Discover easy, accountable, and automated ways to manage business spend with spend management software to ensure you're staying compliant and on...
Spend visibility refers to the system of records, oversight, and understanding of exactly how funds are allocated and spent in a company. The importance of this visibility, however, is often underrated. Having real-time oversight, as opposed to tracking expenditure after the fact is invaluable and has the potential to change the course of how you manage purchasing and spending in your business, and ultimately how you profit and grow.
Let’s break down the importance of spend visibility by understanding the likely scenarios you could experience with and without spend visibility.
The consequences of poor spend visibility
When companies have no way of overseeing how business spending occurs until after the fact, the common outcomes that can ensue include: spending beyond the business’ means, exceeding budgets, making duplicate payments, paying for goods not received, and wasting money on unnecessary purchases.
A lack of control and visibility leads to irresponsible, unauthorized, and unbudgeted expenditure that can lead to financial distress later down the line. Furthermore, the corrective action that’s needed to trace or undo spending offences often wastes time and resources ineffectually.
When finance leaders rely on multiple spreadsheets, email threads, and SharePoint-based processes to track spending, they are constantly cross-checking data, uncovering inaccuracies and dealing with the frustration of version control issues; hardly an effective way to closely manage spending and identify any potential risks in advance.
Spend visibility does not stop at how effectively you track your spending, it also provides insight into the efficiency of your purchasing processes and cycle times.
Why some companies lack spend visibility
There are many reasons why some companies lack the necessary visibility into spending; most causes are rooted in inefficient processes that are outdated and reactive.
Manual or paper-based processes offer no insights into what has been requested, approved, ordered, or spent. Tracking down relevant employees across dispersed office locations, or remote home offices further exacerbate this issue when tracing purchasing records, receipts, and goods not received.
Beyond the day-to-day frustrations that these inefficiencies cause, bigger concerns can exist without visibility into current and historical spending. Ask yourself these questions to determine your current state of spend visibility:
• How are you tracking purchase requests and approvals?
• Are you committing to purchases with no insight into budget availability?
• How do you go about reducing costs?
• How do you identify saving opportunities?
• How do your financial leaders forecast and budget for future financial periods?
• How do you go about onboarding and approving vendors?
• How do you determine which vendors your business should retain?
• Are vendor contracts being adhered to and are you realizing maximum contract value?
• Is rogue and unauthorized spending occurring?
• Which employees and departments are overspending?
• What subscriptions or goods are being purchased?
• Are your employees requesting quotes and purchasing at the lowest price?
• Are you consolidating purchase orders to qualify for volume discounts?
• What’s your average purchasing cycle time?
• Are you paying invoices late and incurring penalties?
If you’re carrying out any of these functions blindly, operations could be impacted, and chances are you’re making ill-informed decisions that fail to deliver optimal results and cost you time and money.
Without visibility, the propensity for spend leakage is endless, and what’s more concerning is that it’s often undetected and worse, unresolved.
Companies of all sizes are beginning to understand the true value and importance of spend visibility as it provides a comprehensive overview, enables informed, data-driven decision making, and improves spend predictability.
Today’s remote workforces are operating amid rising inflation, supply chain disruptions, and with a recession on the horizon, not having spend visibility is a significant drawback as costs rise and budgets shrink.
How to achieve spend visibility
Now that you understand the risks of not having a holistic view of how money is spent, what it’s spent on, who is spending, and the vendors they are purchasing from, let’s look at ways that your company can achieve this all-important oversight.
Hiring more people will not solve the lack of visibility, nor will employing a highly skilled procurement team if your business size and function does not warrant that level of sourcing expertise.
• Process automation
• Integrating spend management and accounting systems
• Leveraging spend analytics and reporting tools
Automating your processes using a spend management solution can empower your finance team to proactively manage procurement, gain complete spend visibility, and establish company-wide policies and internal controls.
With visibility across purchasing and spending processes at an employee, department, company, legal entity, or group level, you gain granular spending data that will help you make informed financial decisions.
By integrating your spend management solution with your ERP or accounting solution, you can gain end-to-end visibility, accuracy, spend control and efficiency.
Ways that spend visibility is enabled via a spend management solution include:
You can achieve complete spend visibility and auditability across any number of transactions via digital audit trails. With automated processes, a digital log of every step in every purchase, from the initial requisition to approval and purchase order generation to the receipt of goods.
Beyond offering an easily verifiable audit trail, this standardized spend management process centralizes purchasing documentation, including:
• Purchase orders
• Change orders
Having a central repository for supporting documents can streamline compliance during tax season. During this time, your financial controller or third-party auditor can complete a full audit of your organization with every resource they need at their fingertips.
Real-time spend tracking and budget visibility
Keep track of what is being spent against budgets in real-time. Empower managers to review budget impact before committing to or approving spend. This spend visibility at decision points is further enhanced if the system can be accessed via mobile or smart devices, enabling budget review and approvals from anywhere.
Spend management solutions help organizations to manage multiple budgets, and projects by cost allocation, giving authorized employees visibility of what is available and committed by financial period. There’s no need to capture data and cross-check multiple spreadsheet budgets at month-end, instead you can gain instant access to dashboards and report on any selected budget.
Spend management solutions with advanced analytics and reporting capabilities further enhance spend visibility.
With all of your purchasing data in one place, analyzing current and historical spending is simplified, and easy to report on to make smarter decisions around budgets, vendors, purchasing volumes, and open orders that could be consolidated to capture more savings.
Examples of such analytics and reports include:
• The goods and services your business is buying
• Which suppliers you're buying from
• Purchasing frequency
• How much was spent during a financial period
• How spend data compares to previous years
• The value of spend by employee, cost allocation, or company, etc.
• Transactions, open purchase orders, and invoice reports
• Purchasing cycle times
• Budgets vs actuals
These reports help you visualize how to provide for all the departments or employees within your organization while empowering you to identify and take advantage of every saving opportunity.
For instance, if your business has multiple locations and each building relies on a different maintenance contract, your vendor reports can help determine if it's possible to channel this spend to one contractor. And in doing so, increase your buying power and qualify for discounts.
Within the next quarter or fiscal year, you could reduce the number of vendors you transact with, end contracts that are not providing value, gain more favorable pricing or payment terms with preferred vendors, and simplify your accounts payable process, all courtesy of your spend data and analytics.
Gain a competitive advantage with spend visibility
With a clear overview of the risks of not prioritizing spend visibility and the benefits of attaining it, determine where your business currently stands and what you could gain from having more oversight.
In the current economic climate, cost containment is top-of-mind for every business leader; having spend visibility can help you navigate the uncertainty and make the best-informed decisions that will drive results for your business.
By automating spend management, you can easily track, manage, and analyze spending, visualize your data, and gain actionable insights that convert spend data into intelligence.
How Fraxion can help
We develop spend management solutions with embedded spend analytics and reporting capabilities. Our aim: to help finance teams gain complete spend visibility, proactive control, and efficiency across procurement processes to reduce operational costs.
Get in touch to discuss your requirements, we’d like to share how you can gain complete visibility and spend under management.