How to Control Expenses in a Company: 4 Foolproof Strategies
When it comes to spending, companies are continually challenged. Whether spending on vendors, advertising, or many other expenses, businesses that lose sight of how their spending is affecting revenue can put themselves at risk. On the other hand, even the most conscientious firms might unknowingly lose money to an unscrupulous vendor or to an employee who defrauds them.
It goes without saying that figuring out how to control expenses in a company is critically important. By doing this, businesses can keep their costs reasonably low and cashflow healthy while avoiding unnecessary or fraudulent expenses.
Today, we’re going to explore a few basics of spend management, four foolproof strategies for controlling expenses, and how Stampli can help make it happen.
The Basics of How to Control Expenses in a Company
How to control expenses in a company isn’t always the easiest endeavor. After all, a company’s primary objective should arguably be to sell its goods or services at enough of a profit to keep operating. Taking too much time to count beans can thwart this.
Money is also flowing pretty freely these days, with U.S. companies expected to spend $30.61 billion on marketing data alone in 2021. At a time when businesses seemingly can’t spend money fast enough, it might seem antithetical to try to find strategies for how to control expenses in a company.
Still, it’s not hard to start finding better methods for how to control expenses in a company. Let’s start by exploring a few of the basics.
Defining Company Expense Control, or Spend Management
For our purposes, expense control and spend management are essentially the same thing, with different definitions for spend management available online.
Gartner defines spend management as “a set of practices that ensure organizations make procurement and sourcing decisions in the interests of both the bottom line and company efficiency.” The research company goes on to note that spend management centers on maximizing value, boosting vendor relationships, and trying to offset any financial risk.
How to control expenses in a company goes beyond sourcing and purchasing, too. As we’ll explore later, spend management is also about having the framework in place for good spending decisions. It’s about having the right systems and a variety of payment methods.
As a formal practice, spend management perhaps hasn’t been around that long, at least in systematic form. But spend management tools like accounts payable (AP) automation software are making it easier for companies to refine their practices.
Who Controls Expenses in a Company
In a 2021 survey report by Stampli and Treasury Webinars, “AP Today: Bottlenecks, Benchmarks & Best Practices” 25% of companies were having purchases made by a procurement team, 38% were leaving purchasing to individual departments, and 34% were using a combination of departments and procurement teams.
Clearly, who controls expenses can vary a bit from company to company. But the question is also less about who controls expenses than what does. Some companies with legacy or non-existent technology might be strictly using paper general ledgers for expense control. Others may already be benefitting from a more advanced system that takes things electronic.
Why Controlling Expenses in a Company Matters
As we noted earlier, companies don’t want to spend too much time counting beans. Nor do they want to have to be constantly monitoring their staff so they can know that the company is making responsible spending decisions.
All the same, figuring out how to control expenses in a company is extremely important. Among other things, it will help companies to know that they’re spending an appropriate amount relative to their gross revenue, that vendors are charging them fairly, and that individual employees aren’t attempting to defraud them.
4 Tips for How to Control Expenses in a Company
The good news when it comes to how to control expenses in a company is that businesses don’t have to sit passively. Many different strategies can aide spend management. Here are four to consider:
1. Pay Attention to Your Vendors
Stampli and Treasury Webinars’ report on AP bottlenecks found 31% of companies had at least 500 vendor relationships. In addition, 73% of companies were primarily managing relationships through email or spreadsheets. It’s easy in either scenario for firms to struggle with organization, be unclear if they’re being overcharged, and risk excessive spending.
Recommended action: Unless you’re a company with few vendors, ditch the spreadsheets, which will have staff fumbling. The stress is unnecessary, too, with accounts payable automation software able to show what different vendors are charging and how long they’ve been doing business.
2. Watch How Different Departments Spend
It can also be hard for companies to track what different departments are spending, particularly when companies leave it to individual departments. Some departments will have a savvy purchasing agent or team that keeps costs low. Other departments, not so much.
Recommended action: For companies that allow individual departments to make purchasing decisions, put clear purchasing protocols into place, spend time thoughtfully educating around these procedures, and check-in regularly. Periodically review purchasing data and compare it to other departments to ensure spend amounts aren’t varying wildly.
3. Turn to AP Automation
Figuring out how to control expenses in a company doesn’t have to introduce a headache for every purchase. The nice thing about AP automation software is that it doesn’t just automate invoice processing. It also automates spend management, giving companies instant views of vendor, departmental, and other key data.
Recommended action: Many companies in recent years have begun to automate on a limited basis, selecting individual parts of the procurement-to-pay (P2P) process like invoice scanning or payments. But it’s a good time for companies to consider more full-scale AP automation, which can provide richer spend management data since it will have a full picture.
4. Consider Having Staff Use Virtual Cards
Companies have a lot of ways to pay bills, including checks, ACH payments, and wire transfers. While there isn’t a right or wrong way to pay bills, it can be a good time for companies to consider implementing a virtual card, such as the Stampli Card.
Virtual cards are an emerging method of payment. Stampli and Treasury Webinars found in a 2021 survey report, “How & Why Companies Choose Payment Types” that while 61% of companies had made payments with virtual or ghost cards, just 4% preferred to pay bills this way.
That doesn’t mean, however, that that there aren’t clear benefits associated with virtual cards. Stampli Card is integrated with our AP automation platform, allowing companies to control spend before and after purchases takes place. The transactions sync directly with Stampli and information is also pushed backed into a connected ERP system.
Companies also have good control over how employees spend with virtual cards. Stampli’s virtual card provides employees who use it with reminders to include supporting documents with their purchases. In addition, companies can set card limits and cancel or halt use of the Stampli Card at any point, preventing the cards from being used by unauthorized people.
Recommended action: Look to spend solutions integrated with AP automation platforms, such as Stampli’s virtual card.
Ways Stampli Can Help How to Control Expenses in a Company
Some AP automation systems might not be much more than bits of software that allow invoices to be processed virtually. This isn’t the case with Stampli. While Stampli definitely offers a superb AP automation platform, it also provides sophisticated spend management capabilities.
Here are a few ways that Stampli helps with how to control expenses in a company:
Full Controls Within an AP Automation Platform
AP automation systems are a wonderful paradox. On one hand, they help AP staffers process invoices from end to end, granting them the ability to do so much with the simple push of a button. But the systems also have full controls in place to prevent individual employees from going rogue with spending or even just causing calamity with an innocent mistake.
With Stampli, companies determine which users have access within their AP automation system, what information they’re privy to, and how much of the P2P process they’re able to control. It’s a good rule of thumb in general to not concentrate too much of the process in any employee’s hands. Stampli helps companies to diversify their P2P process, while ensuring each member of the team remains under control.
Stampli’s artificial intelligence also provides another level of control, able to detect duplicate or possibly fraudulent invoices, offering another great tool for how to control expenses in a company.
Comprehensive and Up-to-Date Spend Visibility
One of the reasons that spend management can be so challenging is that data can be incomplete (ie. when a monthly credit card statement has a dollar amount, but no other details) or is spread across different systems, making full oversight challenging.
Meanwhile, companies might avoid reconciling different sets of their financial books if they have to do so manually. While reconciliation is the best way to ensure accuracy and that company spend data is what any set of books says it is, it can be pretty labor-intensive if businesses don’t have an AP automation platform capable of performing automatic, daily reconciliations.
Companies don’t have this problem when they use Stampli, though. Comprehensive and up-to-date spend data is available within the platform, letting companies know exactly where their spend is. The system is also able to do daily reconciliations with your ERP software, eliminating any discrepancies in your data.
A Virtual Card Integrated with Your System
As Treasury Webinars noted, certain AP automation solution providers can fall short of what they promise with virtual cards.
Stampli has worked hard to create a virtual card that integrates directly with your AP automation system. As part of our Stampli Direct Pay service, companies can pay bills directly within our system via virtual cards. Use our virtual card and enjoy lower payment costs, easier processing, and fewer third-party payment providers to deal with.
It’s all part of everything that Stampli does to make how to control expenses in a company easier than ever.
Improve your spend management and make payments painlessly with the Stampli Card.
