Managing spend for organizations typically comes with a lot of paper, manual processes and headaches.
Usually, the auditing workflow involves looking at expense reports filed by employees, with a focus on identifying potentially erroneous or even fraudulent transactions. At most, a manual approach to spend management can attempt to uncover potential patterns: an employee that is continually breaching internal spend policy, for instance.
But without an automated approach to spend management, organizations are missing out on more than the ability to reign in excessive spend by one worker. Terrence McCrossan, CEO of Oversight, spoke with PYMNTS about the opportunity organizations have to not only keep employee spending in check, but to optimize the ways the enterprise spends money across functions, from T&E (travel and entertainment) to accounts payable (AP) and procurement.
Today, that’s an especially difficult achievement considering the impact of the pandemic — even with business trips on hold.
“In the T&E space, it’s certainly fair to say travel and typical employee spend is down significantly as a result of the pandemic,” he explained. “But what we see in our data is other types of spend are up. Employees are still spending money on behalf of the organization, and what’s really unique about that is the risk profile has completely changed.”
In fact, he continued, Oversight analysis suggests that risk levels are up threefold compared to this time last year.
While professionals may not be going on business trips and using their personal or company cards to use employer funds, work-from-home requirements have remodeled the profile of spending from that of plane tickets and taxi rides to a focus on outfitting home offices.
In addition to a shift in spending categories, also driving change in the expense risk profile is the fact that professionals are working remotely, creating an environment of less direct insight into purchasing habits.
Employee spend and T&E is far from the only area of the enterprise in which risk is evolving and increasing. The disparate nature of the workforce is also creating new challenges in how managers oversee the way professionals spend company cash in other areas, including AP and procurement. It’s now more likely that two employees working from home will accidentally pay the same invoice twice, for example.
Further, although businesses continue to modernize and digitize their payment workflows, the silos between all of the channels through which money flows out of the enterprise — from expense reports to purchasing cards, to ACH transactions in AP and beyond — have created an ecosystem of fragmentation that make gaining holistic visibility over spend a significant pain point.
The Value Of Automated Analytics
Digitizing and centralizing spend across various departments and workflows is the first step to enhancing the auditing process, said McCrossan.
“Organizations want to take a more analytical and automated approach to managing expenses,” he noted, adding that technologies like artificial intelligence (AI) can automatically identify whether spend is erroneous, fraudulent or non-compliant with company policy.
But the true value in data analytics technology is in the ability to continuously audit transactions as they flow in. In this way, automation tools can identify patterns of spend behavior that perhaps went unnoticed by human examination, while risk analysis technology can arm managers with actionable insight to help guide leaders in the enterprise in knowing whether they need to step in and address an issue.
Overall, according to McCrossan, an auditing strategy that is built on continuous and real-time analytics can help drive a change in the overall spending culture of an organization.
“It really helps to build an organization’s culture of compliance by providing a continuous monitoring approach to expense,” he said, adding that this could come in the form of identifying a potential issue with an invoice payment before that transaction ever occurs, or pinpointing employee spending behavior trends from historical expense reports.
Less Of The Bad, More Of The Good
With digital transformation now at the top of every chief financial officer’s priority list, embracing data analytics as a tool to mitigate spend risk will be an important part of organizations’ efforts to strengthen financial positions at a time when market volatility demands it.
It’s certainly important for business leaders to address problems like expense fraud, duplicate invoice payments or non-compliant spend. But according to McCrossan, spend management isn’t just about combatting so-called bad spend, but also promoting spend optimization by identifying which areas of spend are most beneficial to an enterprise.
“Once you start to identify the spend that shouldn’t take place, and you start to help companies drive a culture of compliance that eliminates bad spend, the opportunity is now how to identify what is good spend — spend that has an ROI for the organization?” he said. “That could be certain types of sales or marketing spend. IT might mean taking advantage of pricing promotions through different procurement vendors.”
Combatting spend leakage is vital to the financial health of any organization. But when sophisticated data analytics can overcome data silos and intelligently identify patterns unbeknownst to the human eye, business leaders will also have the opportunity to drive compliance and elevate returns by both nixing the bad spend and encouraging the good.