In our ongoing customer improvement series, we’ve discussed how employee spend is changing, tips for mitigating fraud, why you should be controlling low-level spend, and the power of corporate and P-cards. Now, we turn to the business outcomes that your organization can look forward to achieving by implementing best practices and intelligent spend management processes associated with employee-initiated spend.
What are business outcomes?
Business outcomes are broad goals the organization strives to achieve to meet its commitments to shareholders, employees, clients, and suppliers. In relation to employee-initiated spend, including travel, expense, and discretionary or low-level spend, we group these outcomes into three pillars:
- Controls and compliance
- Spend visibility and management
- Employee satisfaction and workforce engagement
For instance, shareholders benefit when the organization is in control of spend; employees benefit when tedious administrative and repetitive tasks can be automated to enable them to spend more time on activities that move the business; and suppliers benefit from timely payments for the goods and services they provide.
What is intelligent spend management?
Intelligent spend management of employee-initiated spend is a comprehensive way for your organization to obtain a unified view of spend as follows:
- Managing every source of spend such as air travel, auto mileage, non-P.O. invoices, cash payments, services, etc.
- Managing every category of spend such as sales expenses, home office expenses, marketing support, supplies, etc.
- Providing a unified view of spend, which benefits multiple functions of the organization’s finance, accounting, and HR departments.
You can achieve the above by:
- Capturing data every time money is spent, for example through corporate cards, online booking tools, automatic mileage logging, image capture of receipts, etc.
- Categorizing spend as soon as it occurs through the application of rules, artificial intelligence, and machine learning
- Applying policies for approval routing and payment authorization
Best practices for intelligent spend management
Capturing data should be an initial area of focus. Best practices include use of mobile devices for scanning receipts and approval of expense reports, OCR and machine learning to automate the capture of invoice data, and having an integrated system linking travel reservations and expense reporting.
Categorizing spend involves one or more of the following activities: assigning invoices/expenses to departments and project owners, determining the tax treatment of expense, and validating that the vendor is in the database of suppliers, among others. This categorization is very important because it will affect the volume of business the organization is spending on the individual vendors and the amount of money charged to each corporate department. Best practices associated with categorizing spend include using automation to record and categorize expense and invoice items, automation of mileage recording and entry, and usage of corporate cards and P-cards instead of cash.
Policies for approval of reimbursement and payments may include limiting the expense to an allowable range, purchasing from approved vendors, attachment of receipts for tax substantiation, obtaining prior approval to the purchase, etc. Best practices associated with application of policy include use of automated tools to detect unusual expenses or reimbursement request patterns, tools to reject nonconforming P-card charges, and tools to track non-P.O. expenses against approved budgets.
Applying intelligent spend management best practices improves business outcomes
The same best practices associated with intelligent spend also help achieve your organization’s desired business outcomes of spend visibility and management, internal controls and compliance, and employee engagement and satisfaction. For instance, practices that minimize blind travel spend or integrated tools that link bookings and travel expense improve spend visibility and management. Practices that include tools to detect unusual expenses or that track expenses against approved budgets improve internal controls and compliance. And practices that involve automation of expense report creation, categorization of invoice items, or mobile tools for receipt capturing and approvals improve employee engagement and satisfaction.
Best practices in action
Using corporate cards instead of cash, your organization can get rebates in the 0.5% to 1.5% range on amounts charged to the cards. For example, moving $5 million in spend from check or cash to a corporate card can save up to $75,000. Integrating the corporate card program to your T&E management system provides enhanced spend visibility with daily reports from the financial institution showing employee name, amount charged, vendor name, and other category info.
An Aberdeen study found that for employees who are always on the road, using mobile devices for receipt/invoice capture and expense approvals can save up to 4.5 hours per month. That’s a week each year per employee! In addition, organizations experience 28% faster approval times and less time handling receipts and managers can approve on the go, which all result in higher employee engagement and satisfaction.
An IDC 2017 study found that after deploying a system to manage incoming invoices, the surveyed organizations reported that general-ledger coding errors dropped 90%, time spent on invoice management tasks decreased 34%, and IT staff time required to manage invoice management solutions was reduced by 29%. Not only did the benefit impact the A/R and A/P departments through better internal controls, but also the IT department, as it could support the application with fewer staff members.
Putting it all together
Best practices associated with intelligent spend management help organizations improve their business outcomes. Those outcomes benefit multiple departments/personas, for example:
- The HR manager benefits from happier employees who can dedicate more time to their functions instead of spending time with expense reports.
- Procurement has more visibility on opportunities to aggregate spend by vendor or supplier category.
- Treasury has more visibility to better manage cash flow.
- The director of compliance can spot noncompliant charges and potential fraud faster.
- Accounting has increased productivity in data entry and categorization.
As each department focuses on the benefits brought about by spend automation and integration tools, it’s key for them to make the value visible to the organization’s leaders. This way, management can appreciate the breadth of business outcomes the organization can achieve through intelligent spend management.
Ready to learn more? Download the white paper to understand what you can achieve by capturing every source of spend, across each category, in one unified view.
This post originally appeared on the SAP Concur Newsroom.