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When you think of business expenses, you probably default to the traditional choices—dinners, hotel rooms, airfare, conference fees, parking, and other similar charges. These types of purchases most often represent the average expenses incurred by employees.
But expense management has evolved, and with it, opportunities to capture and report on all spend (and even get cash-back rewards1.) This means creating a more expansive, real-time picture of spend and other company expenses like:
- Software subscriptions
- Paid online ads
- Website hosting services
- Utilities
- Office supplies
- And more
In short, expense management is one small part of a bigger discipline: spend management. And if you’re only working with typical expenses, you’re missing opportunities for your firm and your clients.
To fully understand why spend management is more than T&E (and what that means for you and your client), it’s helpful to take a look at its basics.
Traditional expense management
Spend management is the ability to view, control, and manage a business’s cash flow in real-time and in one centralized location, providing actionable insights to key financial decision-makers. It relies on a practical blend of budget-based charge cards and technology that lets you and your client review and control spending in real time.
Spend management varies drastically from traditional expense management. Traditional expense management is often after-the-fact, manual, and runs on data that can be a month old. Spend management offers a proactive approach to managing spend while also allowing other types of spend—ones that you may not have associated with expenses—to be added to the system.
How does spend management work?
Spend management always starts with budgets.
Authorized employees are given access to spend on budgets. To accomplish this, your client can issue physical or virtual charge cards to employees. Each card is mapped to variables such as specific budgets, departments, or projects, and issued with a limit. Your client can even use merchant category codes to limit the kind of purchases that employees can make or designate other user rules for the cards.
When an employee spends on behalf of their company using the charge card, the expense comes out of the company’s budget instead of the employee’s pocket. Transactions can be precoded, cutting down on manual work. The employee is prompted to take a picture of the receipt and submit it as soon as the expense is charged. Now, your client has all of the documentation needed for the expense.
If the employee tries to buy something not approved by the budget, the card will not work. If an employee needs more budget, they can request it online or via a mobile app or Slack. The budget owner can approve or deny the request. If approved, the card is funded in minutes. This additional control ensures that spending is appropriate and available as needed.
A proactive approach to spend
Spend management, since it is linked to charge cards and budgets, takes a proactive approach to managing expenses. The charge cards are linked to budgets, with guidelines around how the employee should spend it—acting like an approval before the money is spent. Employees are empowered to spend as needed to further your client’s business.
Another notable differentiator between traditional expense management and spend management is the ability to issue both physical charge cards and virtual—as many as your client needs. This plays an important role when it comes to cash-back rewards.
How are spend management cash-back rewards different from regular expense management ones?
Your client has the potential to increase cash back rewards by consolidating spend into one system.
Your client can create cards and link them to many types of spend. Have a recurring software fee each month? You can issue a virtual card dedicated specifically to it, making it easier to control and track. Need to pay for Google Ads or other advertising? You can pay for those expenses on one physical or virtual card created specifically for that type of spend. You can even do one for each type of advertising—from Facebook to print ads.
Bringing spend under one system and one charge card provider shifts cash-back benefits from individual employees to your client’s company. That means all employee expenses can be eligible for cash-back rewards. It also means when you add in additional forms of spend, your client is getting even more cash-back rewards.
Taking this approach can maximize their rewards and bring in money for their bottom line.
Spend management behind the scenes
While cash-back rewards are certainly important, spend management offers accounting firms and their clients the ability to:
- Easily track client spend in real-time from a single dashboard
- Quickly issue, activate, or deactivate physical and virtual card
- Automate manual accounting task
- Manage spend with real-time categorization and customizable budget control
- Store everything automatically so you and your clients never have to worry about keeping paper receipts or
invoice - Close books faster, since everything is already captured in real-time
- Leverage user-friendly mobile and desktop app
- Integrate spend management with leading accounting systems including Quickbooks Online, Sage Intacct, and Oracle NetSuite
- Identify trends and forecast future spending by analyzing current and past spend
Accounting firms and spend management
An additional advantage to evolving expense management is that accounting firms can expand client advisory services (CAS) to include spend management. Your firm decides how it would like to deliver the services, ranging from a very hands-on approach to focusing on advisory services that pull from spend data.
To learn more about how spend management differs from traditional expense management, visit here.
