In B2B FinTech, spend management is a greenfield opportunity as innovators explore how to help corporates understand the nuances of how money flows out of the enterprise.
But this category of software has, in recent years, evolved within silos as technology providers tackle particular spend scenarios like accounts payable (AP) and employee expenses.
Exacerbating this challenge is the growing number of payment rails available for corporates, which further limits the ability for businesses to obtain a unified view of not only what money is being spent, but how and why — as well as to obtain an understanding of what that spend means for the broader financial health of the enterprise.
Historically, said Airbase CEO Thejo Kote, finance and accounting teams have been forced to work around the friction of a fragmented spend ecosystem. But there is an opportunity in consolidating spend data across platforms, he told PYMNTS, and it starts with bringing spend management and payments closer together.
“The many layers of spend management software traditionally have had nothing to do with payments,” he said in a recent interview. “They didn’t touch the money, but that’s starting to change.”
The Data Friction of Silos
While more sophisticated technologies have been available for larger enterprises to consolidate spend data for the middle market, Kote noted that breaking through silos has been a major source of pain for finance professionals.
As adoption of third-party financial software platforms grows, businesses are able to automate key aspects of their spend processes. Although undoubtedly a move in the right direction, these processes remain independent of one another. A business may have one platform for their corporate card, another for AP, and another for employee travel expense management.
When it comes time for the accounting team to reconcile these transactions at the monthly close, or for budgeting and reporting purposes, Kote said an accountant’s job, in essence, becomes one of “glorified data entry.”
“Accounting teams are expected to go into system after system, download data, manually enter it into the general ledger, categories them, chase people down to get receipts,” he said. “It’s a whole mess of trying to wrangle data sitting in multiple different systems.”
Increasingly, businesses are integrating into more payment rails and adopting new payment methods based on emerging infrastructure and changing supplier payment preferences. This, too, can muddle the view of spend as accounting teams must log into various interfaces to obtain spend data.
Putting Spend Into Context
Obtaining the data of money already spent is only one portion of the corporate spend management process. Placing that spend data into context is key to understanding who spent what money, and why.
“It’s much harder to get any semblance of control into how you’re spending money in the organization when money is leaving the business through multiple different systems,” explained Kote. “How do you get a bird’s eye view of what I am paying for? Am I using everything I’m paying for? Is there waste happening?”
Innovations in payment network infrastructure continue to turn greater attention to the opportunities in transmitting transaction data along with funds. While this can have a positive impact on the ability for a company to gain greater contextual information about its spend, Kote noted that there are significant shortcomings to relying on payment networks to obtain the right information.
Level 3 commercial credit card processing data and ISO 20022 reconciliation data can certainly help, but transaction data is not standardized across all rails, he noted, pointing to paper checks as an example of a payment method that cannot usually provide high-quality data.
What businesses can rely on, however, is the opportunity to transform internal processes to marry the appropriate information with payments.
“A business will receive its credit card statement at the end of the month, and if it’s a shared card, I have no idea who spent what,” said Kote. “How can I get that visibility? The way you solve that is not through Level 3 data. The better way is to have good processes and workflows.”
Transforming Internal Processes
Those internal processes and workflows include best practices in corporate spend, like attaching request-for-approvals and approval data with a transaction to understand the context of each payment.
For Airbase, this also means combining corporate payment capabilities through card and bill pay technology, with spend management functionality across supplier payments, employee spend and beyond.
Looking ahead, as businesses continue to adopt new payments technologies, they’ll not only be looking to bridge the gaps between those silos, but to be able to obtain spend data in real time — a capability that Kote said will be critical to identifying potential budget issues sooner, rather than at the end of the month when the money has already been spent.
While today, organizations and their finance and accounting teams continue to turn to manual data aggregation and entry to consolidate business spend across platforms and payment rails, in the future, Kote predicted that this will no longer be tolerated by the middle market.
“The next 10, 20 years will be all about bringing [payments and data] together to give businesses much better control and visibility and real-time access to spend information,” he noted. “I can’t see a world in 10 years where it’s still the status quo for everything to happen in silos.”