A study this year found that 61% of small businesses struggle with cash flow. It also found that 1/3 of the surveyed businesses are unable to pay themselves, loans, vendors, or employees. Running a business into debt is never anyone’s goal, but it often happens without proper policies in place. To reduce business spending in different categories, improve your spend management strategy. Keep reading to learn how.
Define Your Business Needs
Understanding where your business stands is the first step to building an effective spend management strategy. Think about what you need to achieve growth and business goals.
Consider these questions to help define your business needs:
- Are your processes paper-based or manual?
- How effective are your existing systems?
- Is your procurement process decentralized?
- Is your team making informed and responsible spending decisions?
Answering these questions will help you highlight efficiencies and opportunities for improvement. A spend management plan works when you consider the specifics of your company.
Implement Digital Processes
If your processes are paper-based or manual, they aren’t likely to be efficient. Automating spend management can extend cost savings, accountability, and risk management.If you want accurate business finances, you need continuous data entry. The steps to do this are time-consuming and repetitive. With a manual process, human error is common.
Manual and paper-based processes put your business at risk of the following:
- Overspending
- Maverick purchasing
- Fraud
Using spend management software gives you an advantage when it comes to spend management strategies. Find out more here about spend management software.Choosing the right solution is necessary for your spend management plan. Automated enhancements allow your team to do more in less time while gaining a complete outlook of spending.
Analyze Spending
Without understanding how your business spends money, you won’t have insight on how to create the right course of action.
Spend management starts with gaining control of the following processes:
- Purchase and expense reporting
- Supplier management
- AP workflows
Automating the processes in one platform allows you to collect and analyze spending data. You need insight into spending behavior to have a better chance of creating a successful spending strategy.
It’s recommended to report and analyze spending based on these categories:
- Employee
- Supplier
- Budget
- Transaction
- Financial period
This will help you identify spending patterns and opportunities to cut costs.
Establish Policies
Friction is likely to occur between finance and other departments when data is missing or if there is a lack of understanding and visibility.
You’ll want to create cohesion between key departments to build an effective spend management strategy. Establish procurement policies and enable collaboration to ensure compliance.
Improve Your Spend Management Strategy Now
If you are dealing with cash flow issues at your company, improving your spend management strategy can help.
You can cut down on employee, supplier, and overall business spending with the steps in this guide. Start with defining your business needs, implementing digital processes, and analyzing spending.
From there, you can establish policies that help you reach your financial goals.
