What is spend management?

What is spend management?

Here’s what you can expect to learn in this piece:

Managing expenses is a tedious and tiresome task for both the employees who submit expense reports and the finance team members who review and approve them. It drains productivity, and pulls people away from more important, growth-oriented projects.

Employees are expected to keep careful track of business-related spend data, save receipts, create expense reports, and wait weeks to be reimbursed for out-of-pocket purchases.

Fortunately, technology is changing how companies manage their expenses, and employees no longer have to rely on invoicing for reimbursement. Let’s see how spend management streamlines the traditional procure-to-pay process, and how to implement it at your company for a new approach to spend analysis & spend visibility.

How does spend management work?

Pouring through expense reports is tedious and drains productivity. There's finally a better way to manage company expenses – spend management software.

With an Expense Management system, employees typically spend their own money and then put in an expense report with documentation and request reimbursement from the company. If they spent on something unauthorized, you have to deny the reimbursement, and have a tough conversation with the employee about why they have to pay for the charge that they thought the company would cover. Uncomfortable, and definitely something you’d like to avoid.

With Spend Management, the authorization and approval move from the end of the process (after the money was already spent!) to the beginning, before the spend even happens. Expense reports are eliminated completely because there is nothing to reimburse or approve - if the spend happened, it was authorized.

spend management eliminates expense reports

So, how does spend management actually work? It starts by giving everyone in your company a corporate card, for which the company pays the bill. What? Won't employees spend like crazy?

Well with a traditional corporate card they might, however with spend management these cards are turned off by default and only get turned on when employees are authorized to spend within a budget and with certain types of merchants. For example, you might allow your marketing department to spend on software, but not on designer desk decorations. That would make sense, wouldn’t it?

Spend management turns the corporate card from something uncontrolled to something with ultimate control - giving companies who use spend management more control and visibility over expenses than they get from traditional expense management. Plus, you don’t have to go through the painfully long process of weeding through expense reports, and budget owners have real-time visibility into their actual spend vs budget as well. Spend Management can really be a win win win when it comes to spend visibility!

Spend management software

Spend management software automates time-consuming expensing tasks and frees your finance team members up to work on initiatives that help the company grow and gain a competitive advantage.

Having spend management software lets you see exactly when someone spends money and on what, and eliminates the lag time between when a purchase is made and when you find out about it. There are no surprises when you are armed with these spend analytics. You can manage budgets more accurately because your finance team has real-time visibility into company cash flow – which is the only effective way to truly stay on top of spend data.

spend management software

What are the benefits of spend management?

Spend management is changing how companies keep their expenditures, supplier relationships, and spend data in check. Here’s how it’s adding value to finance teams: spend management provides real-time visibility into actual spend!  Traditional expense methods obscure actual spend data until after the books have been closed and it’s too late to reverse any damage made to the budget.

Spend management decreases the misuse of funds

No matter how clearly they are written, T&E policies can be misinterpreted. They can also be straight up disobeyed.

Spend management solutions help decrease out-of-policy spending by letting account administrators place limits and restrictions on purchases made with a corporate credit card. It’s not only spending over budget that’s blocked; certain purchases can be too, by authorizing spending with only a few types of merchants, such as travel for sales reps who are constantly sent on the road.

This disobedience isn’t always what you would expect, though. It’s not always ‘the steak dinner’ that will show up on an expense report, sometimes it’s unnecessary supplies or other office-related items that may seem reasonable, though they’re really not. Thankfully, a spend management tool’s ability to authorize spending by type of merchant eliminates this problem and improves vendor & supplier management. Irresponsible spending that might’ve been glanced over and approved after the fact can now be prevented from the outset.

Using intelligent spend management tools empowers your finance team to take control of company spending and eliminate policy abuse for cost savings that help the bottom line.

Spend management promotes growth through automation

A question that we often try to ask ourselves at Lola is, “is my current task fulfilling our mission of making our customers’ lives easier, and if not, what options do we have?” Spending time on initiatives that improve the quality of products and services, the lives of employees and stakeholders, and the experience of the customer is a worthwhile investment. Spending company time on repetitive jobs like expensing, however, is a poor use of resources.

Why waste the talent of your finance team by making them do basic data management that software can automate? Spend management software automates time-consuming expensing tasks and frees your finance team members up to work on initiatives, such as strategic sourcing, that help the company grow and gain a competitive advantage.

spend management benefits

How to implement a spend management process

Now you understand why spend management is so much better than the traditional expensing process. How can you make the switch to spend management at your company?

First, you should revise your T&E policy to allow nearly all employees to have access to a company card (don’t worry, the cards can’t be used until there is a budget assigned to the employee. It’s just a piece of plastic until you turn it on!). Review or rewrite budgets and spend categories. Set guidelines for who can spend how much and on what.

Next, choose a software solution or tool to help you implement your new strategy. Lola.com's spend management software has everything that you need! Our solution helps you get in control by tying cards to budgets, tracks all of your spend in real-time, and allows you to ditch expense reports for good (finally!).

Finally, roll out the new spend management solution, and permission out corporate cards. Though you should take some time to properly train employees on how to use the tool, you don’t need to worry about constantly enforcing corporate card and/or spending policies. That’s the beauty of spend management – the controls that you set will take care of it all for you!

Having a spend management system gives you an edge.

Having real-time clarity into expenses gives you an edge - whether you are at a tech company owning contract management with software vendors or at a company offering physical products, owning supply chain management. Traditional expense management slows down both your employees and finance team, creating unnecessary friction that limits growth. Intelligent spend management gives you control over and visibility into spend before it happens, and makes your team happier and more efficient by eliminating expense reports.


About the Author: Rebecca Morrison
As VP of Finance and Operations, Rebecca Morrison oversees financial reporting and analysis, forecasting, and budget management for Lola.com. Previously, she was VP of Global Finance and Operations at Midaxo, and has held various roles in Finance and Operations at HubSpot and EMC.