Many finance departments are neglecting and even ignoring one of their most critical streams of data: the money leaving the business. This data can yield insights about what is holding the business back and what needs to be done to take it to the next level, yet many companies remain overly fixated on the money coming into the business.
In large part, this is due to the persistence of legacy finance and accounting systems. These systems have embedded themselves over time and mean that information is divided and siloed, making it hard for decision-makers to get an accurate overview of the company’s numbers. This fracturing of data across invoices (some of which are still on paper), employee expenses, payroll, taxes and countless other sources doesn’t need to be the case. Modern technology makes it easy and affordable for businesses to keep track of every penny that is spent. Here’s why upgrading to modern spend management software is critical for businesses of all sizes.
Problems with the status quo
As a business grows, systems which work well – or at least well enough – become increasingly unsuited. There are also systems which are borne of necessity, and others which have become obsolete because of technological progress. This means that large companies are often reliant on systems which aren’t well suited to their current needs, and this is particularly true of spend management. The more staff, departments, costs, and variables a business has to deal with, the more systems they are likely to have accrued to manage them, and each system brings its own quirks and inefficiencies.
This can be a serious issue when it comes to getting an overview of the company’s finances. Numbers are often scattered across dozens of platforms, some online and some not, and it’s up to the finance team to visit each silo to collect them and then piece them together as best they can. This process creates countless opportunities for human error, not to mention the additional time commitment and stress it imposes on the staff themselves.
The value of spend data
Spend data is some of the most valuable data that a business generates. Ensuring that the number on the P&L statement is accurate and being able to break it down to find out where the company’s money is going are both critical to a healthy business. Without this data, businesses could easily be double paying for services, accepting uncompetitive prices for goods, or in the worst cases, be experiencing fraud or embezzlement.
Every time an employee makes a purchase, the finance team should have a record of it. For a company with a large staff, this may seem like an unrealistic volume of data to collect. Collecting it manually may indeed be unrealistic, but automated systems exist which can do it instantaneously. This provides a real-time overview of the money that the business has available, and how it is being spent. However, shifting to a new system can be a big investment, so why should businesses consider moving to a spend management platform?
Modern spend management
Historically, creating a dedicated spend control platform for a business meant engaging with expensive consultants to establish policies, and implement custom technology solutions to support those policies. This was out of reach for most smaller businesses and left many to get by with the mishmash of systems and silos they already had. In recent years, however, a number of online spending management platforms have come to market offering companies a convenient, automated way to keep track of money leaving the business.
These platforms bring together all of a company’s spending in real-time, allowing the finance team to spend less time going silo to silo searching for data and more time generating insights and focusing on growth. What’s more, this technology isn’t the exclusive purview of wealthy corporations: it’s available to businesses of all sizes. Small businesses in particular live and die by cashflow and stand to benefit significantly from adopting new technology.
Certainty and investment
According to recent research by Soldo, 29% of new businesses in the UK and Ireland reported struggling to choose which business priorities to spend their cash reserves on. A further 18% said that they didn’t have enough financial insight to make effective spending decisions. This uncertainty can be a thing of the past with the certainty that modern spend management platforms offer.
Clear, up to date data is a necessity for businesses of all sizes, not only for running the daily operations but also for convincing investors. Knowing the company’s financial performance and being able to generate data-backed forecasts are prerequisites for earning investment, and our survey found that 35% struggle in this area. Modern spend management ensures that businesses have a robust dataset to work from when it comes to generating forecasts, including audit trails and other references for curious investors.
Overall, companies need to have a firm grasp on the money leaving their accounts. Companies which break free from the frustrating, siloed status quo will gain not only a better view of their business in the present, but a better ability to drive profitability and growth in the years to come.