Spend Management Solutions Move Beyond Silos

There have been several years’ worth of evolutions and revolutions in spend management.

As recounted by John Young, CPA at Airbase, as recently as 10 years ago, keeping track of business spending and reconciling was, in his words, “unbelievably manual.”

Those processes were traditionally dictated by the accounting department, setting up workflows that — the rest of the workforce didn’t follow — all too often.

“Accounting was always an ‘after the fact’ concept,” said Young. “And so, companies had slow closes — and making real-time decisions has been hard” because of low visibility into the corporate’s financial position.

Fast forward to the past half-decade, he said, and a proliferation of tools and technologies have addressed some of those pain points. Bust they’ve been developed within certain silos — geared toward specific business needs.

Silos Coming Down

“These tools were meant to address processes that were already in existence,” Young said.

But most recently, and especially as the pandemic took root, accounting teams have begun to take a holistic approach toward workflows and gotten better clarity on how employees can categorize and code their expenses (often in an automatic fashion) to get better compliance.

Among those technologies that help streamline those processes, optical character recognition (OCR) has improved markedly, positively impacting those first steps of data entry and processing. Not long ago, it had a 20% success rate in “reading” data.

Young said that accuracy rate is now about 100%, with tools on offer from firms such as Airbase. And in moving beyond the siloed approach, software can foster better collaboration between finance and other parts of the business, ensuring bills are all accounted for and paid.

“The whole process has become more pleasant,” he told PYMNTS.

In doing so, more responsibility is placed back in the hands of the employees who are spending the money.

At a high level, he said, “when we talk about spend management … we’re saying that if you’re spending it on a card or asking for reimbursements or asking for [accounts payable (AP)] payments, data are still getting put in to capture the information and getting it back to the employees to provide real-time insights.”

Virtual Cards Ascendant

As a result, the 30-day closing process falls by the wayside in favor of a consistent, unified view of where invoices, payments and expenses “are” at any given time.

The rise of virtual cards has spotlighted a fundamental change in spend management, where eCommerce can be streamlined, as employees no longer must carry plastic cards and type numbers into a checkout page.

But because physical cards have been prevalent, there will need to be some education in the mix, said Young, to get virtual cards more fully into the field. And in illustration of the advantages inherent with those cards, specific “approval policies” can be embedded within them. For example, one card can be issued and used for a specific airline for employee travel or recurring subscriptions.

“The great thing about these cards,” said Young, is that “they can give so much more granularity and control to people and business owners and accounting departments to control spend.”

He posited that business owners might be relatively quick to embrace those virtual options, as they may already be used to using digital wallets and other high-tech options to manage expenses.

Down the line, he said, virtual cards will find more penetration in spend management across verticals and businesses of all sizes because visibility into everyday spend translates into better cash flow management.

Better cash flow management is ever urgent in an inflationary environment, and better data and analytics can refocus managers’ attention on unnecessary expenses.

“When you consolidate all of your spending into one area, now you can make important decisions identifying, ‘Do we need to spend this money?’” he said.

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