It’s a phrase that can cause several types of jobsite headaches — stepping away from a project to hit a hardware store with petty cash, for instance, or calling the boss to gain approval to go over a card spending limit. “Spend management” is hardly the sexist buzzword in payments and commerce, but the practice is developing to a point where many of those headaches are being reduced — a process that can also lead to more revenue.
New ways of managing spend and expenses is the focus of the latest PYMNTS “Beyond the Buzzword” podcast, this one featuring Karen Webster and Toffer Grant, CEO and founder of PEX. The company was founded in 2006 and sells Software-as-a-Service (SaaS) workforce tools designed for businesses not typically served by enterprise SaaS spend management solutions.
Spend Management Change
First, while the meaning of “spend management” may seem clear, there is no harm in defining it. According to Grant, the phrase “comes down to tying spending to specific tasks and work, and having the ability to get things done” in an orderly, organized way that conforms to the specific rules and guidelines set by the relevant units within the company, such as financing and operations (more about that later).
Spend management is a vital party of a company’s operations, as the costs of supplies — or of certain entertainment and travel activities — are likely to reflect, directly or indirectly, on the invoices going to customers and in the financial reports of firms. Spend management, too, is undergoing a slow but steady change, away from house accounts with a small group of pre-approved suppliers and toward employees carrying company credit cards, or mobile phones with payment functions.
Spend management is becoming more digital and decentralized, and that provides opportunities not only for PEX and its competitors, but the business clients they serve, especially small- and medium-sized businesses (SMBs) or enterprises (SMEs).
“I think there are a lot of openings for SMEs now” that want to upgrade their spend management processes, Grant said, knocking down the typical assumption that smaller businesses are all-but-hopeless laggards with technology. “A lot of them are thinking about upgrading.”
Spend Management Misconception
That said, a company such as PEX can face significant work persuading those smaller firms to change.
“The main misconception they have,” Grant said, “is that they believe that what they are doing is the right way to do it. It’s just an awareness issue.”
One of the main pitches to such firms revolves around the relationship between the return on investment (ROI) and time. Maybe a company is trying to make the move from analog to digital record-keeping and related processes — when it comes to the construction industry, for instance, paper records not only lead to more costs in the form of late payments, but can put firms at greater risk should they suffer fires or floods — or maybe a company just needs to invest in better, up-to-date technology.
Time Is Money
No matter the motivation, Grant said that improving the spend management process — including the preemptive setting of rules and spending limits — takes some of the manual work and decision-making out of that task, which in turn saves time.
“We tend to focus on the time savings more than anything,” he said, describing his pitch to potential clients. “Time is money. If [a company] can get to one more job in a day, that means they can bring in more revenue.”
Better spend management can also help businesses stay within their longer-term budgets, and the automatic limits set via software can serve to keep company employees from carelessly spending too much, as well as help bosses receive quicker notice of any such excesses, and the reasons for them.
Going beyond the old concepts of spend management requires some conditions. First, the technology used by PEX and similar companies is designed mainly for situations in which there is a high frequency of spending. That makes automation of some of those spend management functions a more pragmatic undertaking.
In addition, successful spend management, even with the freshest technology, works best if all relevant parts of an enterprise are involved in the process. That includes not only the workers in the field, but the finance professional back in the office, Grant said.
“You have to make sure all the groups are looped in,” he said.
A willingness among employees and executives to embrace modern digital technology is also important. People reluctant to use mobile devices, whether smartphones or tablets, might not serve as the best users of these newer spend management techniques. That issue becomes especially acute as spend management technology continues to tie closer together with workforce management software, giving companies a wider and deeper view of how their money and labor are being deployed.
However, the younger generations appear likely to be able to handle that, Grant said. They are not only moving into important roles on the jobsite, but people who have grown up in a digital world have inherited — or soon enough will — the types of companies that have a relatively high level of spend management needs, he said.
Going forward a few years, or a decade or so, there might still be that foreman in the pickup truck who carries around a wad of cash for unexpected supply purchases or similar spending needs — and that person might also carry a gun, as is sometimes the case, given the cash involved. But as the digital economy advances, the need to carry around that cash seems likely to decrease as more companies embrace software.