Spend management
In the days before remote work, managing what the company spent was fairly easy. If a team member was going to go out and use company funds, they had to get handed a credit card, check, or cash. That made it easy for finance teams to track what was going out when and with whom.
Before 2020, remote work started to make this trickier. With workers distributed across the state, country, or even the globe, companies needed a way to get those folks the necessary resources. They had a choice to make: have someone else manage purchasing – and, when necessary, shipping whatever remote workers needed – or giving those people a company card to use. The latter came with the added work of tracking spending on that card.
Then the pandemic happened. And remote work exploded. Tracking a few company cards was manageable. Managing dozens, maybe even hundreds, is a whole lot harder.
Fintech founders took note, and a few notable options stepped onto the scene, introducing the category of spend management. As its name suggests, this focuses on monitoring how money is spent within the company, specifically by individual employees.
Notable spend management platforms include:
Choosing any of these platforms offers a few notable gains over handling company cards the traditional way:
Issue corporate cards with controls and perks
Spend management providers allow you to give team members cards with built-in controls. That means you can easily set spending limits and automate denials with certain merchants or within certain categories. You might issue a card that an employee can exclusively use on Canva or for meals, for example.
What’s more, with apps to pair with the cards, your team members can easily access the policy controlling the way they can spend, empowering them to make decisions in alignment with the rules you set. And they can snap pictures to track the resulting receipts, too.
Finally, these spend management providers let you create virtual cards, meaning you don’t need to worry about mailing anything to your remote employees. They can be up and spending as quickly as you need.
And these cards usually come with rewards like points or cashback. Comparing different options can help you maximize the return you see on employee expenses.
Expense report and review automation
Most employees view expense reports as a necessary evil. With a spend management tool in play, employees can capture the expense in the moment by simply taking a photo of the receipt through the app. Additionally, employees can add notes and descriptions to describe what they are paying for and the context of the transaction, for example, ‘Meal with Investor’ or ‘Sales team Dinner for a successful Q4.’ Some platforms even automatically capture receipts from common merchants like airlines and rideshare companies.
In other words, these platforms promise to help employees do away with creating expense reports, or at least significantly streamline that effort. These platforms offer various ways to share invoices and receipts, which include a forwarding inbox, uploading directly on your mobile device, and even sharing via a dedicated Slack channel. This makes it super convenient for employees on the run to stay organized and for the company to maintain its recordkeeping standards, which makes both financial statements, audits, and IRS/State tax audits a lot smoother!
What’s more, reviewing those expense reports has long been a cumbersome task for the finance function. Again, automated spend management tools can streamline this, breaking expenses into categories, then flagging potential problems for the team to check. Many spend management platforms now leverage AI to further streamline this expense review, saving your finance team time and effort.
Accounting platform integration
A strong spend management platform will integrate with your accounting platform of choice. This means that employee expenses automatically sync with that platform, helping you keep visibility into all of the cash outflow at your company.
This saves you from an unwelcome surprise if you only integrate employee expenses on a set cadence (e.g., monthly). As your company grows and you give more employees more spending power, this becomes increasingly important.
Some spend management platforms also feature integration with communication tools (e.g., Slack, WhatsApp). This way, if someone from your finance team needs more information from an employee about an expense, they can seamlessly get them information about it. This helps both parties tackle the issue quicker and with more ease.
Understanding how spend management platforms work
It’s important to note that Brex, Ramp, and Rho aren’t financial institutions. Instead, they’re fintech companies.
They often partner with FDIC-insured financial institutions like established banks. It’s worth reading the fine print, though, to see what established entity is behind the spend management platform you choose.
When we say read the fine print, we mean it literally. Check the footer at the bottom of the company’s webpage. It should spell out where any cash is held and whether or not it will consequently be insured by the FDIC.
Procurement
Even in their earlier stages, companies often have a procurement process; it’s just usually an informal one. A team member might ask around to see what they can learn about the vendor, or comparison shop pricing online. But as the company grows, there comes a time to formalize the steps of bringing a new vendor on board. A solid procurement process manages third-party risk and compliance, including vendor onboarding.
When to establish a procurement process
Sometimes, companies decide to formalize their procurement process at a certain headcount (e.g., 100 employees) or revenue benchmark (e.g., $50 million+). Other times, they develop a structured process because regulatory bodies or other third parties are involved.
If the company is getting Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grant funding, for example, the resulting money needs to be spent with U.S. sources whenever possible. That means that buying a flight from Delta or American Airlines would be fine, but a flight — even between the same destinations on the same day — from British Airways wouldn’t be.
In other words, once the company needs some diligence behind its vendor selection, it’s time to implement a procurement process.
What procurement should entail
The formalized procurement process at most companies starts with intake, which usually centers around having the vendor complete an established form.
The team then evaluates potential vendors based on that intake and other data.
That process should generally include some vetting of the potential vendor, whether that’s calling references, confirming that the vendor isn’t on the Treasury’s Do Not Pay list, or reading reviews.
Once the company evaluates vendors based on price, reputation, and product/service offering, they select the vendor they will use. At this stage, contracts are usually sent out, negotiated, and finalized.
Then, they need to get that vendor set up in a way that integrates with the company’s AP system. Ideally, you want the procure-to-pay process to be as smooth as possible. That means ironing out details like exchanging tax information early.
With all of that established, the company can simply send a purchase order (PO) to procure goods or services from the vendor.
Fortunately, again, technology platforms can help here. Both BILL and Ramp offer a dedicated procurement functionality. Brex has an integration with a third party called Zip that specializes in procurement, too. Using procurement technology can give you pre-built features like intake forms and POs to lighten the load for your team.
Support for tech companies navigating accounts payable, spend management, and procurement
We hope this guide has been helpful and highlighted some things you and your finance team should be thinking about. It might have left you with more questions than answers, though.
We’re here to help bridge any gaps and guide your company as it makes decisions and implements processes around AP, spend management, and procurement. Maybe you’re looking for an AP clerk. Maybe you want to consult with a team that specializes in supporting tech companies about what might be right for yours. In any case, we’re here. Schedule a call with our team today.
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