Spend visibility is the level of oversight a company has about how, where, and why funds are used in business operations. It increases if a company can track and understand its expenses more comprehensively or accurately but decreases if there are difficulties in doing so.
It isn’t limited to tracking spending. It also requires real-time monitoring, spend analysis, and purchase lifecycle optimization. Overall, it gives a detailed and holistic picture of a company’s purchasing processes and financial operations and their productivity, efficiency, and efficacy.
Importance Of Spend Visibility In Business
The main importance of spend visibility is its ability to trace an audit trail behind any transaction. It will serve as a single source of truth for a company’s entire purchase cycle, allowing cost structure transparency, cross-referencing, and optimization. It will also help reduce errors that result in wasted funds and increased costs.
Specifically, high spend visibility should be able to provide information about:
• What is purchased?
• When is it purchased?
• Why is it purchased?
• Who purchased it?
• Who or where is it purchased from?
• How much is the purchase?
• What are the other items and costs involved in this purchase?
• What is the overall cost?
• How often this kind of purchase is made?
• How is it developing?
This data transparency from high spend visibility is invaluable in making data-driven business decisions on company spending. This is particularly important to understand and develop working capital management and procurement strategies effectively.
A granular look into a company’s procurement activity enables finance teams to allocate budgets accordingly, thereby mitigating risks related to not having a good budget and preventing operational losses.
The same granular overview can enable companies to uncover controlled and uncontrolled business cost trends. For example, it prevents maverick spending (i.e., purchases that don’t follow a company’s established procurement rules and procedures) and other areas of overspending, such as over-expensive suppliers. Make sure your business budget is spent wisely and in a planned manner.
Identifying and weeding out high-cost categories can also lead to cost-saving opportunities. For example, suppose two processes use different tools with the same function. In that case, the company can consolidate its expenses into a single service that can be used across the entire business to save more.
Lastly, it ensures a company can enjoy a competitive advantage and stay ahead of the game, even in the current economic climate. As mentioned, it helps a company to future-proof its business by making the best-informed, result-driven decisions and performing cost containment (i.e., reducing costs in a business to ensure or increase profitability).
Reasons Why Some Companies Don’t Have Good Spend Visibility
Traditional accounting and payment practices are the common reason why several companies lack visibility over their spending activities. They are typically processed manually, which is slow, tedious, error-prone, and distracts from higher-value actions.
Manual processes are also decentralized (i.e., controlled or managed by entities). This poor availability of a single source of truth can likely result in costly mistakes, such as duplicate payments or orders.
How To Improve Spend Visibility
The first way is moving away from old-fashioned payment methods, such as cards on file or paper checks. Instead, embrace modern digital payment solutions. This will make spending data much more visible.
The costs for the tools used to improve spend visibility vary depending on the functions or features a company would want to avail. Generally, it can range from as low as $9 to as high as $2000 per month. Despite these costs, companies using these tools achieved 5% -20% cost savings for each new money spent under management.
For new, small, or struggling businesses who need financing, they can tap into alternative lenders. They offer the easiest personal loans to get online because they are more lenient towards borrowers with poor cash flow and credit than other traditional lenders.
Moreover, digital payment solutions are automated, saving companies more time and reducing the likelihood of time-consuming and costly errors. Plus, they offer savings opportunities to companies and customers, such as supply chain finance and dynamic discounting.
For big companies, besides digital payment solutions, it is recommended to adopt a centralized spend management system into one digital platform. Opt for a suitable internal access control system to ensure large efficiency improvements.
Ideally, a centralized spend management system with a broader enterprise resource planning (ERP) system is recommended. This gives better visibility over company-wide spending, ensuring people across a company are on the same page.
Lastly, automating spend-related processes using spend management software is also good. It further improves a company’s efficiency in data collection and analysis. Apart from payment processes, it can also provide opportunities to automate cash flow and demand forecasting as well as supply chain activities, such as inventory and supplier management.
Final Thoughts On Business Visibility Spending
Adopting digital systems to improve spend visibility is important in business. It helps companies get comprehensive insights into their finances and increase spending efficiency, resulting in better working capital management.
