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6 Common Mistakes You Shouldn’t Make In Your Spend Management Strategy

6 Common Mistakes You Shouldn't Make In Your Spend Management Strategy
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A robust spend management strategy is critical for businesses in the modern landscape as it impacts both the internal and external stakeholders, budgets, and profitability. Expense management and Spend management are two terms often confused with each other. While expense management includes work-related expenses incurred by an employee, spend management comprises expense management and all direct & indirect expenses involved in organizational operations.

In most cases indirect expenses go untraced resulting in maverick spends, lack of control, and a broken and slow procurement cycle. This is where investing in a spend management software becomes important as it helps centralize, verify, and analyse expense data which drives a data-driven spend management strategy.

However, while most organizations understand the role an effective spend management strategy plays in controlling and optimizing spends they tend to make a few mistakes. In this blog we delve deep into mistakes businesses make with regards to spend management strategy, their impact, and why should they be avoided at all costs.

Common Spend Management Strategy Pitfalls to Avoid

  1. Lack of well-defined policies and guidelines

  2. Without a system with well-defined controls, policies, and guidelines, employees often make spends and submit an expense report several weeks and, in some cases, months later. In many cases, the expenses are done without purchase orders. When it comes to the notice of financial controllers, it is too late. To undo the damage, they are often left with only two choices – put tight controls in place leading to unpleasant situations between finance and various teams or overlook these overspends. Neither is in the best interests of the organization.

    Spend management software can help companies implement the required controls and enable in maintaining a healthy bottom line.

  3. Poor supplier management

  4. Managing any resource requires complete visibility of data. In most cases, the spend data and supplier information are siloed, resulting in duplicate payments, late payments, failure to leverage early payment discounts and more. A disconnected system and teams also lead to failure in negotiating the best rates and payment terms with suppliers. All these factors compounded have a devastating impact on the financial stability of the organization .

    Read our blog on: Supplier Management–Benefits, Process, & Best Practices

  5. Ignoring employee feedback
  6. A data-driven strategy is effective, but data is not numbers alone. When planning any new strategy and implementing changes gathering data or feedback from employees is essential and most organizations fail to do this. It is the employees who carry out day-to-day operations and hence can give deep insights on challenges at the ground-level. Redesigning or automating a process is successful only when there is complete visibility of challenges and bottlenecks.

  7. Relying on manual processes
  8. A whopping 44% organization have manual processes in place to gather and track spend data. Needless to mention the errors and misses manual processes are prone to leading to many unidentified expenses and maverick spends . Though every individual expense may be small but combined and untraced they become substantial leading to budget over-runs and low and sometimes losses as well.

  9. Failing to invest in technology – spend management software
  10. Most organizations fail to realize the potential of automation and technology in making operations smooth, agile, and seamless. The spend management strategy, in particular, benefits in more ways than one can imagine by leveraging the capabilities of a spend management software.

    The software gathers all spend-related data in a single place, enables tracking expenses in real time , and identifies cost-saving opportunities. It helps to implement in-built controls and necessary compliances, thereby streamlining the entire procure-to-pay cycle and adherence to necessary compliances and regulations. This eliminates or minimizes instances of fraud and misuse of business funds and authority.

    In summary, a spend management software ensures visibility and fairness in spend management.

    Read our blog on: Top 7 Spend Management Software Benefits to Revolutionize your Financial Management

  11. Failure to analyse data
  12. Analysing data to drive effective spend management strategy is possible when one has complete access and visibility of data. In most cases, getting a holistic view on spend sources (vendor management systems, contract management systems, and enterprise resource planning (ERP) systems) is difficult in the absence of integrated data. Data silos make analyzing data and identifying cost-saving opportunities leading to errors, inaccuracies, and redundancy.

Zycus Spend Management for Efficiency

46% of CFOs lack complete visibility on financial transactions within their organisations which is why they aren’t able to identify leakages and stop them. Leveraging Zycus’ AI-driven spend management software can help business eliminate manual processes and g give key stakeholders and decision-makers deep insights and a comprehensive view of total business spending.

With Zycus get an edge over competition by:

  • Getting complete visibility on suppliers and spends
  • Better negotiation control with Merlin payment term maximiser
  • Benchmarked supplier recommendations
  • Identifying savings opportunities

Get a hold of your spend management function with Zycus. Book a demo now!

Related Reads:

  1. 7 Steps to Effective Spend Management
  2. The Increasing Need for Intelligent Spend Management Solutions
  3. Benefits and Challenges You Didn’t Know about Spend Management
  4. White Paper: The Evolution of Spend Analysis and the Rise of Big Data
  5. White Paper: Advanced Spend Analysis- A new offering for your procurement initiatives
  6. White Paper: Smart Spend Analysis: A bird’s eye view
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