How To Manage Your Company Spending In 2023?
When it comes to growing a business, many executives focus on increasing profits and growing revenue as the way to achieve their goals.
However, one aspect of growth that is sometimes overlooked is the expense management of your organization, and how to make it more efficient.
Without proper spend management strategies, your efforts to grow the company revenue could be easily sabotaged by overstuffed budgets, inefficient spending, and a lack of expense tracking that hurts your bottom-line when tax season comes around.
That’s why this article will discuss the importance of managing your company spending, and how to do it efficiently!
The Importance Of Company Spending Management
Business spend management is a combination of strategies and business tools used to track, analyze, and manage business spending, in particular in regard to supplier relationships.
When companies are unable to track and control their spending in real-time, they may expose themselves to financial leaks and lose revenue in the long run.
The majority of a company's costs come from external expenditures, which account for 40-80% of its total costs. A lack of efficient spend management can have disastrous effects on your business; the statistics speak for themselves.
As a result, businesses that understand and wish to mitigate this risk need to use spend management software to do the heavy lifting. Not only does the software offer cost-saving opportunities, but it also prevents overspending.
A spend management solution becomes particularly crucial when it comes to tax reporting, as the expense documenting process simplifies the tax reporting, which makes it easier to receive tax breaks and avoid hefty penalties.
For the United Arab Emirates region, corporate income tax (or CT for short) will be applied to business activities starting on the 1st of June 2023. You’ll be charged 9% for taxable income exceeding AED 375,000, but 0% if your annual taxable income falls below that threshold. As such, keeping track of your expenses and managing spending will be even more important than ever.
Benefits of Expense Management
The importance of spending management is not limited to enterprises with large expenses, but also to small and medium-sized businesses looking to improve profitability, scalability, and sustainability.
There are several benefits to spend management automation, regardless of your business size. These benefits include:
An in-depth analysis of all spending
Saving money for your business requires analyzing all aspects of it in order to find cost-cutting opportunities or other areas of improvement.
Pluto gives you a general overview of your operations in terms of costs, as well as an in-depth analysis of your spending, making it much easier to find what you are looking for.
Maintaining an efficient budget
When it comes to proper spend management, your budget is crucial. But building a proper budget requires that you have both an eagle-eye view of your business, as well as attention to the smaller details. This is made much easier through the use of spend management software.
Control over company spending in real time
It’s much harder to make efficient decisions about your spending when you are basing them on data that is already outdated.
With Pluto, you’ll be working with real-time data to ensure your decisions are based on current information.
An easier time identifying and eliminating out-of-policy and fraudulent expenditures
It’s harder to reduce out-of-policy spending when you can’t track it effectively. Pluto will help you automatically detect fraudulent and out-of-policy employee expenses and alert you to them.
Payables can be tracked and processed easily
If you are managing your expenses properly and using the right spend management tools to do so, you won’t have an issue keeping track of your payables, as well as have a better overview of your spending.
Better negotiations with your suppliers
You can make better decisions when it comes to your supply contracts and purchases when you have real-time data of your expenses.
Using Pluto's unified spend management dashboard, finance teams can always see where money flows. This way, they can make better data-driven procurement and sourcing decisions that ultimately help increase business growth.
Budgeting is the key to delivering on your promises, growing your team, enhancing your product offerings, and weathering inevitable economic downturns.
The Problem with a Manual Spend Management Process
Trying to manage business spending without proper oversight and strategies in place is like putting all your home expenses on a credit card without checking the statement every month. You might not know what you are facing until it’s too late.
If you don't implement intentional spend controls, you may still be profitable, but you won't know when your situation will change or how close you are to the edge.
The importance of spend control becomes more obvious to companies, especially growing ones, after they face a tight situation or a disruption to their business. As a result of these problems, businesses can experience budget overruns, erratic cash flows, supply chain management issues, and deteriorating customer relations.
But traditional spend management techniques are limited, which is where the aid of software comes into place. If you limit yourself to manual spend management strategies, you might face the following issues:
- Outdated spending reports: Traditional methods of managing spend tend to produce spending data that is at least a month old. As a result, finance teams have difficulty identifying and correcting unnecessary spending before the damage is done.
- Overspending: Overspending and budget noncompliance are a consequence of finance teams being unable to track real-time spend. Costs like these can quickly add up to cause trouble for tax authorities as well as overspending.
- Inefficient strategies due to lack of real-time data: If you lack real-time data and work only based on reports that are outdated, you might be missing the forest for the trees. This could have the effect of optimizing your spending rather than improving your overall business process efficiency. In order to cut costs and optimize operations, real-time spend data is essential.
- Manual entry errors: Data entry errors skyrocket if your finance team has to move data between multiple software programs and map employee spending manually. As a result, financial reporting could be delayed.
- Issues with remote working and compliance: Employees who work remotely need to pay for other business expenses quickly and in accordance with compliance requirements. The traditional spend management system, with its shared corporate cards and lengthy approval processes, simply cannot keep up.
- Strained resources: It takes finance teams a long time to manually align expenditures to budgets after the expenditures have been made. This takes up many productive hours and, of course, can lead to errors when entering data.
How To Manage Company Spending
Managing your company spending is both a science and an art, but much more the former than the latter.
Each business will have its own unique challenges to overcome when it comes to spending, but there’s still general strategies you can adopt that will fit most situations.
Create a Budget that Accounts for the Future
When it comes to budgeting, you shouldn’t just think about the expenses in front of you, you also have to consider potential unexpected expenses.
If you limit yourself to budgeting for the present, you’ll have a hard time dealing with expenses that can pop up out of nowhere.
Your budget should be realistic, but also reviewed frequently to ensure it is still appropriate for your business as it grows and evolves.
Creating a good budget will require that you examine your current and past expenses, take a look at your spending habits, and consider your potential expenses as your business grows.
This will give you an opportunity to review your existing processes, expense policies, and track expenses that you might not be thinking about.
Use Zero-Based Budgeting
It’s not uncommon for organizations to focus on past expenses and budgets when creating a new one.
However, businesses and the environments around them change, and so budgets need to change as well.
That is where zero-based budgeting comes in. This technique creates a new budget from scratch for each budgeting period. The budget is then compared to past budgets and weighed against current expenses.
In a company, zero-based budgeting can be used to keep your expenses under control. Your budget needs to be a living breathing element of your operation, and as such you need to constantly evaluate it to find realistic cost-cutting opportunities and areas that can be made more efficient when it comes to expenses.
Report and Track Your Expenses
Any expenses incurred should be documented and filed as soon as possible. This way, your business expenses are accounted for when filing its tax return. This is one area where the use of spend management software becomes crucial, as it dramatically simplifies the process of reporting and tracking your expenses. Pluto helps to categorize said expenditure, further assisting you when it comes to tax season.
Use a Spend Management Platform to Automate Processes and Digitize Expenses
As your business grows, you’ll find that using a spend management tool to track your expenses saves you a lot of time and money. In addition to tracking expenses, it tends to offer many other features, such as the ability to track invoices, payments, and credits all in one place.
Furthermore, Pluto gives you the ability to assess your expenses on the go, thanks to mobile apps and online dashboards.
It is easier to keep track of your expenses and receipts by digitizing them. Employees can do this by taking pictures of their receipts as soon as they receive them. These images can then be uploaded and tracked through Pluto.
Automating your approval workflows and processes will help to reduce, if not outright eliminate, human error.
Key Spend Management Software Features
Using spend management software is almost mandatory if you want to make your spend tracking and reporting as efficient as possible.
When looking to choose a platform, consider the following features:
Complete Control Over Spending Data
If your finance teams don’t have complete control over spending, real-time data cannot be of much use to your business.
Pluto allows your business finance managers to streamline and automate processes with superior customizability and control over workflows.
This freedom allows admins to change or optimize workflows as business/processes scale.
Real-time and in-depth spend analytics
Managing company funds efficiently is the essence of spend management. In order to do that, you need to keep track of your employee expenses as they occur.
Pluto records employee expenditures in real time and provides you with a reliable picture of what they are spending.
You can control expenses by using real-time expense tracking without restricting your employees’ work.
Additionally, Pluto provides your finance team with insights and analytics based on all the data it gets. A feature like this is crucial for proper management, especially if your goal is to cut costs and optimize spending through automation.
Your finance team will struggle to drive meaningful change without detailed analytics, requiring them to go through reams of data and make sense of it.
Reports on expenses provide an overview of your expense history, making it easier to track down individual purchases. Maintaining accurate records, limiting expenditures, and avoiding fraud are all made easier with this functionality.
Easy to Use
The most advanced software in the world is worthless if no one wants to use it. Simplicity and ease of use of essential business software, such as spend management, should therefore be a priority.
You might find, for instance, that employees don't use your spend management software if they find it clunky and difficult to use. This can result in a manual spend reporting process that is time-consuming and error-prone.
A lot of time is spent by businesses storing and processing invoices, receipts, and purchase orders.
Pluto makes it easy to retrieve and keep track of essential documents, including matching documents to authenticate transactions, for record keeping and due diligence.
An all-in-one platform
Your spend management platform should be a centralized solution for all your spending needs. Keeping all company spending in one place, in real time, is more efficient (and more secure) than using multiple smaller tools.
Pluto has it all:
- Unlimited virtual cards
- Spend management platform
- Real-time analytics
- Real-time spend control
Essentially, anything that will allow you not only manage your expenses, but really take you spending under control and make sure that everything is at it's maximal eff
Managing your company spending is a crucial aspect of company growth that is sometimes overlooked. Proper spending management strategies can help you find cost-cutting opportunities, gain a better overview of the health of your business, and simplify your tax reporting to avoid penalties.
When it comes to developing effective spending management strategies, you should focus on creating a budget that can evolve with your organization, reporting and tracking your expenses in real time, and using a spend management platform to automate and simplify your expense tracking and reporting.
At Pluto Card, our mission is to assist businesses of all scales make well-informed choices. To uphold our standards, we follow editorial guidelines to guarantee that our content consistently aligns with our high-quality benchmarks.
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