You might think that a corporate card with good cashback or points is sufficient for your business's expense management needs. However, that would be shortsighted.
Companies who want to make their teams more efficient and achieve greater ROI are increasingly realizing the value of expense management tools. These tools can help business owners dig deeper into the context of their business spending, which is especially important in these economic times when expense management has become a necessity—not a nice-to-have. Without these tools, businesses of every size can accrue hidden costs on top of rising operating costs. While rewards like cashback can be helpful, expense management tools can actually provide a long-term market advantage.
Right now, businesses are being hindered by inflation that is making it even more expensive to fund day-to-day operations. Three-quarters of small businesses report being negatively affected by rising costs in the past six months, according to a recent Goldman Sachs survey.
Our own spending benchmarks for Q2 2022 show that companies big (and small) are seeing an uptick in spending across many categories. For example:
- Shipping expenses soared for large enterprises, increasing 103% to overtake advertising, as their top expense. Software spend spiked too, up 68.3% on Q1 2022.
- Merchandise costs remained the top expense for small businesses, although airlines, restaurants, and cloud computing transaction volume grew the fastest.
- Advertising was the top expense for large SMBs and mid-market companies, while airline and restaurant costs were the fastest growing.
Expense management tools can help combat these rising costs and arm businesses with the technology they need to navigate the current economic climate and avoid costly mistakes, such as:
1. Missing saving opportunities
With the speed of business today, companies need to be able to get real-time insights into their spending at the click of a button, not at the end of the month. They also need to have access to the insights they need to ensure that they’re saving cash whenever possible and aren’t throwing money down the drain, e.g. on duplicate spend.
2. Chasing out-of-pocket expenses
Out-of-pocket expenses are a clear example of the drawbacks of not investing in expense management. Think about your own processes for a moment. Are you relying on employees to email you their invoices and receipts, and then having to manually track down and rectify out-of-policy spend? These steps can all be a real drain on finance’s time and it can create additional costs. With functionality like spend controls and pre-established expense policies, which can streamline these processes, you’ll be able to avoid such costly and unnecessary steps.
3. Overpaying for software
Once your SaaS needs pass around $10,000 for a piece of software, pricing can often seem like a black box. You could be vastly overpaying for contracts and not even know it. Procurement tools can help you manage vendors, stay notified of better prices, and even negotiate costs like pricing, terms, and licenses.
4. Encountering messy vendor payments
Your vendors and suppliers each have their own payment terms and billing cycles. When you don’t have any flexibility in paying these contracts, you could be stuck adhering to rigid payment terms or late fees, which is a recipe for lumpy cash flow.
5. Wasting top talent's time
The human factor just might be the biggest of all the hidden costs of unmanaged operating expenses. Employees usually don’t want to spend any time dealing with clunky expense systems that were designed for how businesses ran in the 90s.
Similarly, finance doesn’t want the end-of-month close to feel like a game of hide-and-seek, one where they constantly have to nag teams and managers for mundane expense reports. Today, your talent wants to focus on high-value work that they actually enjoy.
Getting serious about expense management
Simply relying on monthly cashback as your main perk won’t solve any of the above errors. However, combining cashback with tools that can help you manage expenses, streamline operations, and automate the pain away will help set your business up for long-term growth. Businesses that use Ramp save an average of 3.5% in their first year. See how much expense management can save your team by signing up today.