Spend management software: A luxury or a necessity?
- Spend management software automates approval workflows, streamlines manual processes, and provides high-level spend data in real-time.
- Automating business processes can save your company 10-50% on costs you have from manual processes.
- Categorized spend data allows us to discover areas of waste and other cost-saving opportunities.
- If you invest in a spend management tool, make sure it has the features and functionalities your stakeholders need.
Whether formal or informal, every organization uses some sort of spend or expense management process. How much are we spending? What are we spending on? Is there obvious waste or overspending? At the most basic, transactional level, those are the questions that spend management processes strive to answer.
However, like supply chain and procurement teams have moved from the organizational sidelines to a seat at the strategic decision-making table, spend management needs have also shifted. Today, leaders not only want but need spend management to be proactive, strategic, automate approval workflows, streamline manual processes, and provide high-level spend data in real-time.
Sounds like a lot, right? That's where spend management software comes in. In this post, we'll discuss the benefits of spend management software and key functionalities to look for. Then we’ll show you how to use these tools to optimize your business spend management processes.
4 transformative benefits of spend management software
Consider the goals your company wants to achieve with a spend management platform. For example, perhaps the company uses many SaaS tools and needs better oversight of SaaS spending. Your goals may be different than other stakeholders' goals. It's important to make sure that stakeholders agree on internal priorities.
As you read through the main benefits of spend management software, think about how these may apply to current and future processes and the scalability of your organization.
1. Efficiency through automation
Many business processes, both transactional and more complex, have been done the same way for so long that we don’t even realize the magnitude of labor resources we spend doing them. In a Salesforce and Pulse survey, 57% of IT leaders said that automation technology saves between 10-50% on costs previously associated with manual processes. Process automation is one of those things you don't know to appreciate until you have it. Then, you'll never want to go back.
Gartner defines business process automation as "the automation of complex business processes and functions beyond conventional data manipulation and record-keeping activities, usually through the use of advanced technologies." More standard process automation involves conventional data mining and record-keeping.
Once upon a time, a SaaS spend management spreadsheet could have been considered purely record-keeping. But now, SaaS spend management is a complex business process.
Spend management software automates both standard and complex processes, like approval workflows, collection of requisition, purchase orders, credit card spend data, forecasting, and more.
2. Spend visibility
Do you know what your organization spent last year on software? How much of that was traditional software vs. SaaS? How much of that SaaS was enterprise IT vs. exclusively used by one department? Which suppliers increased prices and which were planned maintenance increases?
I don't know about you, but the longer I was in procurement leadership, the more granular the spending detail requests became. Without a spend management tool, it was almost impossible for me to feel confident in the answers I gave, no matter how much time I spent data mining to conclude them.
If you are responsible for improving operational efficiency, reducing costs, and freeing up needed cash flow, real-time spend visibility is what you need.
3. Waste reduction
In 2020, Gartner reported that more than 20% of software spending may have been on shelfware. If your company spends half a million on SaaS in a year, that’s around $100,000 paid for applications sitting on the shelf, unused. Spend management software helps to identify opportunities for waste reduction by providing spend and usage metrics.
Waste reduction leads to decreased spending, allowing organizations to redistribute that budget to areas in need or increase cash flow.
It could also be said that labor time spent on manual processes is waste. In that case, spend management software reduces waste in more ways than one.
4. Spend analytics and strategic decisions
Better analytics lead to better insights, and better insights lead to more strategic decisions. Strategic decisions drive more value back to the organization. Despite the many ways companies may differ, we all share a common goal to drive value back to the bottom line. The spend analytics offered by most spend management software empowers us to do that in various ways. Here are a few:
- Detailed forecasting can result in a quicker reaction to issues or changes.
- Categorized spend data identifies potential cost-saving opportunities.
- Analytics help you identify spending habits that allow for more accurate budgeting and performance improvement.
- Oversight of spending, including usage metrics and price increases, strengthens your negotiation power and supplier management.
What to look for in a spend management solution
If your company's stakeholders have agreed on the internal priorities of a spend management system, it's time to start developing a list of specifications (features) the chosen solution should include. Reminder: Be sure to include IT in your spec development.
I recommend starting a two-column list, one column for required specifications and one for desired specifications. First, identify the things that are dealbreakers for your company and put those in the required column. Then, identify the things stakeholders would like the tool to do as "icing on the cake" and list those in the desired column.
Here are some features and functionalities you may want to add to your list:
- User-friendly and intuitive dashboards
- Easy end-user role management
- Approval workflows
- Mobile friendly or mobile app
- Categorized and spend-level analysis functionality
- Seamless integration with existing ERP, e-procurement, and accounting software
- Expense management or integration with an expense management solution (i.e., employee reimbursements)
- Spend and expense reporting
- Real-time spending metrics
- Minority and women-owned supplier tracking
Use spend management software to optimize your business
Spend management software is all about giving organizational leaders like you the tools they need to maintain an unwavering grasp on company spending. In today's time of rapid technological and supply chain changes, we require that grasp more than ever.
Spend management software gives us real-time visibility of spending, but it also puts time back in our day to focus more on strategic initiatives and profitability. That is where we can genuinely drive value back into our organizations.