October 19, 2021
Opinion

Why poor spend control can hurt your revenue

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Getting tripped up on outdated methods could cause you to lose your grip on your company’s spending, whereas new technology like spend management software uses automation and artificial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

 

Topics covered in this article:


What is spend control?

Spend control, also referred to as spend management, is the practice of monitoring and managing your company’s outgoing money to determine what’s going out, where it’s going, and why the purchase is beneficial for your employees or the organization as a whole. When you and your accounts payable team correctly practice spend control, you can also make sure that every purchase is approved and that budgets across the company are being met.


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.

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 way to grow your business. You could lose the opportunity to grow as an organization due to a lack of visibility into company spend. 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.

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
  • Executives can’t make accurate data-driven decisions because they don’t have up-to-date information

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.

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.

View of a Ramp accounting dashboard


#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. 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.

Ramp automatically sends a text for purchases that require a receipt, so employees can immediately send a photo.



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.

A spending limit and approval set-up in Ramp


#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 costs by renegotiating with the current vendor. Without this capability, it could take weeks or months to detect these changes and even longer to correct them.

Automated savings alerts in Ramp


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.

Benefits of using Ramp include a full audit rail of requests, approvals, and reviews as well as spend limits and saved time


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.

No credit checks or founder guarantee, with 10-20x higher limits.
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Stefanie Gordon
Senior Content Marketing Manager, Ramp

Stefanie Gordon is a Senior Content Marketing Manager at Ramp. A former financial journalist and content strategist, she is excited to help Ramp develop new, engaging content.

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Learn more about Ramp

Streamline approvals.
Review requests, pre-approve expenses, and issue general expense cards in a few clicks – or directly in Slack. Delegate approvals and empower your team leads to spend on the things they need and control their team’s expenses.
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Issue instant cards.
Unlimited virtual and physical cards with built-in spend limits, instantly available for everyone in your team. Define spend rules and let your smart cards enforce your policies automatically. No more surprises or under-the-radar spending.
Learn more
See spend as it happens.
Stop waiting on monthly statements or manual spreadsheets. Find, browse, and download real-time transactions from any employee, department, or merchant – on any device.
Learn more
Close your books 5x faster.
An accounting experience by finance teams, built for speed and efficiency. Automate manual processes and start enjoying instant reconciliation – Ramp does all the heavy lifting.
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Trim wasteful spend.
Ramp analyses every transaction and identifies hundreds of actionable ways your company can cut expenses and alerts your team via email, SMS, or Slack. It’s like having a second finance team, laser-focused on cutting costs.
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Consolidate reimbursements.
Ramp makes it easy to reimburse your employees for any incidental out-of-pocket expenses. Review, approve, and pay employees back for anything that didn’t make it onto a card with the rest of your Ramp transactions.
Learn more