Spend management: The next big wave in accounting automation
06/10/2021
If a “big wave” ushers in changes to the way we do things, how we understand things and even how we relate to each other, spend management is a tsunami.
Spend management improves the efficiency of accounting and operations by automating time-consuming, error-prone manual work. It shortens the time-to-close, provides for continuous accounting and even opens the way to a rolling, or continuous, close. Further, with modern spend management, teams work together cooperatively and asynchronously, and experience an increased sense of accountability, ownership and agency with respect to their spending and their company’s budget. The benefits of streamlined processes, plus visibility and control, are felt across the organization and ultimately help finance leaders build better, stronger companies.
Why conditions were ripe for this pivotal moment
Accounts payable practices are overdue for a change. Long burdened with cumbersome manual processes and cobbled-together tech stacks, AP teams find themselves spending hours on time-consuming tasks, like reconciling credit card statements, gathering documentation and maintaining spreadsheets for payments. All of this leaves leadership and budget owners in the dark about what is being spent and by whom. In recent years, a confluence of events further magnified the weaknesses in these processes.
- The shift to decentralized spending. Centralized procurement department purchases have given way to employees purchasing resources directly. The corporate card has facilitated this trend, and, while decentralized spending can make teams more productive, it has been at the expense of less efficient finance and accounting operations.
- The rise of subscription-based spending. The subscription model for many products and services has fueled decentralized spending and exacerbated visibility issues. The resulting unwanted auto-renewals, duplicate subscriptions, subscriptions continuing after employees leave a company, etc., lead to wasted spend.
- The move to remote work. New tools are needed to support remote teams by ensuring visibility and control over spending while giving access to the purchases that employees need.
- More agile business practices. The Covid pandemic-induced shutdown highlighted the importance of budget agility and responsiveness. There is an increased urgency to implement tools to capture and report spending in real time, and to secure levers of control to adjust spending when needed.
As these trends strain and, at times, create chaos for accounting teams, innovations in digital payment systems have opened the doors to new possibilities for solutions. Fintech companies that build products on top of these new payment rails have released a spate of software-enabled corporate cards that connect spending from an initial request-to-spend all the way to booking to the GL.
The rise of spend management platforms
A few companies have built these intelligent cards into consolidated spend management platforms that also include bill payments and employee expense reimbursements. Those that haven’t done so are making moves to create a fuller platform solution, building both the depth and breadth that can compete with legacy point solutions — each with varying degrees of success.
We’re witnessing a convergence of some of the legacy software and fintech companies as the former add newer tools and the latter build traditional AP functionality. A case in point is the acquisition by legacy bill payments system Bill.com of Divvy (a modern corporate card and expense management system) as a way to build a consolidated spend management platform. The new software-enabled card companies are adding bill payment functionality to broaden out their corporate card program. Companies like Airbase have designed and built their software as a full platform solution providing breadth and depth on par with point solutions for card, bill payments and expense reimbursements. The only other platform solutions with full spend management functionality have been designed and priced with enterprise-level companies in mind.
Automated workflows make the difference
In the most sophisticated spend management platforms, each AP function is supported by intuitive automated workflows.
- Approval workflows, either upfront for new spending or after the fact for reimbursements, build expense policies into the system. This removes both the policing burden from the AP team and ambiguity about policies for employees.
- Automated accounting, including auto-categorization, amortization, payment scheduling and ultimately syncing to the GL, reduces errors and saves time.
- Automated audit trail creation stores all documents, such as approvals, receipts and email chains, in one centralized location. This means no more chasing receipts or looking for context when processing transactions.
This wave is just rolling in, and its impact is only now being fully understood. Eventually, the finance and accounting world will settle on a definition of spend management that includes the full spectrum of spending and AP activities. After all, it’s the full platform that incorporates all non-payroll spend, with reimagined AP capabilities and software enabled cards, that is catalyzing the real change. Comprehensive spend management with visibility and control over spending, and automation to free finance and accounting teams to focus on work that matters, is nothing short of transformative.
Learn more about the next big wave in accounting: spend management. Download Airbase’s Definitive Guide to Spend Management.
Darcie Lamond is Director of Brand at Airbase. Her career spans both finance and marketing. As head of trading and marketing for a U.S. bank’s derivative products business, she built and ran a global trading operation. As a partner in a creative agency, she helped start-ups and early-stage companies define and build their brands.
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