Understanding Spend Management & Why You Need it


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Procurement is the art of creating supplier relationships and managing them to guarantee a stream of the resources your organization needs to operate.

Procurement involves verticals such as sourcing for suppliers, vetting them, managing supply requests from within your organization, passing them on to suppliers, all the way to settling supplier invoices on time.

Essentially, procurement is about acquiring the supplies you need to run your business.

As a result, a significant volume of your budget goes right into the procurement pipeline, and according to the Chartered Institute of Procurement and Supply, up to 70%.

What follows is that if you can optimize spending at this level, you’ll be able to do more with less, build an agile organization, and get more profitable.

That’s the origin of spend management.

Spend management is the art of planning and managing expenses to optimize your procurement and minimize waste. No matter the size of your organization, spend management empowers you to:

  • Spend your budget prudently
  • Eliminate waste through out-of-policy spending
  • Eliminate expensing fraud
  • Control expenses end-to-end
  • Generate the insights you need to manage your procurement better,
  • Increase profitability

In this article, you’ll learn how spend management works and why you need to double down on it to achieve your business targets more efficiently.

What are the benefits of spend management?

Managing spend helps you plan every dollar and ensure it gets spent where it can make the most impact.

That’s the central benefit of spend management. It helps you take a more intentional approach towards your procurement so you can achieve the same and even better results without bleeding cash.

The benefits of spend management are as follows.

Get visibility into your expense data

One of the biggest setbacks organizations of all sizes face is obscure, invisible data.

Supplies are delivered and records are not kept properly. Requests for goods are made and not documented. The budget keeps increasing year on year while efficiency and productivity keep dropping.

There’s no careful collection of data, and even if there is, it’s hard to make sense of all of it since it’s scattered across excel, email, and hundreds of forms and files.

As a result, it’s hard to pinpoint what’s working, what’s not, and what to fix to get better outcomes.

Spend management fixes all this.

More than just helping allocate budget, spend management keeps track of expense data for future reference.

And with this data structured better than just a dozen scattered forms, you can see trends in your organization’s spend to determine where to move your budget dollars to get the most bang for your buck.

Prevent maverick spend

What do employees do when they have unlimited leeway to make expenses at will? Well, whatever can go wrong eventually does, so they buy from unvetted suppliers, rack up huge expenses, and create a budget hollow.

By requiring prior approvals for certain transaction benchmarks, spend management helps create the oversight of a maverick, over the budget spend, thereby controlling it to a bigger extent. If you are wondering where to start, here’s a free ebook on how to bring your spend under management to eliminate maverick spend. Download it now!

Eliminate fraud

We’ve all heard stories of company employees buying their personal stuff with corporate cards, to the tune of tens of thousands of dollars.

Of course, they intended to pay back. But when no one bothered asking, they simply decided to zip up and pretend nothing happened.

Over time, this behavior snowballs until it brings the whole organization down. And you don’t want that to be your story, do you?

With dynamic controls that determine what employees can buy and what’s out-of-policy, you can prevent fraud and ensure only what’s needed gets ordered and that only what’s ordered gets paid for.

In-depth controls into the expense process

There’s a lot of opportunities for things to go wrong in the expense process.

That possibility increases proportionally with the amount of independence given to individual employees to spend without oversight.

Spend management helps create detailed oversight rules that expenses have to pass before approval and helps limit reckless spending and even save money on legitimate expenses.

Smoother, faster procurement operations

Spend management speeds up under a system where employees don’t have to manually get approval for every purchase before they make it.

Rather, they purchase from the budget allocated to them and the procurement department takes one last look to ensure everything is in other before approving the purchase.

Spend management removes the friction of manually approving any item employees need to purchase and replaces it with one where there’s efficiency without sacrificing agility.

A five-step process for managing spend smarter

For all it promises, spend management is yet another process in the procurement equation.

As such, you need to approach it with a calculated, measured approach to ensure you’re able to keep track of your spend obligations and manage them efficiently.

Here’s a brief of the process you can adopt to better manage spend across your organization.

Identify all spend channels, direct and indirect

The first step in the journey to better spend management is identifying all the channels you make expenses from, direct and indirect alike.

Create a comprehensive list of all vendor contracts, and all purchases your organization has made over a past timeframe.

Bring your expenses under management

With your spend channels clearly defined, the next step is to create a system for managing them.

This can include issuing payment instruments with unique controls to employees or creating purchasing workflows with approvals built-in.

Bringing expenses under management helps in tracking data and minimizes the risk of leakage.

Channel your expense data into one source of truth

Bring in all your expense data into one place where you can clearly visualize it, filter down data sets, and make sense of it all.

You could use Excel, but given you may have data in other formats Excel can’t process, it’s often better to have your spend management built on a system with spend reporting designed into it.

This eliminates the need to try hacking together with other tools and gives you one source of truth that works for everyone.

Analyze your spending data

Look into the figures. Filter, segment, and analyze to see any irregularities, patterns, or trends you can connect back to your business performance.

Spend management is essentially a game of data and whoever can process the most data and make sense out of it often has the edge required to win.

Execute on insights

With the insights you need in your hand, you can go ahead to make changes in your procurement strategy, the source for new vendors, procure new product types, and find new ways to spend your budget to make the most influence on your organization’s targets and goals.

Use Kissflow Procurement, the better spend management software

Kissflow offers the all-in-one procurement platform for sourcing suppliers, managing supply requests from your team, managing vendors, and simplifying spend management.

Put together, Kissflow offers a single source of truth where you can manage your procurement with minimal friction and maximum visibility.

Kissflow is built out with advanced features such as:

  • Product catalogs to simplify product ordering
  • End-to-end vendor management from onboarding to payments
  • Multiple payment options to accommodate different vendors
  • Communications via chat, mentions, and notifications to keep both your team and vendors on the same page
  • Enhance security protocols to protect your data
  • Drag and drop process builders for designing your workflow
  • Simple document management that fees you from sending docs over email forever
  • Reporting and in-depth analytics

Learn more about how Kissflow can transform your spend management here.

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