6 Spend Management Tips to Help Optimize Your Expenditures
Spend management involves taking charge of your business’s spending by implementing strategies to help ensure you’re making smart purchasing and procurement decisions. A comprehensive spend management strategy provides guardrails to help you maximize the value of your expenditures, ultimately leading to improvements in your bottom line.
Following are six spend management tips to help you gain control of your expenses.
#1 – Establish clear budgets and processes that are aligned with your organization’s goals.
The first step in gaining control of your company’s expenditures is to establish a clear budget to guide all spending decisions. Once you have a budget in place, it’s important to review it regularly and make adjustments as necessary based on financial performance and changing circumstances.
It’s also important to establish clear expense management processes, such as expense submittal deadlines, receipt management, approved versus non-approved expenses, etc.
#2 – Leverage technology.
Technology solutions, such as spend management software and enterprise resource planning (ERP) systems, can help you automate processes, improve spending visibility and enhance control.
One of the most difficult expenses to plan for is travel and entertainment (T&E). However, spend management technology can help you more effectively identify T&E expenses that comply with your company’s expense guidelines (as well as those that fall outside of permitted expenses). For example, if your T&E budget doesn’t cover alcohol, you may wish to implement software capable of identifying individual items on a dining receipt to identify alcohol purchases and help ensure those expenses aren’t reimbursed to employees.
#3 – Make data-driven decisions.
As the saying goes, it’s impossible to manage what you can’t measure. That’s why having access to accurate, in-depth information is key to your ability to manage spending across your organization. Data analytics can help you track spending patterns, identify cost-saving opportunities and make informed decisions that align with your long-term business objectives, providing insight into pricing structures and offering an opportunity to benchmark your expenses against other companies within your industry.
Maintaining a constant pulse on your company’s spend analytics allows you to:
- Reduce costs
- Manage risks
- Streamline business processes
- Build stronger, more efficient relationships with suppliers and vendors
- Negotiate more beneficial contracts
- Benchmark performance
#4 – Manage spending risks.
Setting spending guardrails can help your business better manage risks, including financial, operational and compliance risks. In addition, proper expense management allows you to quickly identify and take steps to correct employee fraud and audit issues before they cause irreparable harm to your bottom line.
#5 – Educate your employees.
Providing ongoing education to your employees on your company’s spend management policies can help encourage responsible spending behavior and compliance with spending guidelines. Employee education should cover key spending topics, including:
- The importance of financial accuracy and compliance with company guidelines
- Legal and regulatory requirements regarding expense reporting and other financial processes
- Your company’s process for proper expense reporting, including approved/non-approved expenses, receipt management requirements, deadlines for reporting expenses, etc.
- Software training if your company uses an expense management system
- The expense approval process
#6 – Strive for continuous improvement.
Once you’ve implemented spending guardrails, it’s important to regularly review and refine your processes to help ensure they continue to meet the needs of your business over time. Doing so can help you optimize your resource allocation across changing business conditions and evolving organizational priorities.
