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Procure-to-Pay Travel & Expense Purchase Card

Expense Management Should Really Be Spend Management

on June 03, 2014

Pierre Mitchell and Tony Darugar provoke some serious thoughts.  They both observe that “expense management” should really be “spend management” and that makes a lot of sense to me.

I really like Pierre’s statement, “If procurement is to help serve up solutions that accommodate different stakeholder roles doing separate processes that involves different spend categories, then the words matter. They are separate building blocks in a holistic spend management solution design.“

Tony’s view is that for expense management to become strategic, it has to be regarded as one of the three pillars of “spend” along with procurement and invoicing.  Tony proposes that these three pillars need to be consolidated into one function governing the ways a company spends money, much like we’ve consolidated our various forms of communication with one tool: the smartphone.

This need expands, in my view, as companies increasingly move away from ACH and check transactions to corporate credit card transactions.  Companies are moving ACH and check payment terms out as far as 75 days while offering the carrot of credit card payments within 30 days of purchase.  Thirty-day terms for credit card purchases provides up to 30 additional days of float plus rebates of 1% or more.

This all makes sense from a cash management perspective, but what about spend visibility and financial controls?  As Tony mentions, if you manage your invoices, your procurement, and expense reports with separate tools, a task as simple as figuring out how many laptops you’re buying using one method versus another one becomes a big exercise. You’ve got to gather data across three different systems, put them all in the same format, and build an analytical tool that shows you the overlap on spending for the laptops (i.e., this much in expense reports and this much in procurement).  Tony’s contention is that this process requires a significant commitment of resources.

But, actually, this is not the case.  Just as smartphones come with apps that can make life easier, so too do spend management processes.  Leveraging SaaS systems that automate the monitoring and analysis of 100% of an organization's disbursement transactions, companies can have visibility to aggregated spend data as well as exceptions to policy, like when the same expenses pop up in more than one system. (i.e. - the travel expense that should really have been transacted in the purchase card program, or the woman’s handbag or pet resort expense that should never have been expensed in the first place.)  These automated monitoring and analysis systems can operate across disbursement functions and can be implemented for no charge.  Companies pay based on the types of analysis they choose to run, the frequency with which the analysis runs, and the number of transactions that are analyzed on an annual basis.  These “apps” for spend management provide visibility into fraud, misuse and abuse, simple errors, and opportunities to make changes to prevent recurring problems.

While the ultimate objective is to remove silos and integrate spend management regardless of the channel, it is possible to achieve the same result with today’s silos.  It’s all about having the right “app” to make it happen.

Chris Rossie

Chris Rossie is a blog contributor for Oversight.