Today’s workforce and the way employees spend on behalf of an organization have greatly changed in the digital economy. Employees are spending more money across more spend categories, and using more payment methods than ever before. And it’s not just digital natives; all employees now expect a consumer-like experience in their professional lives for booking travel and making purchases. As a result, employees today will not operate within an archaic process, and finance departments are struggling to see accurate spend data and manage it strategically without a solution that keeps pace with digital purchasing habits.
The bottom line is this: Spending categories formerly under company control have shifted to employee control. We call this employee-initiated spend, and the ways in which employees spend will continue to diversify and create challenges for organizations as they grow and as technology continues to evolve.
The challenges around employee-initiated spend
Employee-initiated spend is decentralized by nature. This, in turn, creates problems for finance and procurement teams that tend to manage spend in a centralized manner.
- Largest unmanaged spend category: Unlike corporate initiated spend where an organization plans and allocates resources for budgeted purchases, employee initiated spend is more difficult to create strategy around in a centralized manner despite best efforts to do so. Employee initiated spending includes traditional T&E and non-traditional items that are being lumped together. A diverse range of purchase types reside in this category including ancillary fees (from travel to credit cards), mileage tracking, event fees (from supplies to shipping), mobile roaming charges, VAT compliance fees, and remote or home office expenses, making it challenging to effectively capture, see and track this category of spend.
- More payment methods, more problems: With new types of technology comes new ways to pay for purchases. Corporate, ghost, virtual, and P-cards, as well as personal cards, are all payment channels used by employees to pay for goods and services. The challenge comes when multiple payment methods are managed by multiple systems that are not connected and do not share data. Additionally, employees are putting all types of spending on corporate cards that are meant to be used solely for travel and expense, including office-related, entertainment, meetings, and trade show costs.
- Traditional booking channels aren’t enough: As the demographic of the workforce continues to diversify, preferences for how and where employees book travel is complicating traditional managed travel programs. From home-share accommodations to ride hailing apps, the appeal of the share economy is undeniable. It provides travelers with mobile and flexible options, and employees now want the same freedom, personalization, and flexibility they get when booking personal travel to carry over to their professional lives. And they want to be able to do this all from their fingertips, on the go. The share economy has moved from being a consumer-adopted practice to one for business travelers, and the number of spend categories being generated will only continue to grow. Lacking the ability to capture out-of-program bookings and associated spend will continue to challenge organizations because this trend is now a permanent fixture.
- Reaping rewards directly from suppliers: Vendors and suppliers are now marketing directly to your employees with upgrades and offers, incenting them to purchase directly from them. Since employees now want a more personalized and flexible experience, to compete with all the options available to travelers in a digital economy, suppliers are creating more and more incentives and rewards for your employees to reap. Disconnected silos of information are then created due to the multiple booking channels that are available to employees, making it very difficult for organizations to accurately track spend and properly negotiate supplier discounts.
- Finance departments can’t keep up. Most finance departments aren’t set up to see—let alone manage—today’s complex employee spending behaviors because they haven’t been keeping up with technology. If you haven’t taken the first steps of automating the fundamental spending processes you manage, and then systematically automating every part of the spending process, you most certainly haven’t taken the next step of connecting all of those spend sources and processes so that all data is captured for complete control over spend. How we buy for business is changing, and the way finance departments manage this spend needs to change with it.
A better way for managing employee spend
The truth is, employee-initiated spending is not just about travel or expenses, or even invoices. It’s the way those things intersect with each other, and with the apps and payment methods employees are using to make purchases. If you’re not equipped to understand, connect, and control these factors, you’re not equipped to ensure that every dollar you spend is put to the best use throughout your organization.
Automating your travel and expense processes is a critical first step. Then, you must go beyond automation by embracing an open strategy to digitally capture all spend whenever and wherever it happens. Adopting technologies that will connect your travel, expense, purchasing cards, and invoicing will help you gain the insight to properly forecast and keep you from exceeding budgets. And in the end, doing that will help you more effectively manage your organization’s spend.