How to Implement Best Practice Spend Control for Procurement

Spend policies are an essential aspect of financial management for any organization. However, communicating these policies effectively can be a challenge. In this blog post, we will discuss how using tools to embed and communicate spend policies can help organizations ensure compliance with their policies and improve financial management.

What is Spend Control? Why is it Important?

Spend control is the practice of monitoring and regulating an organisation's expenditures to ensure that all spending aligns with the company’s financial goals and policies. It is a crucial aspect of spend management because it helps maintain budget compliance, prevents maverick spend, and maximises cost efficiency. Effective spend control ensures that all purchases are authorised and within the scope of the spend policy, thereby safeguarding the organisation’s financial health and enhancing overall procurement efficiency.

Here are some other key reasons why spend control matters:

• Maximising Profitability: Cutting unnecessary expenses enhances the bottom line by identifying duplicate subscriptions or out-of-policy spending.
• Improving Financial Visibility: Like driving without headlights, lacking spend control hinders understanding of spending and its impact on profitability.
• Better Informed Decisions: Real-time access to spending data supports accurate forecasting and stakeholder confidence.

Why Uncontrolled Spend Damages Finance Teams

Uncontrolled spend can severely impact finance teams by creating budget overruns and financial discrepancies. When maverick spend occurs, it often bypasses the established spend policies, leading to unplanned expenditures that disrupt financial planning and forecasting. This lack of control complicates procure-to-pay processes, increases the  workload on finance teams and makes for more time-consuming tasks, increases the margin of error significantly, and makes it difficult to achieve cost reduction goals. Consequently, finance teams may struggle with maintaining accurate financial records and ensuring compliance with procurement standards.

When beginning to implement proper spend controls for your business, here are three crucial factors you should aim to consider:

Visibility: make sure that all your employees understand how and why they must categorise any expenses.

Transparency: ensure employees understand how their spending relates to the broader business picture.

Accuracy: ensure that tools are in place to enable employees to record their business spend accurately and efficiently.

Implementing Effective Procurement Spend Controls

What does spend control best practice look like for your business? Here are a few key strategies to have in place towards implementing robust and effective spend control over your procure-to-pay process:

Assess current spending
Without analysing current spend, you won’t be able to improve spend management processes because you have nothing to measure against. To analyse current spending, you need to gather relevant expense data. Typically, you’ll find this data inside your spend management tool, but if you don’t have a tool like this, you’ll find the data you need searching through your procurement tools, corporate credit cards or bank accounts, ERP, accounting software or payroll tools. Unless you have a spend management tool with in-built customisable categories, as the next step, you’ll want to group your spending by team or category to understand where money is being spent and on what.

Set financial goals and allocate budget
To understand your company spending and its impact on business growth, you must set realistic and achievable goals to structure and focus your business spend. After you’ve set your goals, it’s time to allocate budgets. That might include introducing credit card limits and creating a comprehensive spend policy to reduce out-of-policy purchases and mitigate uncontrolled maverick spend.

Implement approval processes
Employee fraud costs businesses 5% of their revenue each year. If you’re losing money through unauthorised spending or fraudulent expense claims, don’t worry — alongside implementing a new expense policy, you can also implement an approval process to heavily mitigate these losses. This can easily be done via corporate spend management solutions including corporate cards with custom limits, blocks, and in-built approvals. With software solutions like Kloo, you can even automate this entire process using custom approval workflows for different spend types, departments, or by threshold amounts and designated approvers to oversee each purchase. This helps stop unauthorised spending, helping you get a handle on company spend without being overbearing.

Monitoring and analysing expenses
Monitoring and analysing expenses quickly and effectively is half the battle of effective spend management. This is where expense management software comes in handy, helping you identify areas where you’re overspending or using inefficient processes. For example, if you’re currently using several tech solutions, Kloo's procure-to-pay spend management can help you integrate your ERP details and accounting system data under one roof to help you access your financial data whilst maintaining a single source of truth. This makes financial reporting processes much more efficient, streamlined, and automated, empowering your finance and business operation teams to make impactful business decisions.

Build better supplier relationships
If you’re looking for ways to reduce costs for your organisation, building stronger relationships with suppliers will help. Having proper spend control policies in place gives you access to supplier spend data, that better positions you to negotiate payment terms, contracts and unit prices. Setting up new supplier relationships can drain resources and finances — so staying with one trusted supplier benefits both parties. The stronger the relationship between you and your supplier, the more efficient your processes become. And using a spend management solution with supplier management features, like Kloo, can help you get there.

Introduce spend control policies
It’s important to create clear employee policies around spending limits, including what expenses are reimbursable and your reimbursement processes. Without spend control policies, your employees won’t know what you expect of them, leading to incorrect expense submittal and expense data categorisation mistakes. Controlling expenses in business should be about making it less stressful for employees and easier for finance professionals. Educate employees on your spending boundaries and explain how they can submit an expense report.

Automate expense management
Ensuring your financial information is accurate is crucial for many reasons, including financial projections, budget planning and management, and tax returns. Technology can give you this accuracy and more. You can streamline your expense reporting and management processes by removing the tedium of manual reconciliation, receipt collection, data entry, human errors — the list goes on.

How Automation Streamlines Spend Control Workflows

Automation plays a pivotal role in streamlining spend control workflows. By automating routine tasks such as invoice processing, purchase order approvals, and spend analysis, organisations can significantly reduce manual errors and improve efficiency. Automation ensures that all procurement activities are compliant with robust company spend policies, providing real-time visibility into expenditures and empowering user control over their spending. Additionally, automated systems with built-in fraud prevention capabilities can also prevent against any fraudulent or duplicate payments, enabling timely interventions and corrective actions.

Kloo's Automated Solution for Spend Control

Kloo’s automated solution for spend control offers advanced tools to enhance your procurement strategy. Kloo leverages AI-powered analytics to provide deep insights into spending patterns, helping organisations maintain compliance with their spend policy. The platform automates key processes within the procure-to-pay cycle, ensuring that all transactions are efficiently managed and accurately recorded. Kloo’s solution also supports effective supplier negotiation by offering real-time data on supplier performance and market trends, driving significant cost reduction and operational efficiency. By integrating Kloo’s automated tools, businesses can achieve superior spend control and financial oversight.