How to Implement Spend Control at Your Company

Ever heard of the Hemingway’s Law of Motion? In the famous novel “The Sun Also Rises”, two war veterans are having a heartfelt conversation. Bill asks Mike how he went bankrupt, to which Mike replies: “Two ways. Gradually and then suddenly.”

Gradually and then suddenly — that’s pretty much how spend control gets out of hand. One unauthorized employee expense follows the next one, or maybe you discover hidden fees within software subscriptions that you’ve been paying for months.

Weak internal spend control policies or systems (and particularly procurement systems) can hamstring your company and lead to lost money. In most cases, cash flow issues become a priority when the damage is already done. But why is that so?

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An overview of spend control

Spend control refers to monitoring, managing, and regulating your expenditures. But it’s not just about cutting costs and limiting business expenses. The best spending policies ensure you’re optimizing company spending in a way that aligns with organizational goals and priorities.

Benefits of spend control include:

• Reduce wasteful spending
• Prevent overspending and unauthorized expenditures
• Better decision-making with access to spending patterns and analytics
• More accurate forecasting and long-term financial planning
• Overall better financial health of the company

Now, let’s take a look at why poor spend control happens in the first place.

What causes poor spend control

Below, we dive into some common reasons behind poor spend control:

Inconsistently applied approvals

If your finance teams still rely on manual processes to manage spend, they might oversee recurring expenses for subscriptions that should have been canceled, for example. The fact that it’s an honest mistake doesn’t change the fact that your company’s been paying for unused tools. Other common errors include inaccurate invoice amounts, misclassification of expenses, or skipping the approval process and overspending (shadow spend).

Lack of proper procurement controls

Poor spend control often stems from inadequate procurement processes. This can include a misalignment with business goals, leading to purchases that don't support the company's strategic objectives. Additionally, IT security risks can occur if procurement doesn't follow standard security protocols, like ensuring software purchases meet cybersecurity and compliance requirements. 

Poor visibility into spend

When you don’t have real-time visibility into your expenses, it’s impossible to detect anomalies and react in a timely manner.

Checklist: how to know when you need spend control

If you’re a member of the procurement, BizOps, or finance teams (e.g., accounts payable department), it’s wise to take a step back and evaluate if you need firmer spend control. This requires team effort and sometimes formal permission from the CFO. It’s very important to achieve internal alignment with all relevant stakeholders.

Amanda Taitel, Principal Consultant at Vendr, shared the most common signals she looks for when consulting companies on improved spend control opportunities: 

“I look for various signals of duplicate or untracked spend. This can show up in many forms including duplicate invoices, rogue users (created a separate account from company instance), purchases made over credit card and not tracked through an approval process, overage charges, contracts signed by various signatories, and low utilization (either in unused seats or over-purchased usage).”

Here’s a list of questions you can go through to see if there’s room to improve your spend management:

• Are the departments regularly exceeding their budgeted amounts?

• Is there an increase in company expenditures while the revenue is plateauing or decreasing?

• How often does the accounts payable department receive purchase requests? Can these be justified in terms of return on investment?

• Are you experiencing difficulties tracking where the company money is being spent?

• Are you struggling to optimize cash flow?

• Have you noticed any fluctuations or anomalies in monthly or quarterly expense reports?

• Is the company paying its suppliers on time, or is it repeatedly late?

• Do you lack real-time visibility into company spending?

Effective spend control starts with taking a good look at the problem, identifying burning priorities, and solving the issue — step by step.

What a fully-developed spend control process looks like

To have an efficient spend control process, you need to have three key elements in place: clear policies, a robust budget, and structured approval workflows. You should leverage technology to make this process as efficient as possible.

Advanced spend management solutions let you automate workflows, set custom controls, and enjoy a single source of truth for all your contracts, suppliers, and spend.

Let’s say you want to track your company’s software subscriptions. While tracking this in a spreadsheet might be your go-to solution, it requires a lot of manual work. This also means it’s prone to human error.

Plus, spreadsheets are a bit clunky and can't always reflect changes in real time. This makes it hard to track subscription renewal dates and automate contract reviews and approvals, for example.

Additionally, with a dedicated management tool, you can finally get rid of the fragmented view of your procurement process and centralize all activities in one place.

Related read: Learn how Extensive managed to save $133K in software spend by transforming its procurement operations with Vendr.

5 spend control practices to implement for more efficient spend

Good spend visibility is a prerequisite for controlling your company expenses. Having a centralized system makes it easy for you to create intake forms, route spending requests, create purchase orders, and more. Let’s walk through the steps your company can take for more efficient business spend.

Start by standardizing procurement intake

Using a consistent method for gathering procurement requests makes it easier to review, approve, and track everything. 

With Vendr, there’s no need to waste time chasing information scattered across emails and spreadsheets. Now you can automate processes by creating trigger-based workflows and collaborate with your team in one place. Everything you need for spend control is within a single login.

Templatized and custom-built  approval workflows

Automating your approval workflows is a no-brainer. With custom automations, you can eliminate blockers, create greater visibility, and make sure every spend request gets reviewed in a timely manner. 

Vendr lets you create custom approval workflows in just a few clicks. You can either create a custom workflow from scratch or use one of the available templates. In any case, it’s very easy to set custom rules and build conditional logic.

Did you know? Vendr makes approvals lightning-fast, allowing you to procure software 3x faster.

Centralize your contract and spend data into a single system

The next step is to centralize your contract and spend data into a single system. Having all contracts neatly organized in one place lets you better manage terms, renewal dates, and compliance.

Vendr’s contract management solution helps you reduce administrative tasks and stay on top of your contractual obligations. You can integrate it with workflows to further streamline and optimize procurement processes, and make decisions on stack consolidation with ease.

Track contracted spend vs. actual

By comparing contracted spend with actual spend, you can uncover discrepancies and take necessary actions. This is important for identifying poor spending patterns and anomalies and enabling strategic planning in the future.

Vendr lets you track and record your savings right in the platform. You can compare your performance against a benchmark and understand your progress in saving. Plus, you can use Vendr to explore potential savings across both your entire tech stack and individual suppliers.

Related read: Discover how the cryptocurrency leader Luno saved $1.8M in software thanks to smart SaaS management with Vendr.

Set up notifications to opt-out of contract renewals

Unfavorable terms of contract renewals can hurt your business ROI. But when the renewal date approaches, it’s also an opportunity to adjust the type of business licenses, negotiate better terms, secure a lower price, and more.

Vendr helps you manage your SaaS subscriptions with ease. You can set different types of notifications and get alerted before your subscription renews. This creates room for your procurement and finance teams to do a cost-benefit analysis, evaluate if usage is going up and down, and negotiate more favorable terms when the time comes.

Take back control of your spend with Vendr

Vendr’s customers have collectively saved more than $430M by taking more control of their spend. Leaving money on the table shouldn’t be an option for any business out there. The impact of weak cost control on your bottom line is huge — and can't be ignored.

With Vendr, you can standardize your procurement intake, build custom approval workflows, and centralize your contract data in one place. Having a single source of truth for tracking contracted spend versus actual spend is going to help you stay proactive and profitable. 

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