Driving better financial decisions with enhanced spend visibility
Learn what’s involved in improving spend visibility, discover how to overcome four of the biggest challenges in doing so, and make better financial decisions.
Understanding how your company’s cash is being spent is one of the most critical aspects of effective growth.
In order to curb excess spending and reduce waste, you need a real-time view of company spending habits.
It’s not all about the bottom line, though.
Improving spend visibility helps you build more realistic budgets for future investment and allows you to guide department leaders in spending that investment effectively.
Learn what’s involved in spend visibility and how to overcome some of the biggest challenges when improving it.
What is spend visibility?
Spend visibility is the degree of oversight your company has over where your company’s money is going.
If you can accurately show where your dollars and cents are being spent, broken down by department, category, and time period, you have high spend visibility.
If you don’t know where any of your cash is going, you have low spend visibility.
Of course, most companies fall somewhere in the middle of the spend visibility spectrum. The data is there if they trawl through various documents, spreadsheets, and systems. But it's not easily accessible in real time or in any manner that provides helpful insights for making financial progress.
Improving spend visibility, then, is a key concern for many finance leaders.
Why is spend visibility important?
Improved spend visibility helps financial leaders make better business decisions.
During the procurement planning phases, visibility over past spending behaviors helps the finance team create realistic budgets that accurately reflect the needs of each department.
Then, spend visibility practices allow CFOs to ensure that budget allocations are being spent effectively. This visibility also highlights maverick spend — purchasing activity that happens outside the company's documented purchasing processes.
Spotting out-of-contract or out-of-process spend behaviors helps finance teams tighten up on internal policies. It helps to reduce the risks associated with non-vetted vendors, such as the possibility of operational failures like software downtime.
Enhanced spend visibility also allows finance leaders to look for expenses that can be consolidated. For example, you might find that your marketing and operations teams have subscriptions for two separate project management platforms. Consolidating these two SaaS licenses into one results in cost savings.
Learn more about the spend analysis process in our guide: Spend analysis 101: how to manage procurement spend.
Why most companies have poor spend visibility
Improving real-time visibility over company spending can be a challenge, particularly in organizations where spending is largely decentralized.
Here are three obstacles that can prevent your company from achieving the cost savings associated with spend visibility.
Spend data isn’t centralized
While larger purchases typically (and ideally) go through formalized procurement processes, individual department heads and managers often have the authority to make spending decisions beneath a certain dollar threshold. Often, this means that data on spending is distributed and owned by each department head.
Many long-established companies are running a variety of legacy software tools and ERP (enterprise resource planning) systems with low connectivity. Because of this, getting a real-time view of spend at a company level is near-impossible.
Inconsistent and low-integrity data
When spending information isn’t centralized, it means that multiple formats, currencies, and even languages exist within a company-wide data set.
Then, you have the problem of low data integrity (mistakes and formatting issues) and inconsistent metadata fields (specific formatting rules applied by different software systems) coming from various data sources.
All of this makes obtaining spending insights a fairly manual process involving a lot of translation and data manipulation. It means you’ll have to:
- Verify data integrity and rectify errors
- Translate and unify data from different languages and currencies
- Decide on formatting guidelines and reformat non-compliant entries
Spend strategies and policies don’t exist
Perhaps the biggest challenge to improving spend visibility is that many companies don’t have well-communicated (let alone well-documented) spend management policies.
Mistakes are bound to occur if department heads don’t have clear direction on:
- Which vendors to prioritize
- How to format and store spend data
- When to seek approval
When spending patterns and data storage habits are inconsistent across the board, developing and distributing clear spend management policies is the most critical step to improving spend visibility.
How can you increase spend visibility?
Create spend management policies
Step one is to create or update the policies you’ll use to manage spending.
Strong spend management policies cover:
- Who is authorized to make purchase decisions and in what spend categories
- When to seek additional authorization to purchase (e.g. when the CFO must get involved)
- Which approval workflows exist to obtain purchase authorization (for instance the process of creating a purchase order)
- When and how IT and procurement teams must be involved in the decision-making process
- Who is responsible for managing spend with a vendor once the contract is in place
Ensure spend management policies are accessible
Step two is to ensure this information is distributed to the people who need it. A workplace wiki or documentation hub is a great solution. Google Drive folders and Docs are a free and easy way to store spend management policies. You can also centralize all your spending with Vendr, a single source of truth for your SaaS stack.
Whichever route you choose, ensure that team members can easily refer back to your spend management policies when necessary.
Update your payment methods
In order to capture and store spend data in real time, digitize payment methods where possible.
Replace checks with direct credit payments and move away from petty cash and corporate credit cards and toward modern spending solutions.
Consider a solution like Brex, which manages employee spend via credit cards.
Spend management software allows spending to be tracked at the employee level and makes spending more efficient for the user, as they don’t need to waste time hunting down a shared credit card.
These companies often offer virtual spending cards, making them impossible to lose or misplace and improving security by reducing the risk of fraud.
Centralize spend tracking and connect payment methods
The only way to obtain real-time spend visibility is to centralize the process of tracking spending data.
Spend analysis solutions are designed specifically to improve spend visibility, create efficiency through automation, and help drive financial success using spend analytics and strategic insights.
Learn more about spend management software and how it works here: Spend management software: A luxury or a necessity?.
Obtain and set up your spend management platform and connect other tools you use to manage payment. You’ll likely need to integrate your banking solution and any physical or digital cards you’ve set up in the previous phase.
With all of your spend data flowing into the same place, you’ve achieved a centralized and real-time source of truth for spending at the company, department, and individual levels.
Build a spend analysis dashboard
Improving your spend visibility is important, but it doesn’t do much in a vacuum. If you can’t pull actionable insights from that data, it's just a block of numbers.
To get the most out of your spend data, build a custom dashboard for spend analysis in your spend management tool.
At a minimum, you’ll want to be able to see real-time:
- Spend by department
- Spend by category
- Spend by employee
- Spend in relation to budget (over or under)
- Spend by vendor
How Vendr helps you achieve spend visibility
Vendr more than a spend management tool — it’s a full-scale cloud-based software buying platform. Vendr helps procurement professionals streamline all aspects of the SaaS purchasing process, from evaluating strategic sourcing opportunities to contract negotiation and supplier relationship management.
Of course, clear spend visibility is crucial to great SaaS vendor management, so we’ve built some powerful features to assist here as well:
- Price benchmarking with the biggest data set in the game that helps you negotiate new agreements and minimize SaaS expenditure
- Overlapping spend analysis to identify savings opportunities and suggest SaaS license consolidation
- Real-time cost savings reports to help you see a return on your investment
- Automated purchase workflows that drive efficiency and ensure contract compliance
Want to know how much you’re overspending on SaaS? Find out today with our free cost savings analysis.