Managing your budget allows you to control finances better, optimize money flow and stay aware of the company’s financial capabilities and limitations. Spend management goes beyond money control and financial awareness, though. In this article, we will share the best practices for effectively managing your business expenditures.
- Spend Management in a Nutshell
- The Benefits of Spend Control with a Budget App
- 3 Things Your Company Need for Effective Spend Management
- Essential Features of Spend Management Software Solutions
- How to Build an Effective Spend Management Strategy
Spend Management in a Nutshell
Spend management is the process of controlling and tracking all the expenses the company has, including procurement, payroll, taxes, licenses, marketing expenses, rent and employee training. Companies have traditionally managed expenses using spreadsheets and manually entering data. But more and more businesses are switching to spend management and budgeting apps that allow them to optimize the process of expense control.
The goal of any spend management strategy is to stay fully aware of the operational costs and find ways to decrease them without affecting the quality of manufactured products or services delivered. Innovative spend management software promises the following benefits for a business.
The Benefits of Spend Control with a Budget App
- Transparency. Modern spend management tools allow a company to gather spend data from multiple sources and decrease the risk of human error. This is one way to achieve better spending transparency and control.
- Better productivity. Manual filling in financial spreadsheets takes a lot of time and effort. Using a dedicated business budget tracker provides an opportunity to get rid of most manual data entry, allowing employees to focus on cost optimization suggestions and determine business opportunities.
- Better budgeting. Business spend management tools often allocate a budget for a particular category of expense, taking into account historical data. By using this feature, a company can forecast and plan its expenditure more effectively.
- Insightful spend analysis. Deep analytics and insightful reporting are some of the core features of a spend management platform. They open up the opportunity to analyze spending trends, identify resource waste and suggest cost optimization strategies based on insights.
- Internal fraud prevention. Spend management solutions are also good at preventing internal fraud and misuse of the company resources by employees since the financial processes and expenditures become more transparent and easy to control.
3 Things Your Company Need for Effective Spend Management
Below are the three pillars of powerful spend management:
- Proactive spending culture. An approach to spend management where necessary spending is carefully planned and forecast, and employees have to get approval. This combination allows for streamlining corresponding business processes, increasing competitiveness and improving productivity.
- Structured data. Spend analysis and control is impossible without data. After being gathered from multiple sources, the spend data should be structured and classified so that it is possible to track spending in real time and extract valuable insights from spending trends and patterns.
- Spend management software. Using spend management software solutions is a way to track costs across different business processes, avoid manual and repetitive tasks, reduce the likelihood of human error and unlock actionable spend analytics.
Essential Features of Spend Management Software Solutions
An effective spend management platform should come with the following set of features.
- Real-time expense tracking. The opportunity to track expenses is one of the pillars of a proactive spending culture which includes no decision-making delays. That means that the spend management app should be integrated with the company's financial accounting, and the spending data should be instantly transferred from the bank’s database to the application.
- Routine tasks automation. Processes such as billing, invoicing and payroll can be automated with the help of budgeting tools, saving time and effort.
- Visual and insightful reporting. A core feature that allows a company to obtain insights to develop cost optimization strategies.
- Forecasting powered by Artificial intelligence (AI). Another pillar of a proactive spending culture. Using built-in AI algorithms, the company can better predict its spending needs, guided by historical trends and current market data.
How to Build an Effective Spend Management Strategy
Following a data-driven path and using a practical solution for spend management are the best practices to build a well-optimized expense management strategy. Here are the steps.
- Gather data from multiple sources. Most businesses have unstructured financial data stored in multiple places which aren’t integrated. So, the first step towards building a more effective spend management strategy supported by top-notch financial software is to document the financial data you have and where it is stored.
- Structure and migrate it to a single spend management solution. At the next stage, it is necessary to migrate data to a single repository in a uniform format to make it classified and ready for analysis.
- Verify and cleanse your data. To avoid data confusion, you need to verify and cleanse it by removing data dupes and unnecessary data pieces.
- Categorize your spending. Then you need to structure your financial data according to spending categories. The spend management solution should ideally come with separate dashboards for each spending category, so you have a clear picture of each spending category, as well as the whole budget.
- Analysis trends and patterns. After the financial data is gathered, structured and classified, it is possible to analyze spending trends and patterns for a particular time. Such analysis and reporting allow you to find spending gaps and suggest better cost optimization tactics.
Spend management has always been a challenging process since each company prioritizes its expenditures depending on current business goals. That’s why tailoring spend management software available to your business needs can be a challenge. Custom software development promises a better opportunity to build a spend management solution that will be effective for your business and intuitive for your employees.
Cprime Studios has in-depth expertise in fintech development. You are welcome to drop us a line for a tech consult and support!