend management are geared toward larger enterprise companies. Therefore, they are too expensive and out of reach for small businesses and midmarket companies. This has led many organizations to stick with inefficient and flawed invoicing processes, resulting in mistakes that take valuable time and money to fix.
The traditional “reconciling spend by the invoice” method is no longer enough now that every business has to act like a technology company if it wants to stay competitive. The disconnect between what a company spends and how it actually uses the resources it buys is no longer acceptable. To get a handle on spending, even small businesses are going to have to move past invoices and dig deeper into how they use products and services.
The Problem With Invoices
Relying only on traditional invoices for spend management can be detrimental to your business. For instance, the manual nature of the process means data entry errors are common — and so is spending valuable time chasing down discrepancies.
It can take up to seven days to resolve a discrepancy on an invoice, which can lead to frustrating payment delays with critical vendors. When a key vendor is upset, the business is in an uncomfortable position — particularly in cases that include early payment terms. These delays don’t just frustrate suppliers. Employees have to find errors, which leads to major lost productivity.
If invoices are paid without checking for errors or measuring how vendors are being used, then costly mistakes are possible. Recently, a man stole $ 121 million from Google and Facebook by sending them fake invoices — which the companies paid. While this is a worst-case scenario, it’s a good example of what can happen when invoices are the main source of spend management.
For a more realistic example, let’s imagine a call center with a high turnover rate. This company has 50 employees but pays for 180 software licenses. For every new employee, the company purchased a new license rather than recycling licenses from previous team members. As a result, the company spent thousands of dollars more than necessary each month. This costly mistake could have been avoided if the company had evaluated the process instead of blindly paying invoices.
Other problems are more systemic. A lack of comprehensive data in invoices prevents companies from measuring what they are doing right or wrong, which makes it hard for them to improve. Combine this situation with a lack of communication between internal departments regarding spending, and you get a bevy of individual problems without solutions.
Going Beyond Invoices
As a company grows, the lack of cohesive spend management will only become more glaring. To truly manage spending, organizations need to streamline and unify operations beyond collecting invoices. The following tips will help you look beyond invoices to eliminate your company’s spending disconnect once and for all:
1. Get key decision-makers together.
When leaders don’t communicate with one another, it can be nearly impossible to track how services are being used in various departments and how to make smart spending decisions.
This type of disconnect indicates a strong need for digital transformation, productivity improvement, and cost reduction. Leaders should discuss technology solutions and how to scale them within their organizations to truly affect company growth. Bringing key decision-makers to the table will ensure that access to important data is available throughout your company, which should better inform your spending decisions.
2. Collect, cleanse, classify, and analyze expenditure data.
Basic metrics for spend management, like efficiency and compliance, are no longer enough. As companies try to find new ways to be more disruptive and adaptable, department leaders within these companies are going to have to find new ways to manage spending.
Expenditure data has the potential to show you exactly how you can improve your internal systems and processes. But that data won’t do you any good if you don’t take advantage of it.
3. Look to technology for help.
Unifying spend management with technology isn’t just a system implementation. It’s a change program with far-reaching effects. Luckily, numerous new products and services are available that can make managing spend much more efficient.
Systems such as Okta and OneLogin can help you manage access to applications across the organization, enabling you to build a system of compliance and control. Newer software-as-a-service management platforms like Zylo offer a granular view of how applications and licenses are used. They can even find duplicate applications to help reduce spend further.
Transforming current spend management practices can be a challenge. Ultimately, it’s worth it — drilling deeper than invoices can improve cost and performance visibility, allowing organizations to make better decisions going forward.
To help you manage and evaluate your current processes and make better spending decisions for tomorrow, request a demo of our technology business management platform.