Written by : Laura Slauson of Airbase View original post
A comprehensive survey of 745 finance professionals at small to midsized businesses, reveals a striking acknowledgment: A majority believe they could save between 2% and 10% of company expenses by improving visibility into company spend and strengthening their cost controls. It is, therefore, not surprising that one of the respondents’ top priorities for 2021 is to gain better control over budgets.
When it comes to controlling a budget, nothing is more frustrating than wasted spend. No matter how much thought goes into budgeting, unplanned or unnecessary expenses can throw targets off. Finance teams find themselves working backwards to track down rogue spending, so their role shifts from one centered around making plans for success, to one of policing employees. Without the right expense management tools, however, it’s impossible to change this dynamic. When finance teams review expense reports and reconcile bank or credit card statements after spending has occurred, they can’t question spend before it happens — only account for it after the fact.
The numbers show that our respondents recognize the imperative to have more visibility in order to avoid wasted spend. When asked how improved visibility could impact savings:
- 68% of all respondents said they could save up to 5%.
- 15% of all respondents said they could save 5–10%.
- 17% of all respondents said they could save more than 10%.
Those reporting the highest amount of potential savings were from larger companies (more than 500 employees), where we might expect to see lower accountability by employees with respect to the budget. Next were midsize companies (between 100 and 500 employees), and those reporting the lowest savings were small companies (fewer than 100 employees). This could mean that smaller companies are more apt to have tighter circles of communication, which can provide a casual control environment.
Read the complete survey results to learn more.
The ability to reduce wasted spend starts with a strong approval process. When purchases are approved up front, including those charged to a card, finance teams have full insight into financials in real time, and don’t have to wait until all systems have been reconciled to spot any issues. Problems regarding unnecessary or duplicate spend are sorted through before spending happens.
According to our survey, many companies recognize the role of pre-approvals in managing spend and gaining control over budgets. At the top end, 41% said they currently have a strong pre-approval process that protects against wasted spend. Conversely, only 14% feel they have little visibility into spend until after the month-end close.
However, 45% of respondents agreed with the statement, “We have a good pre-approval process for spending, except for what goes through our corporate or personal cards.”
Not having control for card spending is a huge blind spot. It is significant because corporate card spending has grown to comprise a large part of spend in companies, and this trend is expected to continue.
For example, Saas subscriptions are generally purchased online by card. The survey results revealed that wasted spend regarding subscriptions is a common budget roadblock. Almost one in four (22%) respondents said they have little visibility into — and consequently little control over — subscription-based spend. This lack of control is often the result of the movement towards decentralized spending. Since many companies no longer require staff to make purchases through centralized procurement departments, employees are free to purchase items such as SaaS subscriptions on their own.
Although this shift empowers employees to purchase what they need to do their jobs, it also leads to gaps in visibility. For example, if an employee signs up for a SaaS subscription on a corporate card, that subscription could auto-renew even after they leave the company and no longer use the subscription. Two employees could purchase the same SaaS subscription without anyone noticing for a long time. Or they could use their credit card when asked to provide one in order to receive a “free” trial, then forget to cancel before the card is charged. This kind of oversight can continue unnoticed for a long time, and take away valuable hours from the finance team in order to resolve once it’s discovered.
With a comprehensive spend management system, pre-approvals for card use are integrated right into purchases.
A use-specific card — usually created as a virtual credit card — can be set to lock before a subscription or free trial comes to an end, so it won’t renew automatically until the subscription has been reviewed. Because virtual cards can be tied to a specific employee, vendor, and time frame, a card can be shut down when an employee leaves a company, without disrupting services others rely on. This prevents so-called zombie spend from continuing after their departure.
Diana Ngo, Senior Director of Finance at YourMechanic, says that moving to a comprehensive spend management system has helped her company get a handle on this kind of wasted spend. “Airbase makes it easy to see if someone else has the same app. So now it’s easy for the finance team and managers across the company to ask, ‘why don’t we just use the tools we already have?’ The visibility really helps us make better decisions as a company. We’ve saved a good 5% in recurring spend with the visibility and control that Airbase has given us.”
Want to get a handle on your budget for 2021 by gaining more control over card spending? Contact Airbase now.
To learn more about Airbase, contact us for a product demo.