Majority of businesses not equipped to leverage cost-saving opportunities such as early-pay discounts or out-of-policy spend
New research from Emburse, a global leader in spend management solutions, shows that most organizations are missing out on opportunities to improve their cash flow, reduce operational costs and identify expense fraud.
“The COVID pandemic presented multiple challenges to finance teams, and some responded by reassessing and then redesigning their processes to increase resilience”
Emburse studied the spend management practices in almost 200 finance departments and determined that only 17 percent are fully optimizing their spend. The remaining 83 percent are leaving valuable optimization and savings opportunities on the table.
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Organizations that fully optimize their spend can, for example: time payments to maximize cash flow and leverage early pay discounts; eliminate cost leakage through out-of-policy expenses and fraud; and analyze their spend to make informed decisions about vendors. They also save valuable finance department time by automating all processes from remittance to reconciliation and eliminate employee frustrations by moving to real-time expense reimbursement.
Emburse has identified four stages of spend optimization.
- Ad hoc – reactive with primarily manual processes – 37 percent of companies. Companies at this stage rely on spreadsheets, email, manual data entry and paper checks. They have no ability to optimize timing of payments or reimbursements and have little to no proactive controls, relying on manual spot checking for compliance after the fact.
- Managed – basic spend controls in place – 23 percent of companies. Companies at this stage have some tools for basic automation and reporting and limited spend controls, but have slow approval times and no actionable spend insights.
- Accelerated – increased control and agility but few actionable insights – 23 percent of companies. Companies at this stage have automated controls and processes, resulting in faster reimbursement and payments, but data is siloed and there are limited analytics capabilities to identify cost saving or cash flow improvement opportunities.
- Optimized – digitally transformed across the entire spend spectrum – 17 percent of companies. Companies at this stage are able to make strategic spend decisions based on data, directly impacting opex, revenue and cash flow as well as team productivity.
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“Finance departments are in the midst of a major shift from spend control to spend optimization. Employees want more autonomy over what they spend on, when and who with. Finance departments can get ahead of this by improving their visibility into spending and putting in place guardrails that are informed by data and enforced through automation,” said Eric Friedrichsen, CEO at Emburse. “Finance teams that continue to operate with predominantly manual processed or siloed data systems are at a significant disadvantage because they simply spend too much time on the basics, and don’t have the time or the ability to generate the kind of insight needed to optimize their spend.”
“The COVID pandemic presented multiple challenges to finance teams, and some responded by reassessing and then redesigning their processes to increase resilience,” observes Robert Kugel, Senior Vice President and Research Director at Ventana Research. “In the case of spend management, some were able to provide their entire organization with significant improvements to productivity, control, and employee satisfaction. Unfortunately, many continue to use ad-hoc, manual and reactive spend methods. However, armed with a clear set of objectives they can use today’s spend management solutions to quickly evolve to optimize processes and spend while future proofing their operations from the impact of any disruption.”