FinTechs Target ‘Zombie Spending’ That Eats 4% of Revenue

Remote work disruptions have brought to light the inefficiencies with traditional spend-management practices, leading a number of players to start looking for ways to disrupt a slow-to-innovate facet of corporate life. We dug deeper into our recent study of companies conducted in collaboration with Airbase to see what’s next in how software-as-a-service (SaaS) companies are addressing their spend management pain points.

According to “The Financial Performance Quandary: Leveraging Automation to Better Manage Non-Payroll Spending,” a PYMNTS and Airbase collaboration, more than 90% of executives at SaaS companies feel that they do not have control and visibility of non-payroll spending.

Many of the 225 respondents complained about employees mindlessly swiping the company card and accounting learning of the purchases only after the fact. Remote work has likely exacerbated the problem as employees and procurement managers no longer sit a few cubicles away from each other.

The report found that “wasted spend — including zombie, unauthorized, unwanted, duplicate or unnecessary spending accounts for between 4.1% to 4.4% of total company expenses.”

Larger companies with more employees were more likely to report issues with non-payroll spending. The top two grievances associated with manual non-payroll spend management in SaaS companies were data entry errors and delayed reporting.

Long payment processing times, difficulty dealing with fraud, and challenges with accessing real-time data were also cited as salient issues by more than a third respondents.

These issues can cost companies a pretty penny. This is particularly true of delays with completing payments. More than 40% of companies said that they incurred some costs due to late fees that were a direct result of processing delays.

The Search for a Solution

With that degree of concern and money at stake, it isn’t surprising to see a surge in startups looking to solve a problem, with many positioning themselves as a one-stop-shop for all things expense management.

These services combine expense visibility, employee reimbursement, corporate card management, and other functions under one roof. They also allow finance teams to easily set up guardrails to prevent unauthorized employee spending and increasing the visibility of spending that does take place.

The likes of TripActions, Airbase, and Ramp have collectively raised $2.8 billion in venture funding in the past year.

A Willing Market

PYMNTS.com and Airbase found that the appetite on the part of companies looking to shore up the spend management process is not abstract. More than half of surveyed firms said that they already use a spend management system. Of those that don’t, almost two-thirds said that they have a strong interest in trying one out.

Unsurprisingly, large firms are 89% more likely to have their non-payroll spend management automated than smaller ones.

Increased transparency and better invoice tracking were the most commonly listed benefits realized for the firms that did automate their spend management system.

Companies realize that automating these tedious processes can save them time and money (especially for the accounts payable team). PYMNTs data shows that tasks related to non-payroll expense management eat up “42% of a full-time AP [accounts payable] employee’s workload.”