At face value, the term spend control may sound obvious in its meaning, particularly for those in finance. But what exactly does it mean to implement spend control? And why is that important for your business?
For large and complex organizations, spend control means having a method for finance professionals to have control of spend data by budget holders in the business.
What does a spend control method involve?
This method involves creating a spend management solution that contains guidelines and policies as well as rules such as budgets to ensure that spending is done in a timely and cost-effective manner. It means defining an overall strategy and then developing and implementing enterprise resource planning (ERP) software that integrates with existing systems.
Spend control can be a complicated process, but it's worth the time and investment because it can strengthen your bottom line by reducing overhead costs, improving productivity, increasing efficiency, and strengthening relationships within your organization.
These methods mean they have full visibility of all transactions, meaning they can identify issues and errors before they have costly repercussions. Ergo, they are successfully controlling spend.
For some finance departments, however, spend control is definitely not a back-burner issue. Finance teams using a manual purchase-to-pay process spend lots of time on paper documents, chasing approvals and manually processing invoices – all of which can be done much faster with a spend management tool. So for these finance departments, spend control is an important aspect that doesn’t need to be left at the back of the queue.
With this in mind, it’s worth asking if finance professionals are fully aware of the benefits spend control can bring to their departments.
To ensure you’re implementing the most efficient spend control strategy, the first solution is to adopt an automated purchase-to-pay system. Using this type of software not only frees up a lot of time used on chasing approvals and manual processes, but it also comes ready-built with a lot of the tools you need to manage good spend control.
Here are some of the important considerations for spend control:
1. Full Cash Flow visibility
As I touched on earlier, one of the biggest considerations for adopting a spend control strategy is the ability to have full visibility of all transactions being processed in the business. Having full visibility means finance professionals will be aware of spending activity, allowing them to have full control. This is where an automated P2P solution far outweighs a manual process.
2. Cut down on human errors
By having control and visibility over spending activity, finance teams are much better equipped to spot errors in the system such a duplicated invoices or missing approvals. This means they will be able to rectify any errors they spot straight away and avoid costly repercussions.
3. Identify maverick spending
Maverick spending can sometimes be disguised as errors in the process but the difference is that this is deliberate unapproved spending. Without a spend control strategy in place, it’s very difficult for team members of finance teams to differentiate and identify maverick spending to genuine errors and this can leave the company’s finances in a vulnerable position.
4. Access real-time data
An automated P2P system not only stores data, but it can present it to finance teams in a digestible way. Having access to real-time data on company spending activity gives finance the full visibility to control spending in real-time.
5. Be equipped to make smarter spending decisions
When you combine the different functionalities of a spend control strategy you’re not only able to control spend in real-time, you’re also now equipped with data to make smarter future spending decisions and optimize your spending habits through this management software.
6. Unite departments
Having the entire purchase-to-pay or P2P process on one automated platform invites other stakeholders with spending responsibility into the process that was once entirely used by finance. By giving budget holders and procurement full visibility in the process, this creates a unified relationship between them and the finance department.
Spend control is important, but with the wide array of solutions and software tools available, it’s not always prioritized. The finance department should always be given options to support the purchase-to-pay process, but they should also be able to define what they want to support. The goal is not necessarily to only implement a spend control tool—the goal is to streamline the purchase process by leveraging new technologies that provide value in their current processes.
If you’d like to learn more about spend control and why it matters, check out this blog!