What is Spend Management: Process & Benefits

In today’s highly competitive market landscape, effective business spend management across day-to-day operations is more crucial than ever. Having strategic oversight of your spending allows you to not only control your costs, but also drives business value and enhances profitability.

Let’s explore the spend management and the benefits that thorough and strategic spend processes can have on businesses, no matter what stage of growth they’re in. 

Key takeaways about spend management

• Spend management is the process of planning, controlling and analysing operational expenses in a way that optimises costs and reduces risk.

• Common challenges businesses face with spend management include tedious manual processes, disparate spend management systems and disconnected data, a lack of transparency and visibility over company spend, and exposure to unnecessary foreign transaction fees. 

• Adopting a unified spend management platform streamlines the spend management process, allowing businesses to manage their processes and workflows in one centralised location. This leads to greater visibility, more accurate data and the ability to make strategic spending decisions.  

What is spend management?

Spend management refers to the process of planning, controlling and analysing your organisation’s spend and expenses. The term covers everything from processing and paying invoices, managing and reimbursing employee expenses, monitoring cash flow, and reconciling accounts. Businesses looking to streamline their workflows and scale globally should be looking to improve their spend practices to ensure accuracy of records, compliance, time and cost savings.

Effective spend management is crucial when it comes to boosting the chances your business will reach its financial goals, as it enables you to reduce your costs, improve your cash flow, and increase your market competitiveness. 

Overview of the spend management process

Spend management processes encompass a range of business finance activities. Here are some of the key responsibilities and processes it covers:

• Setting financial goals and establishing budgets in line with forecasts.

• Implementing spend management policies and procedures to the business.

• Creating purchase orders (POs) and managing approvals.

• Tracking and categorising company spend.

• Submitting and approving expense reports.

• Matching invoices against POs and delivery receipts.

• Monitoring spend and reconciling expenses with budgets to discover any discrepancies.

• Payment processing, through bank transfers, cards, or payment platforms, and managing foreign exchange (FX) costs and currency conversions.

• Reviewing and analysing spend trends to identify opportunities for cost savings.

• Managing risk by ensuring data security and compliance with local regulations.

• Reconciling internal records with bank statements to ensure accuracy and completeness of financial records.

There are many other strategic tasks associated with spend management; adopting technology to support the effective management of business spend and expenses, centralising spend data for easier access and visibility, managing relationships with vendors, negotiating contracts with suppliers, ensuring compliance with company policies and procedures, and fostering a company culture that’s conscious of spending. 

For centralising business data across your organisation, having a unified spend management process can ensure your company manages your purchases and supplier base holistically, both maximising your money’s value and mitigating common risks. Being able to track spend and execute both domestic and global payments on one platform makes it simple to strategically manage your outgoings, no matter the size of your business. 

Challenges in spend management

Businesses of all sizes face many challenges in effectively controlling and managing company spend. It can be tempting for businesses to onboard SaaS solutions to solve individual spend challenges, rather than adopting a comprehensive holistic solution. However, using multiple disconnected tools often ends up creating more problems than they solve. It makes reconciliation of expenses problematic, leads to (often error prone) manual processes to connect data, and prevents visibility and spend control resulting in poor financial decision making. This is compounded further when operations involve international transactions, or high volumes of payments. 

Common spend management software tools are often separated from core banking systems as they have no financial infrastructure included. This means making payments (especially international payments) requires multiple manual steps across disparate systems, increasing the risk of errors, and exposing businesses to unnecessary transaction and foreign exchange fees. 

Manual processes lead to inaccurate data

Using outdated methods such as spreadsheets for spend management can become a nightmare when it’s time to reconcile expenses. Ineffective spend management processes can lead to challenges with cleaning and categorising spend data, making it impossible to draw any strategic insight or trust the reliability of the data. 

Disconnected tools prevent spend visibility

Using disconnected single-purpose spend management tools removes the ability to have full and accurate visibility over spend data. This then leads to a loss of control over your cash flow, which can cause a host of issues like late supplier payments, negative impacts on vendor relationships, and problems with budget management.

Non-integrated spend management software can also significantly slow down reimbursement for employee expenses. The data will need to be manually transferred across platforms, increasing the risk of error and delays. This fragmentation leads to longer processing times, with each step needing additional oversight by multiple finance staff. 

Unnecessary fees and compliance difficulties

When using disconnected spend management tools, funds can be subject to high international transaction fees, leaving less money in your bank account at the end of each month. Ensuring global staff comply with company policies and procedures can also seem like a monumental task without the right software and processes. 

Business benefits of effective spend management

Implementing comprehensive and effective spend management processes sets your business up for scalable and sustainable growth. When businesses operate in financial ‘silos’ (for example, marketing spending their budget, HR managing travel expenditure, and so on), a lack of cross-team visibility can lead to issues with managing company funds in a strategic way. 

Utilising the right technology to ensure transparency makes it easier to make data-driven decisions that drive your company’s financial sustainability.

Financial benefits of streamlined spend management

• Save money by reducing unnecessary spending, negotiating better prices with suppliers, and improving procurement & contract management processes

• Minimise errors by adopting technology that automates spend management processes, leading to direct cost-savings and improving the company bottom line

• Gain new real-time insights into expenses and business spending patterns, helping you stay on top of your budgets, identify cost-saving opportunities and avoid costly mistakes

• Avoid expensive and unnecessary FX and international transfer fees by utilising spend management software that allows you to store and spend funds in multiple currencies 

• Prevent spending that isn’t in line with company policies and procedures, with improved spend control and visibility with features like card controls and approval workflows

Operational benefits of streamlined spend management

• Save time, reduce manual human errors and reduce the chance of compliance risks with time-saving automations, such as AI-powered receipt and bill extraction and auto-categorised expenses

• Improve cross-border management of company spending, making it easier to scale global processes as spending and policies are highly visible across entities

• Free up human and technical resources for more strategic activities, such as business intelligence and data analysis.

• Improve vendor relationships through faster payouts and more payment visibility, leading to better contract term negotiations that improve your bottom line.

How can unified spend management software help?

Unified spend management software is designed to allow businesses to manage their employee expenses and company expenditure quickly and easily. 

Adopting an all-in-one spend management solution (as opposed to individual software tools for each process) makes it simple to gain visibility into your business’s global spend — in a central location. With a unified tool, you’ll be able to efficiently control, track, approve and reconcile all types of company spend, whether domestic or international. 

The spend management software you choose should offer real-time tracking of both employee and company expenditures, as well as quick and simple data overview options, customisable payment capabilities, easy document capture and automation capabilities that save hours of finance team time. 

Best practises for implementing spend management software

Cultivating best practises as part of your adoption of spend management software can help to streamline your procurement workflows, ensure your vendors are paid on time, and improve your relationships with suppliers and contractors, through strategic planning. 

Leveraging spend management best practises generates a positive ripple effect within your business’s general operations, facilitating more efficient, productive and profitable outcomes across many organisational functions. 

Taking advantage of automation and centralisation opportunities

Adopting an automated spend management platform can help companies to reduce errors caused by human error and tedious manual processes. Not only will your data be more reliable, but you’ll be more efficient and finance teams will have exponentially more transparency and visibility across global company spending. 

As well as automating processes, centralising spend management data in one location can help you gain a better understanding of your global spending patterns. Where is money being spent in your business, how much is being spent, and how often? Ensuring data is accessible and easily manageable makes it simpler to identify potential areas for cost reduction and implement measures to improve contract management. 

To automate and centralise your data and processes, companies should consider adopting a cloud-based spend management solution that offers fast and easy integration with their existing accounting software and procurement systems. Choosing a solution that has financial infrastructure embedded within it removes complex bill paying procedures, as you’ll be able to pay quickly and easily, directly through the platform. 

Boosting scalability with centralised data management

Accurate and timely data analysis is the cornerstone of effective spend management for businesses, making it simpler to identify areas for cost reductions and improve how contracts are managed with suppliers and vendors.

Implementing a spend analysis tool can help your business to easily categorise your spend data, identify spending trends and provide insights into spending patterns. By having access to quality data about where your business is spending money, you can make data-driven decisions that safeguard the future of your business’s financial viability, as well as increasing your market competitiveness. 

By adopting platforms that are specifically designed for the needs of modern global finance teams, it can be easier than ever to scale internationally, turn weaknesses into strengths, and lay the foundation for sustained continued growth. 

Understanding different stakeholder needs 

As each department function will have unique needs for a spend management system, clearly communicating changes with these stakeholders and helping them understand how the new spend management software will benefit them is crucial for securing their buy-in. 

Common challenges faced when businesses adopt new spend management software solutions include difficulties finding resources to support the roll-out, staff resistance to change, and issues with integration. However, engaging stakeholders early and showing how the platform benefits their daily workflows is key to winning them over.

Optimising spend management with Airwallex 

As a unified spend management platform, Airwallex supports businesses with their global spend processes, helping to solve the spend management headache. With Airwallex Spend, you can manage your business’s entire spend and expense process in one location. With products including Bill Pay, expense management, international business debit cards for multi-currency transactions and accounting integrations, you’ll gain real-time visibility and control over your spend, domestically and internationally.

The benefit of Airwallex is that our spend management system has both the software and powerful financial infrastructure built-in. This means there’s no need to shift different payment workflows across systems, such as approving bills in one platform and then paying the bills through your banking system; instead, it’s all in one place.  

Using the Airwallex’s spend solutions can drastically reduce friction in your business, improving the accuracy of your global spend data and saving your finance team hours of time when it comes to reconciliation. This frees them up to focus on more strategic tasks, like growing your business. 

Explore what Airwallex spend management software could do for your business to improve your profitability and keep your global spend in view — all from one intuitive and totally unified platform. 

Get real-time visibility over your spend, domestically and internationally 

Centrally manage spend across all entities located domestically or internationally, with real-time visibility over spending, including card spend and out-of-pocket reimbursements.

Track your business’s spending and pay your bills in one platform

An all in one solution across cards, employee expenses, and accounts payable. Optimise your tech stack with the ability to manage funds, currencies, and payments on one platform.

Save time with AI-powered automations that reduce manual tasks

Save your team time and money with AI-powered automations and insights at every step, from expense submission and approvals, through to fraud detection and transaction risk management.

Control spend with card controls and custom workflows

Implement card controls and spend approval flows in minutes, and set up customised workflows to centrally manage spend across multiple domestic and global entities, future-proofing your global growth.

Streamlining spend management for a better business future

Successful spend management is crucial when it comes to your business’s success and longevity. Effective spend management enables companies to reduce their costs, improve, manage and forecast cash flow, and increase market competitiveness.

For companies looking to improve their daily spend management processes, spend management software that provides easy integrations, AI-powered automation to reduce manual tasks, and simple methods for analysing spend data can revolutionise the way you do business. 

*Disclaimer: This information doesn’t take into account your objectives, financial situation, or needs. If you are a customer of Airwallex Pty Ltd (AFSL No. 487221), it is important for you to read the Product Disclosure Statement (PDS) for the Direct Services, which is available here.