As Marc Andresson famously said, “software is eating the world.” This is one of the most powerful and accurate business statements of the last decade. Indeed, today it’s easy to see how nearly every part of the modern enterprise is powered by software.
In the past, business software centered around a few core solutions: the CRM for customer relationship management; the ERP for enterprise resource planning, and the HRM/HCM for human capital management. These enterprise technology solutions “ran the show” from each one’s respective position.
Now, things are shifting.
In recent years, a “shift left” has been taking place. As more people turn to software for making their business processes more effective, less manual and generally better, they discover that these core systems aren’t up to the task. They’re often too siloed, technical, sensitive, or expensive for the array of challenges modern employees need to overcome on a daily basis.
Business spend management was born as a direct result of this phenomenon.
What is Business Spend Management?
Business spend management, or BSM, is the term used to describe the family of spend-centric processes that are powered by software. The majority of the ever important procure-to-pay workflow can (and should) be addressed by BSM software.
The three pillars of BSM are:
- Procurement
- Invoice management
- Expense management.
Below these pillars lie other sub-pillars that include:
- Vendor management
- Contract management
- Strategic Sourcing
- Budgeting and procurement analytics
A business spend management solution addresses all of these areas while sitting alongside the core business systems (ERP, CRM and HRM). Together, the core systems and BSM solutions cover all of the business’s financial and operational processes and operations.
The Benefits of Business Spend Management Solutions
Addressing expense and business spending challenges through a proper spend management infrastructure that uses best-of-breed software solutions is one of the most important tasks of the modern organization.
Deploying this type of expense management, or spend management infrastructure results in employees getting the products and services they need faster, with better terms. It allows finance to optimize cash management and planning. It gives every stakeholder involved in every purchasing process the visibility they need to make smart and informed spend-related decisions. And, when done right, this type of spend management software accelerates business.
Following the successful deployment of a spend management infrastructure, organizations can expect to save time and money, and also reduce risk and friction, improve planning and vendor relationships, and shorten processing times.
Here are some other central benefits of business spend management:
- Assurance that spend is properly approved. By unifying purchase requests forms and creating clear approval flows, every dollar (or Euro, or Pound…) spent is the result of a healthy process. You’ll be surprised by the amount of money and time that’s saved by this alone!
- Access to a complete audit log. Knowing the history of every purchase is key for preventing misconduct, analyzing processes in order to improve them, and preparing for a funding round, IPO or M&A.
- Better budget use, planning and analysis. With BSM, businesses can achieve structured purchasing processes in which stakeholders can easily check that there is enough budget for the purchase being requested. This enables better accountability as well as accurate budget planning.
- Increased contract compliance. Business spend is often dictated by contracts. By keeping contracts organized and compliant with contract lifecycle management, and ensuring that the right people view and sign under agreed upon terms, you can improve your organization’s business stance with vendors.
- Automating manual tasks. Invoice collection, processing, and matching are often tedious and manual processes done over emails and other siloed systems. Automating these processes with BSM frees up time for your employees and your vendors.
- Improving supplier relationships. Using business spend management tools means you can guide employees to work with the right suppliers, ease vendor onboarding processes, and provide vendors with transparency into their invoice and payment statuses. This type of supplier relationship management results in better relationships with vendors, which helps maintain your financial health.
When implemented right, BSM can help every procurement stakeholder achieve better results. So how should companies think about implementing the right business spend management programs? We’re glad you asked!
Choosing the Right BSM Software for Your Company
While the processes and goals discussed above all fall within the scope of business spend management, managing all of them using a single system can be a challenge. This is why modern companies are leveraging the power of integrations, creating a web of best-of-breed solutions to ensure that every stakeholder involved in purchasing operations has the best tools for doing their job—all while driving more streamlined and more efficient processes.
For example, consider the pairing of Salesforce and Hubspot, or Salesforce and Outreach. These are common in the CRM space. For HRM, businesses often combine solutions like Workday with Hibob. Combining business spend management tools with an ERP allows businesses to leverage the best of both worlds. When purpose-built software for spend management can be seamlessly merged with existing core systems, the result is a synergy that profoundly outperforms any alternative.
Here are the criteria we recommend focusing on as you consider which spend management tools are right for your organization.
- The interface. Ideally, the spend management tool you choose should offer a modern interface that’s easy to use and supports quick user adoption. Some older business spend management tools offer legacy user interfaces that make adoption and use difficult. Look for solutions that are fast and slick.
- Ease-of-use. On that same thread, ease-of-use is paramount. Specifically in scenarios where you are introducing new processes, ease-of-use can make or break the transition. Keep in mind that not all users of spend management tools are admins, or from financial or procurement backgrounds. With this, the spend management tool you choose must be intuitive and easy to use for more occasional users. Tip: Look for screens with fewer than three buttons!
- Flexible workflows. This one is also paramount. Successfully implementing business spend management tools means you must be able to customize them to your needs. Moreover, remember that every organization undergoes change. And with change (for example, in hierarchies and roles) come necessary changes to your spend management workflows and processes. Flexibility in the solution you choose is key.
- Automation. There are naturally some areas of complex purchasing processes that you will not automate. But many areas of the procure-to-pay operation can be automated, and this translates to fewer errors, shorter process times and greater savings. Look for tools that were developed with automation as a central theme. Ask your vendors how they can automate your everyday tasks.
- Insights. Data is king. Real-time data helps people make better, more informed decisions, like lowering the budget for one department and adjusting approval flows in another. Look for tools with built-in analytics and reporting.
- Integrations. Today, integrations are a must-have. Embracing business spend management should not mean abandoning existing systems. Indeed, BSM tools should align with the core technologies you are already using. Remember, too, that you never know what future integrations you might require one day. For example, you may choose to adopt BSM solutions and later integrate them to your ERP. With this, look for solutions that offer integrations and a Rest API layer.
The Top 5 Business Spend Management Tools
The tips provided above should help you as you scope out the market for the best solutions for your business. In case you want even more help, we’ve gone ahead and rounded up the five best spend management tools for you, and ranked them based on the criteria described above.
#1. Purchase order system: Approve.com
Approve.com is a PO and vendor platform for mid-sized enterprises. Approve.com streamlines purchase requests, approval flows, purchase orders and vendor onboarding processes. It connects directly to leading SSO, HR and ERP systems, acting as a frontend for procurement operations.
Modern interface – High
Easy to use – High
Flexible workflows – High
Automation – Med
Insights – High
Integrations – High
#2. Expense management system: Expensify
Expensify is an expense management tool that is commonly used by small and mid-sized businesses. Expensify streamlines expense collection (including employee expenses) and scanning (using OCR), and report generation. It also offers integration with leading cloud ERP systems.
Modern interface – High
Easy to use – High
Flexible workflows – Low
Automation – High
Insights – Med
Integrations – High
#3. Travel expense system: TripActions
TripActions is a travel management system designed for enterprise travelers. Employees use TripActions to book their flights and hotels, and finance teams are able to easily collect invoices and unify their payments.
Modern interface – High
Easy to use – Med
Flexible workflows – Med
Automation – High
Insights – High
Integrations – Med
#4. Invoice automation system: Tipalti
Tipalti is an AP automation platform for enterprises. Tipalti automates invoice collection and payments, and has a robust tax rule engine that saves time and eliminates mistakes for AP teams.
Modern interface – High
Easy to use – High
Flexible workflows – Low
Automation – High
Insights – Med
Integrations – High
#5. Virtual CC system: BREX
Brex is a business credit card provider for SMBs. Brex offers an array of tools and solutions from virtual credit cards to physical cards, including an API integration with leading accounting systems.
Modern interface – High
Easy to use – High
Flexible workflows – Low
Automation – Med
Insights – Low
Integrations – High
Business spend management is here to stay—and there’s good reason why. Properly implemented business spend management solutions can make collaboration for your employees easier, faster and more informed, while increasing cost savings. With this, choosing the right tools is key!
Start your journey into business spend management by studying the marketplace and understanding what the most important criteria in a solution are for you. If you’re at a mid-sized business or an enterprise, consult with your stakeholders to make sure their needs will be met. Also, pay attention to integrations to ensure you’ll be able to synchronize your new spend management tools with your core systems (in the case of BSM, this will be your ERP).
Good luck!
FAQ
What is spend management?
Spend management refers to any group of practices or tools organizations use to monitor and analyze their financial spending, including procurement and supplier relationships.
Why is spend management important?
Spend management allows businesses to gain a clear and accurate overview of their organizational spend, including any maverick or unaccounted for spend, and learn where they can decrease costs and gain value from their transactions.
What does spend management software do?
Spend management software helps organizations gain visibility into spending by organizing and tracking payments, automating purchasing, and manage expenses and invoices.
