What is spend visibility? (And how to increase it)

Running a profitable business involves more than just fundraising and earning revenue. Many startups and growing companies barely break even as they search for a business model that drives sustainable growth.

Close financial oversight is a major key to successfully building a stable company. Businesses and finance teams that have high spend visibility know how their funds are allocated and exactly what they’re spent on.

And the best teams know this in real time, not only during month-end closing (or the quarterly, or year-end close).

Unfortunately, many business leaders don’t have enough control or real-time awareness over their fiscal activities. As a result, teams spend impulsively without understanding the consequences this has on the company’s financial situation.

Common scenarios include going over budget, spending money that the business doesn’t have, or making redundant and duplicate purchases.

Enforcing your expense policy and overseeing budget distribution isn’t just the responsibility of the finance team or CFO alone. It’s essential to have a framework with clear-cut processes that apply to each and every role.

What is spend visibility?

Simply put, spend visibility is the level of oversight and understanding you have about where company funds go.

Finance teams who can accurately show where dollars are spent - in as close to real time as possible - have a high degree of spend visibility. Those who aren’t sure, or who need to wade through records and documents to find out, don’t.

But spend visibility isn’t limited to just tracking business expenses across the year. It demands both a general and granular look into the productivity and efficacy of the company’s financial operations and purchasing processes.

This requires real-time tracking, monitoring, and spend analysis, as well as purchase lifecycle optimization.

As with all forms of analysis, the most important factor is how this information is put to use. If you can’t track your spending easily and then make smart financial decisions as a result, this visibility isn’t particularly valuable.

Why does it matter?

Certain teams need to spend much more than others. Yet, without analysis and a breakdown of past and present buying activity, finance teams cannot allocate budgets accordingly.

As a result, employees still buy the things they need, eating into other teams’ budgets. Or they’re left without essential resources, and company performance suffers.

Spend visibility mitigates these kinds of risks by preventing operational losses and identifying cost savings opportunities. For example, if two departments are each subscribed to different SaaS tools that provide the same type of service, they can simply consolidate their expenses into a single paid subscription or license that can be used across the entire business.

Companies that have clear spend visibility are able to increase their efficiency, strengthen cost structure, and even optimize other business processes like procurement and vendor management.

Why don’t most companies have visibility over spending?

There are several reasons companies lack visibility over their spending activity. Sticking with traditional accounting practices is one of the most common. “That’s the way we’ve always done it,” isn’t a great reason to limit yourself to outdated and error-prone processes. Here’s why:

Old-fashioned payment methods are risky

The problem with relying on manual payment methods alone is that they’re difficult to scale and vulnerable to fraud. This includes:

• Shared corporate cards

• Paper checks

• Petty cash

These traditional payment methods are easily misplaced or stolen. It's nearly impossible to track who makes each purchase, causing a lack of accountability and leaving managers with little to no control over the budget.

Finance teams struggle to reconcile unauthorized purchases, dragging out the closing process and leaving the company liable for audit penalties.

Manual processes lack real-time data

Out-of-date manual processes aren’t ideal for modern businesses either. Whether it’s expense reports or budgeting spreadsheets, even the smallest mistake in data entry can cost companies hundreds to millions of dollars.

Some slow tedious processes can cause more problems than they solve. Without simple straight-forward workflows, people cut corners on overly complicated tasks to win time. Yet when teams are perpetually catching up on finances, they can’t focus on driving real growth.

The most effective way to monitor, manage, and control finances is being proactive, not reactive. This requires companies to prioritize real-time visibility over spend.

How to achieve real-time spend visibility

Increasing spend visibility in your organization doesn’t require doubling the size of your finance team. It’s as simple as choosing and implementing a good spend management solution into your business operations.

Software solutions like Spendesk use powerful process automation and flexible payment methods to help businesses spend smarter, while giving finance teams greater control and visibility. Here’s how it works.

1. Upgrade company payment methods

Every team spends differently, so it’s best to have a variety of payment options:

Prepaid debit cards are individually assigned so every employee can promptly access the funds they need, without hunting down a shared company card.

• Teams can identify who made each purchase and what it was for. Purchase types can be categorized to help finance understand and prioritize the company’s latest spending needs and trends.

• Purchase requests, approvals, and transaction details all live in one centralized dashboard, updated in real-time.

• With adjustable budget allocation, managers don’t have to worry about overdraft or credit scores. Employee card balances can be reviewed and topped up with a click.

• Instant reconciliation using mobile receipt capture saves employees and finance teams hours when closing the books.

Prepaid debit cards can be issued in the form of virtual or physical company cards.

Virtual debit cards are generated instantly, each with unique card details for more secure online payments. They’re impossible to lose or misplace.

• Perfect for one-time or recurring online payments, and managing subscriptions and SaaS stacks.

• Teams can view subscription details, pricing, and pause, cancel, or transfer ownership of virtual cards, all from the same platform.

Physical debit cards can be assigned to employees that frequently spend in their roles. All purchases are linked to their respective cardholders, making it easy to identify the points of contact for specific transactions and vendor contracts.

2. Connect payments to centralized software

Spend management software integrates all payments and purchase activity into one central online platform. Many of these tools also support direct integrations with accounting and messaging softwares like Quickbooks, Xero, and Slack.

Teams can access detailed breakdowns and budget analysis across different teams, functions, and locations–from the office or on the go.

Employees can easily request funds and view the status of pending approvals or reimbursements. Managers can allocate or adjust budgets, and approve purchase orders, while finance can track the info they need at any time.

3. Create easy-to-follow processes & policies

Automated solutions enable teams to execute proactive spend management, but clear internal policies can also empower employee autonomy and accountability.

This is key for companies that want to practice transparency and trust their teams to make the best purchasing decisions for the company. Simple yet comprehensive processes eliminate the risk of confusion or misinterpretation in employee spend practices.

4. Automate spend analysis

Spend visibility involves precise monitoring, tracking, and control over your business transactions. It also enables you to transform knowledge of your company’s purchasing behaviors and habits into cost savings strategies.

With spend management software, teams can tag every transaction with data points on: who purchased, vendor, price, date, category, department, and more. By analyzing this data, finance teams can determine valuable insights such as:

• Whether the company is spending too much on specific categories or services

• Whether departments are overspending or under-utilizing their budgets

• if there is room to negotiate a more competitive price with a vendor

• Relevant market trends like pricing fluctuations due to seasonal demand

The more real-time data your team has on its finances, the easier it is to identify opportunities to improve business costs. What’s more, your company will be well-prepared in the event of an audit.

Increase visibility and spend smarter with Spendesk

Although companies often struggle with a lack of visibility and control over their finances, you don't have to. With Spendesk’s comprehensive spend management solution, finance teams can upgrade their workflows and purchasing cycles across the entire business operation–from procurement to payments.

Powerful spend analysis enables you to proactively distribute funds and manage budgets, with a real-time overview of your ongoing purchase activity. Implementing these automated processes will not only increase your spend visibility, but also strengthen company-wide performance.