B2B Payments

Spend Management's Rocky Road To Better Analytics

Software turned business management into a whole new ball game. For Andrew Hoag, CEO and founder of corporate spend management startup Teampay, the advent of software has been wildly beneficial for his background in product engineering.

"I can tell you exactly what engineer changed what line of my source code, why they changed it, when they changed it and who approved it," he recently told PYMNTS when discussing the benefits of modern software built for the enterprise.

So what does this have to do with spend management?

According to Hoag, corporate finance is among the last areas of the enterprise to benefit from this type of technology.

"I have better tools to manage my product and software than I do my company's money," he said. "That is a fundamental disconnect with the rest of the organization."

Spend analysis has always been a critical component of corporate finance. But data has been locked away in siloed systems for years – and today, many of those same barriers remain as businesses struggle to analyze spend across traditional realms like procurement and accounts payable, and less accessible areas, such as an employee's one-off purchase of a software subscription.

The very fact that an employee has to be reimbursed for a purchase signals a "broken system," Hoag noted.

"If I have to reimburse someone, that usually means they were authorized to make the payment, but weren't able to make the purchase on behalf of the company," he explained. "In between reimbursements and accounts payable, there is a lot of spend that is unmanaged. Most of that spends up on cards, and especially in today's climate, where you have more software services, it's no longer the CIO making a software purchase decision for six figures. It's individual contributors and staff-level employees who need $50 here, or $200 there, to buy software to get their job done."

The distribution of spend data across the enterprise (and across cards) has shown that traditional accounting and ERP systems are unable to holistically manage that information, the executive continued.

In addition to spend being distributed across multiple areas of the enterprise, the purchase process itself is also disparate, with information stored in documents and systems related to purchase orders, accounts payable and ledgers. When a purchase is made, a request can be sent in and an approval can be received, but rarely can this process seamlessly link a professional to the actual purchase process.

Turning the purchase approval into an actual means of payment is where the virtual card comes in. For Teampay, this means not only issuing a virtual card to make a purchase, but linking that buy to the historical information of who is making that purchase, and for what, and who approved it.

V-cards aren't a new innovation, however. So why has it taken so long for corporates to embrace the technology?

"What's been surprising is some customers aren't aware they exist," said Hoag. "It's old technology that's been around for years. Traditional ERP systems have had access to virtual cards and e-payables for years – but the problem with virtual cards, historically, is that they’re very process-oriented. It's batch generation, CSV download and upload – there has not been good data exchange."

For mid-market companies – the demographic that Teampay targets – facilitating data exchange and more robust data management is even more critical considering their auditing needs.

"As soon as you have multiple levels of hierarchy, you have people authorizing spend for other people who authorize spend, and it becomes a lot more complicated," said Hoag. "With this size of a company, you start to have real audit requirements, you start to have third-party audits, you're moving real money around."

He mentioned one customer of Teampay with 500 employees and a 90-page American Express statement.

"That becomes really hard to keep track of," added Hoag. "It's impossible to know which employee is using which service and for what purpose."

From an auditing perspective, there must be clarity in this transaction data, as well as defined accountability and controls.

"You don't get that with a standard commercial card," the CEO said.

What many of these trends illustrate is the increasing importance of data: to track spend, to identify purchases, to streamline auditing and beyond. Virtual cards are a growing part of that effort to gain greater visibility into corporate transactions – though they aren't always without their own challenges. Not to mention that card transactions remain only a small piece of the B2B payments pie (for instance, NACHA data found that credit and debit cards account for 11 percent of accounts payable transactions, and that is expected to increase to just 12.5 percent by 2020).

On a broader scale, the data sharing revolution beginning to bubble in Europe and the U.S. also shows promise for the corporate spend management market.

"I'm not sure we're at the proliferation of open data yet, but I welcome the day when that happens," said Hoag. "It's very difficult to get data out of existing financial systems. It's CSV files and it's 1980s mainframe reports."

To understand where company cash is going, a business has to have access to data. And if it's easier to track minute changes in product source code than it is to track an employee's purchase, there's a problem.

"There is a rich lifecycle of ways you can help companies be smarter," said Hoag. "We have access to this in other parts of the enterprise, from recruiting, to enterprise, IT management – you have data and analytics in all of these other parts. But spend management has been locked inside legacy systems."



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.