In our ongoing customer improvement series, we’ve discussed how employee spend is changing, tips for mitigating fraud, how to maximize visibility, why you should be controlling low-level spend, and the power of corporate and p-cards. Now, we turn to the business outcomes that organizations can look forward to achieving by implementing best practices and intelligent spend management processes associated with employee-initiated spend.
What are business outcomes?
Business outcomes are broad goals the organization strives to achieve to meet its commitments to shareholders, employees, clients, and suppliers. In relation to employee-initiated spend, including travel, expense, and discretionary or low-level spend, we group these outcomes into three pillars:
- Controls and compliance
- Spend visibility and management
- Employee satisfaction and workforce engagement
For instance, shareholders benefit when the organization is in control of spend, employees benefit when tedious administrative and repetitive tasks can be automated to enable them to spend more time on activities that move the business, and suppliers benefit from timely payments for the goods and services they provide.
What is intelligent spend management?
Intelligent spend management of employee-initiated spend is a comprehensive way for organizations to obtain a unified view of spend. Intelligent spend management consists of managing:
- Every source of spend – such as air travel, auto mileage, non-P.O. invoices, cash payments, services, etc.
- Every category of spend – such as sales expenses, home office expenses, marketing support, supplies, etc.
- Providing a unified view of spend – which benefits multiple functions of the organization’s finance, accounting, and HR departments.
We achieve the above by:
- Capturing data every time money is spent – e.g. through corporate cards, online booking tools, automatic mileage logging, image capture of receipts, etc.
- Categorizing spend as soon as it occurs through the application of rules, artificial intelligence, and machine learning
- Applying policies for approval routing and payment authorization
Best practices for intelligent spend management
Capturing spend should be an initial area of focus. Best practices include use of mobile devices for scanning receipts and approval of expense reports, OCR and machine learning to automate the capture of invoice data, and having an integrated system linking travel reservations and expense reporting.
Categorizing spend involves one or more of the following activities: assigning invoices/expenses to departments and project owners, determining the tax treatment of expense, validating that the vendor is in the database of suppliers, among others. This categorization is very important because it will affect the volume of business the organization is spending on the individual vendors, and the amount of money charged to each corporate department. Best practices associated with categorizing spend include using automation to record and categorize expense and invoice items, automation of mileage recording and entry, and usage of corporate cards and P-cards instead of cash.
Policies for approval of reimbursement and payments may include limiting the expense to an allowable range, purchasing from approved vendors, attachment of receipts for tax substantiation, obtaining prior approval to the purchase, etc. Best practices associated with application of policy include use of automated tools to detect unusual expenses or reimbursement request patterns, tools to reject non-conforming P-card charges, and tools to track non-P.O. expenses against approved budgets.
Applying intelligent spend management best practices improves business outcomes
The same best practices associated with intelligent spend also help achieve the organization’s desired business outcomes of spend visibility and management, internal controls and compliance, and employee engagement and satisfaction. For instance, practices that minimize blind travel spend or integrated tools that link bookings and travel expense improve the organization’s spend visibility and management. Practices that include tools to detect unusual expenses or tools that track expenses against approved budgets improve the organization’s internal controls and compliance. And practices that involve automation of expense report creation, categorization of invoice items, or mobile tools for receipt capturing and approvals, improve employee engagement and satisfaction.
Best Practices in Action:
Using corporate cards instead of cash the organization gets rebates in the 0.5% to 1.5% on amounts charged to corporate card. So, moving $5 million in spend from check or cash to corporate card can save the organization up to $75,000. Integrating the corporate card program to the organization’s T&E management system provides enhanced spend visibility with daily reports from the financial institution showing employee name, amount charged, vendor name, and other category info.
An Aberdeen study found employees who are always on the road, using mobile devices for receipt/invoice capture and expense approvals, can save up to 4.5 hours per month – that’s a week each year per employee! In addition, organizations experience 28% faster approval times, less time handling receipts, and managers are able to approve on-the-go, all which result in higher employee engagement and satisfaction.
An IDC 2017 study found that after deploying a system to manage incoming invoices, the surveyed organizations reported general ledger coding errors dropped 90%, time spent on invoice management tasks decreased 34%, and IT staff time required to manage invoice management solutions was reduced by 29%. So not only did the benefit impact the A/R and A/P department through better internal controls – but also the IT department as it could support the application with fewer staff members.
Putting it all together
Best practices associated with intelligent spend management help organizations improve their business outcomes. Those outcomes benefit multiple departments/personas in the organization, for example:
- HR manager benefits from happier employees that can dedicate more time to their functions instead of spending time with expense reports
- Procurement has more visibility on opportunities to aggregate spend by vendor or supplier category
- Treasury has more visibility in managing cash flow
- Director of compliance can spot non-compliant charges faster, as well as potential fraud
- Accounting will have increased productivity in data entry and categorization
So as each department focuses on the benefits, they see brought about by spend automation and integration tools, making their value visible to the organization’s leaders is key in order for management to appreciate the breadth of business outcomes the organization can achieve through intelligent spend management.
For more information on how SAP Concur Customer Improvement can help you and your organization, please contact your SAP Concur representative.