Why poor spend control can hurt your revenue

If losing some of your company’s revenue to a completely fixable issue concerns you, then you need to examine your spend control strategies. Spend control is the way you manage your organization’s outgoing funds—or don’t manage them. A recent study from European payments platform Soldo found that companies in the United Kingdom were losing about 2% of their revenue annually due to poor spend control.

If you’re not effectively controlling your company’s spending, you could be losing thousands of dollars across your business every month—affecting your overall bottom line and leaving you with unaccounted-for money. Uncontrolled spending can lead to many problems like going over budget, company debt, and more.

Getting tripped up on outdated methods could cause you to lose your grip on your company’s spending, whereas new technology like spend management software uses automation and artificial intelligence to provide real-time visibility.

With the right methods and tools, spend control can help your finance department effectively manage your company’s outgoing funds.

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What is spend control?

Spend control, or spend management, is the tracking and managing of a company’s outgoing money to determine where it’s going and why. With spend control, companies can make sure that every purchase is approved and that budgets across the company are being met.

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How poor spend control prevents you from making important decisions

Poor spend control not only hurts your finances but also affects other areas of your company.

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Without visibility into company expenses, your finance team loses the ability to provide spend data that could give your executive team the information needed to make important decisions, such as the best ways to optimize your supply chain or the best ways to grow your business. You could lose the opportunity to grow as an organization due to a lack of company spend visibility. A lack of spending transparency can also inhibit your ability to set meaningful objectives, since it's difficult to set objectives or figure out how to allocate funds without an accurate spend analysis.

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Identifying causes of poor spend control

If you’re looking at budgets in the red, mismanaged funds, frequent financial errors, and mounting debt, then your company may have poor spend control. Some causes of this include:

• Employees have little to no guidance on what they can and can’t purchase
• Your procurement process and expense policies aren’t clearly defined
• Supervisors don’t have to approve purchase orders or procurements
• CFOs and other stakeholders can’t do proper financial planning and analysis, benchmarking, or make accurate data-driven decisions because they don’t have up-to-date information

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Another way you may be unintentionally practicing poor spend control is by using paper-based systems. These can cause the company time and money, and the potential for human data entry errors to become higher.

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You also risk a greater potential of fraud, as there is more opportunity for employees to falsify expense reports or other financial documents.

Another way you may be unintentionally practicing poor spend control is by using paper-based systems. These can cause the company time and money, and the potential for human data entry errors to become higher.

How to manage your spend control

As you build your spend control plan, consider implementing some of these strategies to help manage your company’s spend and make effective, data-driven choices.

#1: Practice continuous accounting

Continuous accounting involves updating financial information throughout the month rather than waiting until month-end like many manual processes do. These real-time updates allow the finance department and key players in the company to see where money is going and better manage cash flow. You’re able to sync transactions when they happen, giving the finance department instant visibility and transparency. Plus, it saves time and lets department heads know if they’re getting close to monthly budgeting limits so they can adjust spending where it’s needed. Using the right financial management software for this can save your team hours, sometimes even days of time.

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#2: Automate your expense reports and spend policies

When you automate your expense reports instead of doing them on paper, it becomes much easier to control any ad hoc spending. It’s also easier to eliminate any human entry errors that could cause issues later down the line.

Expense management software, like the platform Ramp offers, has the capability to let employees submit receipts on the spot. The software then takes the information from that receipt and reconciles it to an automatically created expense report. Within the system, you can also create digital expense policies that will remind the employee of everything they need to enter to document their purchase, avoiding a long back-and-forth process in the event they forget a key piece of information, and leading to better spending habits among employees. Employees are also typically reimbursed the next day, giving them their funds back quickly, so they aren’t waiting on the finance team or stressing about keeping their personal accounts balanced.

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If your employees are often waiting for expense reimbursements, then you may want to switch to a spend management solution that also offers employee credit cards with built-in controls. They can be virtual cards or physical cards. The company can place limits on them, restrict what merchants employees buy from, and more. These cards allow employees to buy things they need to do their jobs, such as home office equipment or software—and those purchases are then logged into your software, often removing the need to create expense reports.

#3: Approve spend ahead of time and use multi-level approval to stay in control of payments

Empower employees by making it easy for them to request spend and route requests for approval. To do this, you’ll need to use software that lets you instantly generate corporate cards for employees to use upon approval. If you’re having trouble controlling spend, you can set up multi-level approval for bills. This approach provides accountability across the company, gives managers and executives a better view into what employees are doing, and reduces maverick spending. With the right software, you can also create custom workflows that will send the bills along to the right people automatically so that employees don’t use up their time chasing down approvals—this is especially valuable in companies with a distributed workforce.

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#4: Implement automated savings alerts

With automated cost savings alerts in place, your finance team will immediately receive notifications when there is an unexpected spike in costs, duplicate spending, and even redundant software. This real-time data could help the team make quick decisions on what to do. For example, if a vendor suddenly costs more, the finance team can get quotes from other providers or try cutting operational costs by negotiating with the vendor. Without this capability, it could take weeks or months to detect these changes and even longer to correct them.

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A case study: How one company fixed inefficient spend management

When Red Antler, a brand marketing agency, first started, their producers were purchasing everything associated with production. This meant they took time away from their job of creating content to manage expenses manually, which included long spreadsheets and lots of transactions to verify. With this method, many expenses slipped through the cracks, and employees often weren’t reimbursed properly.

To address these inefficiencies, Red Antler decided to work with Ramp and use its spend management software that includes employee credit cards. They were able to get back 80+ hours a month and route all purchasing approvals directly to the head of creative production so that she could monitor budgets in real-time. They also gained insight into purchases across the company.

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Keep your company spending in check with Ramp

At Ramp, we know how easy it can be to fall victim to poor spend control practices—that’s why we created our company credit cards and spend management software that works together to help you be as efficient as possible. If you want to see how Ramp could help your organization streamline spend control, you can sign up for free today.