One of the trends taking place across enterprise finance is the rapid adoption of spend optimization platforms. It’s the sort of technology that 25% of the most complex global organizations are already using today to great advantage and that their competitors are rapidly rolling out to play catch up.
It’s no wonder why.
Spend optimization is how finance teams use the analytical power of AI to uncover hidden spend risk in everything from payables to T&E.
Instead of manually auditing a small sample of spend, organizations today automatically analyze 100% of transactions to see the actions they need to take right now to prevent cash leakage, as well as spot patterns, identify root causes and trends to steer the future toward better processes, policies, and controls.
It’s effective technology with clear value for any large enterprise. For those CFOs who understand that the future of financial analytics is spend optimization, the question becomes what to look for in a spend optimization platform before you buy.
Here are five things for you to know:
1. There are underlying risks that need to be mitigated in every step of the payables process
Risk is endemic to sourcing, contracts, vendor master lists, invoice submission, invoice approval and payment. It lives at every step of your processes.
And the odds are, you don’t even realize how much cash leakage your organization really has. According to a recent report from the Association of Certified Fraud Examiners, 5% of revenue is lost to fraud each year.
2. To find risk, you must look across systems
From procurement card programs to payables, travel and expense reports, electronic payments and paper invoices – you have to be able to look at each system individually, and then compare the data from each system with data across systems to get a full picture of risk in the organization.
3. To work across systems, build tools that work together
Maybe it seems a bit obvious to say, but if you’re considering getting your organizational spend into a single view, you need systems that integrate easily with one other.
So, if you are using a system for travel and entertainment expense management, you’ll want a spend optimization tool that enables easy data transfer between systems. Same thing in payables; you will want to ensure that the spend optimization tools integrate easily with your ERP system.
Look for open APIs, or better yet, pre-established connections between your primary financial platform and the spend optimization tool for plug and play setup.
4. To affect change, study trends
One of the most effective uses of spend optimization tools is the ability to look across systems over time to identify trends that sample-based audits don’t catch.
Pull any one expense report and you may find reasons to except it from a policy. Pull 12 months of out of policy spend in a row for the same employee, or department or manager, and suddenly a performance argument is armed with data over time.
Spend optimization platforms that attack trends average a 70% reduction in out-of-compliance spend within the first year.
5. Measure the intangibles
It goes without saying that you can get spend performance data trending in the right direction by implementing a spend optimization tool.
Indeed, the whole idea is to reduce out of compliance spend and get duplicates trending toward zero.
But how do you measure culture? What do cleaner processes and better vendor master lists do for employee satisfaction? What are the secondary effects of more effective processes and less waste worth? Probably more than you realize. Take cultural snapshots before, during and after your implementation and measure the effect of better systems on your team. The results might just surprise you.
To learn more about spend optimization platforms, download the 2021 study commissioned by Oversight and conducted by Forrester Consulting here.
