What is spend visibility?: Strategies for improving financial oversight

/ Posted By - Bradleys Accountants / Categories - Advice for Small Businesses

Did you know that only one in ten UK finance decision-makers has complete spend visibility across their business? Without seeing where the money is going, risk management and resource allocation become much harder.

Investing in expense visibility can be a key factor in a company’s commercial success, as optimised day-to-day spending decisions add to long-term financial oversight and accountability.

In this blog post, we’ll talk about the concept of spend visibility and how to make it work for your organisation.

Highlights of the UK Spring Budget 2024

In simple terms, spend visibility is about a company’s ability to understand and track how capital is used in its business operations. It encompasses tracking, analysing, and understanding spending across various departments, projects, and suppliers.

By leveraging technologies such as data analytics, Artificial Intelligence (AI), and digital platforms, companies can gain real-time insights into their spending patterns, identify cost-saving opportunities, mitigate risks, and optimise their procurement processes.

The better the finance team can identify where, when, and how money is spent, the higher the company’s spending visibility.

It enhances financial transparency and enables strategic decision-making, fosters compliance with regulatory requirements, and ultimately drives operational efficiency and cost-effectiveness within enterprises.

The importance of spending visibility

There are numerous benefits to having high spending visibility. When you know how your money is being used, you can decide how to optimise that usage for maximum business returns, which is key to your long-term success. Investing in spend visibility can help you:

  • Identify specific opportunities and inefficiencies in your spending patterns
  • Improve cost control and reduce resource wastage by only spending on the most efficient activities
  • Streamline your business processes by determining which automation and what team sizes are best
  • Optimise your marketing strategy by focusing on the channels that give you maximum ROI.

Key components of spending visibility

Spend visibility in its ultimate form gives you a comprehensive overview of your organisational budgets and day-to-day individual transactions. There are three main components involved in building this overview:

  • Data capture, i.e. budget tracking and expenditure recording as they occur
  • Spend analysis, i.e. understanding the spending data and deriving insights and recommendations from it
  • Reporting, i.e. the sharing of relevant insights with stakeholders

Each of these three is critical, and together, they form a connected system that gives an accurate picture of the company’s entire purchase cycle.

Expense tracking incorporates elements of predictive analytics, enabling companies to anticipate future spending patterns and potential risks.

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    Challenges in achieving high spending visibility

    Despite how vital spending visibility is, many companies, including startups, still struggle to achieve it. Several barriers exist to the seemingly simple process of tracking and analysing business expenses. These include:

    1. Lack of a single source of data

    Often, there’s no one centralised dashboard recording all the expenditures taking place within the organisation. This means that different teams work with different data, which can lead to certain expenses being missed out or wrongly categorised and duplicate transactions being recorded.

    2. Use of cash or other traditional payment methods

    Businesses that use cash, cheques or cards on file must manually upload those transactions into the expense system, a process fraught with human error.

    3. Lack of data integration

    Maintaining a complete database of consolidated expenditure information is extremely difficult in businesses that rely on manual accounts payable processes. Not only is there the risk of oversight, but the manual effort involved is also tedious and distracting from other activities—unlike in the case of cloud accounting.

    4. Complicated IT infrastructure

    Even in companies that don’t have manual processes, using legacy systems or multiple ERP systems poses a challenge. It can be hard to integrate data with systems like these, creating the same problems concerning spend visibility and cumbersome processes.

    5. Inconsistent metadata

    When spend data is entered manually, it is often entered inconsistently, such as in different formats or with varying fields of metadata across sources. This can lead to significant errors in the company’s financial statements.

    6. Supplier data quality and management

    Inaccurate or incomplete information about suppliers can hinder spending visibility efforts. Poorly maintained supplier databases, outdated contact details, and lack of standardised vendor information can lead to difficulties tracking spending associated with specific suppliers and negotiating favourable terms.

    7. Lack of stakeholder buy-in and collaboration

    Effective spend visibility requires cooperation and support from various stakeholders across the organisation. Resistance to change, siloed departments, and a lack of communication between finance, procurement, and other relevant teams can impede efforts to implement comprehensive spend visibility initiatives.

    8. Compliance and regulatory complexities

    Different jurisdictions may have varying regulations regarding financial reporting, tax return filing obligations, and data privacy, requiring companies to invest additional resources to ensure their financial visibility practices remain compliant across regions.

    How to improve spend visibility: Best practices

    While these challenges are significant, there are ways to overcome them. Plenty of tech solutions are available for businesses of all sizes to clean up their data and automate the spend tracking and analysis process. Here’s what we recommend:

    1. Assess your current spending visibility

    Take a step back and assess how you’re currently meeting your ROI goals, how much time is devoted to collecting and studying expense management data, and what improvements could be made if you had more accurate data.

    It’s a good idea to talk to different departments and see how the lack of visibility on spending affects each of them.

    You can always speak to us at Bradleys Accountants to gain insights into the challenges you face in reconciling expenses, identifying discrepancies, and ensuring the integrity of financial statements.

    Additionally, we can shed a light on the impact of inaccurate or incomplete spending data on audits, tax filings, and overall financial health assessments.

    2. Adopt one centralised spend management system

    Invest in a single digital platform where every recorded spend can be integrated with a broader ERP system to give senior stakeholders the necessary visibility. Provide suitable internal access controls for each department that records expenditures.

    3. Move to digital payment methods

    Avoid cash or cheques as far as possible, and stick to digital payments that can be automatically recorded and uploaded to the central dashboard. This reduces the effort needed from your end and also maximises accuracy.

    4. Adopt other software as relevant

    You can massively improve the capabilities of your spend management platform if you integrate it with other tools that collect spending data for you.

    Useful tools to invest in include an invoicing system, a procurement system for order management, and a centralised payment system. Be sure to integrate each one with your spending software.

    5. Have clear protocols for software usage

    Establish a clear set of protocols for using the new spend management software, so everyone knows exactly what to do. A training session on uploading spending records and analysing spending data is also a good idea.

    6. Automate your spending analysis

    Investing in high-quality spend management software gives you access to advanced data collection and analysis capabilities.

    Use them to automate payments, forecast your cash flow and demand patterns, understand market fluctuations, and derive insights into things like which suppliers to work with or how to plan your inventory. The more real-time data you have, the better you’ll be able to identify the right opportunities.

    7. Help your team through the transition

    There is always an adjustment period with any new tool, and some team members may well resist adopting the spend management software. This is an opportunity to have an open discussion about the exact benefits of the tools and cover any questions that come up.

    8. Be smart about which spend management software you use

    Particularly if you are a smaller limited company, simply investing in the most expensive tool may not be a good idea. The high-end tools may also require a lot of custom configurations, and your software team may not have the bandwidth for that. Instead, invest in a more straightforward tool with readymade functions and upgrade later.

    Final words

    As competition intensifies across the global economy, those who can act swiftly and smartly will emerge. One of the best ways to achieve this is to have complete control and visibility over where your resources are going.

    When you invest in expense monitoring, you can optimise every decision in your business operations, from which marketing channels to use to which suppliers to work with.

    Eventually, this will translate into money and time saved as well as higher profits made—a worthy ROI indeed. So, don’t waste time—book a consultation with us.

    Gain a complete understanding of the ramifications of poor spend visibility across various financial processes and make informed decisions about improvements needed.

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