What is Spend Management? Definition, Benefits, & Choosing the Right Software Solution
by The Ottimate Editorial Team
Every penny counts when it comes to your organization’s financial success. But while you’re likely focused on growing profits to boost your bottom line, you also need to consider how you’re managing your expenses. This is where spend management comes into play. By adopting a spend management strategy, you can control and streamline your company’s expenses.
But what exactly is spend management?
Let’s explore what spend management means, its benefits, and how to choose the right spend management solution for your business.
What is Spend Management?
Spend management is the process of controlling, monitoring, and optimizing an organization’s expenses. It involves a range of activities, from budgeting and procurement to invoice processing and data analysis.
The best spend management practices allow your business to maximize value while minimizing costs. But the process isn’t just about cutting expenses. It’s also about making strategic decisions that contribute to your company’s overall financial health.
Benefits of Spend Management
Implementing a spend management strategy offers many benefits for your business, including:
- Greater Control: Managing spend gives you more visibility and control over the entire expense management lifecycle. You can track spending by department, monitor transactions in real time, set spending limits, and more.
- Better Employee Expense Processes: Smart expense management lets your team easily upload receipts, submit mileage reimbursement, and use virtual cards issued by the company.
- Improved Budget Management: Access to real-time spending data empowers you to make well-informed budgeting decisions. Gain insights on spending patterns, supplier performance, and areas for improvement with analytics and reporting tools.
- Reducing Costs: Monitoring expenses helps reduce unnecessary costs. By identifying and eliminating wasteful spending, companies can direct resources to more strategic initiatives.
- More Efficiency: Spend management streamlines financial processes, making them more efficient. Automated workflows reduce the time and effort needed for invoice processing, approvals, and other tasks.
- Increased Risk Management: Spend management ensures that organizations comply with internal policies and external regulations. This not only lowers your risk of legal or financial penalties, but also safeguards your company’s reputation.
- Stronger Vendor Relationships: Building strong relationships with suppliers is crucial for long-term success. Spend management facilitates effective communication and collaboration with suppliers, fostering mutually beneficial partnerships.
Approaches to Spend Management
Two main approaches exist for building a spend management strategy: manual and automated.
The Manual Approach
Manual spend management involves traditional, paper-based processes. It often relies on spreadsheets and manual data entry for tasks such as budgeting, procurement, and expense tracking. While this method may work for smaller businesses with limited transactions, it can become more challenging and error-prone as a business grows.
Manual spend management is tedious, time-consuming, and costly. It makes it difficult to generate real-time insight and adapt to the dynamic and fast-paced business environment.
Automating the Process
To overcome the obstacles of manual processes, many businesses turn to automation software. These tools digitize the expense process, providing a streamlined and efficient solution for all of your spend management needs.
Spend management software typically includes features like:
- Expense Tracking: With automated expense tracking, your business can monitor spending in real-time, reducing the risk of overspending or fraud.
- Procurement: Streamlining the procurement process ensures that you get the best value from your vendors. This includes automating purchase orders, approvals, and vendor management.
- Budgeting: Easily-accessible insights into your expenses help you set and manage budgets effectively. This helps control costs and align spending with your company’s financial goals.
- Reporting and Analytics: Robust reporting and analytics tools offer valuable insights into spending patterns, so your business can make data-driven decisions with ease.
Choosing the Right Spend Management Software
The best software solutions not only improve your expense management practices, but also maximize their benefits.
Choosing a Spend Management Solution
Consider the following when choosing the right spend management software for your needs:
By carefully considering these factors, you can make an informed decision when choosing automation software, so that it aligns with your unique requirements and contributes to financial success.
Ottimate offers a powerful solution for all of your accounts payable needs — including spend management. Achieve greater success for your business by using Ottimate’s Spend Management solution to increase efficiency and streamline processes. Learn more about Spend Management and book a demo today.
Stay up to date on the latest news in AP automation and finance
Related