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What is Spend Management? Importance, Benefits & Process
In the realm of business operations, effective spend management is crucial for maintaining a healthy financial bottom line. Businesses grappling with inefficient spending control face risks that can substantially impact their financial stability.
For example, poor invoicing practices that cause a delay in payment can lead to contract management issues or, even worse, a lost client for your business. It also might cause issues with some of your preferred suppliers if they feel they’re not being paid on time.
Making a slip-up that disrupts a subscription can mean your company lacks access to critical software or tools until the issue is fixed.
A poor expense report system means charges incurred on your business trip might result in many follow-up questions, so your accounts payable team is on the same page with purchase orders. A system without real-time visibility for spending data is not ideal for any organization and does not make it easy to reduce spend.
Intelligent spend management helps prevent these issues. A business uses spend management to comprehensively track and review organizational-wide spending and purchase orders down to the last dirham.
In this post we will deep dive into spend management and discuss the best ways to properly manage it.
What is spend management?
Spend management refers to the systematic process of tracking, analyzing, and controlling an organization's total expenditure. It encompasses all aspects of business spending, including invoicing, contract management, subscription services, and expense reporting.
The goal of spend management is to enhance financial stability by providing real-time visibility into all financial transactions and purchase orders. This comprehensive approach enables businesses to identify inefficiencies, reduce unnecessary expenses, and maintain strong relationships with suppliers and clients.
The Importance Of Spend Management
Effective spend management is crucial for a company's financial health and operational efficiency. Neglecting careful expenditure tracking or allowing excessive indirect spending can lead to significant revenue loss, risking even the most well-planned business strategies. Managing costs and enhancing efficiency becomes challenging when financial processes are time-intensive and complex.
A report by McKinsey highlights the critical nature of this issue, noting that external spending on suppliers typically represents 40-80% of a company's total expenses. This statistic underscores the vital importance of meticulous spending control. Furthermore, the process of reviewing and optimizing expenditures can have a substantial impact on employee workloads, indicating the far-reaching effects of spend management.
Adopting robust spend management practices enables companies to achieve greater financial stability and avert potential crises. Implementing a system that tracks and monitors all financial transactions ensures that expenditures are fully accounted for, reducing the likelihood of wastage. In summary, efficient spend management is not just about cost control; it is a strategic approach that influences every aspect of a company's operations and contributes significantly to its long-term success.
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Advantages Of Digital Spend Management
In this day and age, using an online tool to keep track of your expenses should be a no-brainer. Let’s have a look at some of the main advantages.
1. Insight Into Everyday Expenditures
Where is every dirham your company makes going? If you don’t know, digital spend management will dramatically strengthen financial accountability, budgeting, and expenses. In addition, reporting on where company funds are flowing makes it much simpler to see how different department heads oversee budgets. Read more on how to improve internal control over financial reporting.
2. Stronger Financial Controls
Spend management tools like Pluto, allow you to not only monitor your spending in real-time but also set the limits on the go. In addition to that you can issue cards for departments or individuals, and even focus them on a particular type of usage, such as specific vendors only.
3. Budget optimization
Effective spend management is a great solution to ensure a better-looking budget. Analyzing and managing spending makes it simple to find and cancel unneeded services, negotiate lower prices with new supplier contracts, and never have to pay a late fee again. It will also significantly help your board of directors as they’ll have a simplified, streamlined budget to review and discuss at the start of the year.
Common Spend Management Challenges
It’s easy to pursue spend management practices that hurt your business’s bottom line if you’re not careful. Many ‘traditional’ best practices might not fit companies with remote-first work policies, engage in cutting-edge industries, or have an unorthodox structure.
If your company has a dynamic structure, spend management becomes all the more important to help you keep up with the competition and get the most value out of every dirham spent.
Keep these potential challenges in mind as you pursue spend management practices.
1. Relying On Old Spending Data
Be wary of relying on old budgets or financial data when managing more spend. It’s challenging for leadership to identify problem areas with cash inflows or outflows, when they only have outdated information.
2. Over reliance On Manual Mapping
Having to go back at the end of the month to match spending to budgets manually can take an inordinate amount of hours and opens the door to errors and mistakes that can throw off a spend management policy.
Pluto helps to automatically match spend to budgets in real-time, ensuring accounting and finance teams have accurate updates.
3. Harnessing Too Much Technology
Modern financial software can dramatically help your company’s day-to-day operational flow. However, if these solutions do not work together, chaos can ensue which leads to data migration and processing errors. Pluto integrates with your accounting tools, cutting the data flow time significantly.
4. Outdated Processes
The post-COVID world of remote and digital work means your employees might be scattered across the globe and in different time zones. Having to arrange shared corporate cards manually or coordinate team spending with employees in different locations can be tricky. Pluto offers unlimited virtual cards, which allow you to provide a payment channel for any employee anywhere in the world.
How To Improve Your Spend Management Process
Optimizing your spend management process might seem tricky at first glance. Fortunately, small and large businesses often rely on the same core strategies to optimize spending.
1. Rely On Spend Management Software: Pluto can help automatically track expenses, keep abreast of budgeting, and help manage strategic sourcing. CEOs and CFOs then have relevant, real-time data at their fingertips to see where their company is financially.
2. Focus On A Few Payment Methods: Do you have too many company cards in your pocket? It might be time to streamline purchasing methods to help simplify your spend management strategy. For example, your business can dramatically improve expense tracking by asking employees to only use company cards for business expenses instead of asking for their personal cards to be reimbursed.
3. Have An Organized Approval Process: You can clarify your spending process (you might want to check our post on how to create a corporate card policy) by ensuring employees have a clear hierarchy of how and by whom purchases need to be approved. If your team is unclear, they might complicate the payment process by not filing the right reports, which means your financial team could be left in the dark about purchases.
6 Efficient Spend Management Strategy Tips
Your company needs to optimize its spend management strategy to ensure the final results lead to reduced procurement costs, improved efficiency, and streamlined workflows.
Spend management best practices also help improve vendor relationships and communication, procure the optimal goods and services your business needs, and even help you earn volume and early payment discounts due to more effective and simplified financial practices.
Keep the following steps in mind for the best results regardless of your organization’s industry or size.
1. Calculate Expenses
Do you know exactly where employees spend company funds? If not, you’ll need to build a comprehensive list of company expenses, suppliers, and entities where funds are going.
This might quickly become a challenge if you’re in charge of a large business. If so, look to designate specific team members to review employee salaries, utilities, marketing, training, and all other day-to-day expenses to have the most detailed list.
You can’t improve what you do not measure. You can use Pluto to get a firm grip on your expenses. Pluto allows you to monitor and control your expenses so you clearly see how much was spent in which category.
2. Confirm Data
You’ll want to ensure all accrued expense data is accurate and can be cross-checked with receipts and inventory records. Ensuring transaction data is precise, and expense lists are free of duplicates, spelling mistakes, and other mistakes makes the entire spend management process more efficient.
Take this step extremely seriously if your company spend practices have relied on more manual processing methods. Standardization ensures that multiple currencies, formatting differences, and other nuances are accounted for when looking at spend analysis data.
(Goes without saying that when using Pluto this is all pre-done for you!)
3. Categorize Information
While optimal spend management brings all expenditures under a single umbrella to review, your team will still want to categorize expenses into various groups to make reviewing and making adjustments across different departments simpler.
It’s usually best to categorize expenses in multiple ways to understand where money is going. Pluto allows you to categorize expenses both through specialized cards or just by tagging, so everything is nicely grouped together when it is review time.
4. Review Expenses
A well-thought-out process of calculating, verifying, and categorizing spending information will simplify your entire review process when you’re looking at spend data.
You should immediately be able to spot expenses that are anomalies or recurring spending that might be able to be cut out from the start.
Pluto’s dashboard can give you a high level but also a detailed view, so you can clearly identify trends and separate expenses.
5. Devise A Strategy
You’ll want to move decisively once you’ve identified potential changes to spending habits and department budgeting approaches.
It might seem difficult at first glance to start reducing budgets, cutting out vendors, or make other dramatic changes to your company’s budget and expense habits. Rely on good change management practices and your leadership team to cultivate employee and stakeholder buy-in to any adjustments.
6. Practice Good Data Forecasting
Keep updating your expense data as you make a budget and spending adjustments. Doing so keeps your team on top of where funds are going and can help forecast different spending scenarios and how they might impact your business’s bottom line.
Keeping data and information updated becomes particularly important if your expenses grow to ensure financial operations run smoothly. Don’t forget to cultivate supplier relationships if you work with different vendors for optimal inventory management.
Should You Rely On Spend Management Software?
Manually processing expense claims, keeping up with petty cash, and tracking company credit cards can quickly turn inefficient, hinder your company’s financial management, and inhibit the overall procurement process.
In contrast, the right spend analysis solution can aid real-time expense tracking, provide easy-to-read charts and graphs of high-level expenses, and capture and store financial-related documents, so your finance team members are not scrambling to find a receipt or report.
Pluto has a multitude of features including procurement software and account payable that will help you with spend management and make spend control much easier.
1. Flexibility
Pluto allows you to create cards for various purposes, edit spending limits on the go and monitor your expenses in real time. This allows you to scale up or down depending on what your business needs at any given moment.
2. Powerful Analytics
With Pluto, you will be able to track spending patterns and areas of high expenditure and get real-time insights into your business finances. The powerful analytics will help you make better decisions about where to allocate your resources.
3. Ease Of Use
The main bottleneck of many spend management platforms is that the employees do not use them - as it is just too time-consuming. Not with Pluto! The sleek and user-friendly interface makes expense management a breeze.
4. Simplified Reimbursements
Receipt upload and reimbursements can be quite a burden for the team. Pluto allows you to take pictures of receipts with your phone and just add them to your reimbursements list. With the use of categories and tags, you will be able to both submit and review them in record time!
Key Takeaways For Company Spending
Spend management remains an essential component of all organizations regardless of size. Accountability for every dirham flowing in and out ensures your company maximizes revenue and remains growth-focused, no matter the budget.
You can take the first step today by relying on Pluto and processes to establish control over budgets, track spending, manage payments, cut costs, and boost your financial team’s day-to-day operations and processes.
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•
Vlad Falin
How IT & Procurement Teams Should Evaluate Spend Management Products
In today's fast-paced business world, managing expenses can be a daunting task for IT and procurement teams.
To help you out, we compiled a list of features and functionalities that you should consider when picking your spend management platform.
Spoiler alert, Pluto has them all.
PCI DSS Level 1 Provider
One of the essential features that should be given high importance is the product's PCI DSS Level 1 compliance.
The Payment Card Industry Data Security Standard (PCI DSS) is a set of guidelines and security requirements designed to safeguard payment card data.
The standard was developed by major credit card companies, including Visa, Mastercard, American Express, Discover, and JCB, to ensure that all companies that handle payment card data maintain a secure environment. PCI DSS compliance helps to prevent fraud and data breaches, protecting both the company and its customers.
PCI DSS Level 1 is the highest level of certification a company can achieve for PCI compliance.
It requires companies to undergo a rigorous independent audit to ensure compliance with all 12 of the PCI DSS requirements, including network security, access control, and vulnerability management.
Achieving PCI DSS Level 1 certification demonstrates that a company has a comprehensive and effective security program in place to protect payment card data.
When evaluating corporate spend management products, IT and procurement teams should look for products that have achieved PCI DSS Level 1 compliance to ensure that the product meets the highest security standards.
This will help to ensure that the company's payment card data is adequately protected and that the company is meeting its compliance obligations. By prioritizing PCI DSS Level 1 compliance, IT and procurement teams can help to safeguard their company's reputation and financial well-being.
Being PCI DSS Level 1 compliant is essential for any organization that handles corporate card information, as it provides a high level of security and assurance that the organization is taking all necessary measures to protect its customers’ data.
Pluto Card is proud to be PCI DSS Level 1 compliant. This means that our customers can trust that we have taken all necessary measures to secure their data and protect it from unauthorized access.
We also partner with vendors who are held to the highest security standards, such as PCI or SOC2 compliance.
Passwordless Login
Passwordless login is a secure and convenient way for users to access their accounts without the need for a password. It is an effective way to protect against unwanted access to your account, as passwords can be easily compromised or stolen. By tying your Pluto access with a company email account provided by your organization ensures that when your employees lose access to their company email address they also lose access to Pluto.
At Pluto Card, we understand the importance of passwordless login, and we offer this feature to our customers. With our passwordless login feature, our customers can access their accounts quickly and securely, without the need for a password.
Activity Log And Audit Trails
Activity logs and audit trails are crucial for ensuring strict auditing everywhere. An activity log records all user activity within an application or system, while an audit trail provides a record of all changes made to data within the system.
Pluto Card offers a 7-year audit log, which means that our customers can track critical changes made to their data over a seven-year period.
Data Access
Employees that are using our platform have only as much access as they need, and we have infrastructure redundancy built into Pluto, which means that all compute and data is run in multiple geographies.
Business continuity is paramount at Pluto - to this end, we ensure data redundancy with redundant backups in multiple geographies as well.
In addition, at Pluto, your application data is always encrypted in transit, and at rest.
Continuous Security Scans
Pluto also provides a continuous security scan, which tackles multiple dimensions, including code or dependency vulnerabilities, infrastructure, and public endpoint scans.
Our customers can be assured that we take security very seriously and are always on the lookout for any potential security threats.
In the event of a security incident, we have an immediate incident response plan in place and will notify impacted customers without undue delay of any unauthorized disclosure of customer data.
24x7 Customer Support and Dedicated Account Manager
In addition to these security features, Pluto Card also provides 24x7 customer support.
We understand that our customers need support around the clock, and we are always available to help with any questions or issues that may arise.
Data Infrastructure, Redundancy and E2E Encryption
We also provide infrastructure and data redundancy, which means that our customers’ data is highly available and secure, even in the event of a system failure or outage.
Data is always encrypted in transit, which means that it is always protected during transmission between servers or devices.
Finally, another crucial feature that IT and procurement teams should consider when evaluating corporate spend management products is data residency and retention policies.
Pluto Card offers an audit trail for changes to customer data, so we can track who did what.
Additionally, we have a data residency promise of 7 years, which means that we retain customer data for that period of time.
This can be important for compliance with regulatory requirements, such as tax or financial reporting.
Conclusion
In conclusion, when evaluating corporate spend management products for your enterprise, it’s essential to consider the security features that the product offers.
PCI DSS Level 1 Compliance, passwordless login, activity logs and audit trails, and data residency and retention policies are all critical features that can help ensure the security and integrity of your organization’s financial data.
Pluto Card offers all of these features, along with 24x7 customer support and infrastructure and data redundancy, making it an excellent choice for organizations looking for a secure and reliable corporate spend management solution.
For more information visit Pluto and book a demo.
•
Leen Shami
Ramadan Benefits in the Workplace: A Guide to the UAE and MENA Region
The month of Ramadan provides HR Managers with the opportunity to take the initiative in their organization and implement a benefit program for employees and to remind them to support their Muslim colleagues during this holy month.
What are the benefits of implementing a Ramadan employee benefits program?
Employees who observe Ramadan may require special considerations in order to maintain a high level of performance.
The main goal of any corporate environment is to get the best possible results, but this can only be achieved if your team is given a supportive environment.
During Ramadan, HR managers and employers should consider implementing employee benefits programs to ensure that their employees are able to fulfill their religious commitments while feeling supported by their companies.
By doing so, you will help ensure that every member of your team has access to the resources they need to be productive and successful.
Employee benefits program
Flexible working hours
Allow employees to come in late or leave early during Ramadan, modify their hours so they can work when they feel the most energized,and be able to take part in religious activities such as prayers while still being productive at work.
Remote or hybrid work
Remote or hybrid work can provide employees with more flexibility and autonomy to manage their work and religious obligations during Ramadan, allowing them to maintain their productivity and well-being while observing the holy month's spiritual practices.
Set up dedicated prayer spaces
Having dedicated prayer spaces can help employees maintain their spiritual practices during the workday. This is particularly important during Ramadan when employees may need to perform their daily prayers. Providing these spaces can make it easier for employees to observe their religious obligations without having to leave the workplace or worry about finding a suitable location to pray.
Accommodate dietary needs
Provide employees with food options that meets all dietary needs, so they can break their fast at the office if needed.
Examples of foods that are commonly used to break the fast:
- Dates
- Dried fruits
- Ayran (yogurt drink)
- Soups
- Sambusak ( pastry filled with cheese or meat)
Inclusivity
Promote open dialogue between employees of different faiths to foster an inclusive workplace environment. Consider arranging a presentation for those who would like to learn more about Ramadan and Islam.
Gift and Bonus Programs
Corporate gift and bonus programs during Ramadan can take many forms, but the underlying purpose is to show appreciation to employees for their efforts and to strengthen the relationship between the employer and employees.
Here are some common examples of corporate gift and bonus programs during Ramadan:
Eid al-Fitr bonus
It could be an additional incentive where employers give their employees an additional payment or bonus at the end of Ramadan to celebrate Eid al-Fitr, which marks the end of the month of fasting.
Corporate gifts
Companies may offer gifts such as food hampers, prayer mats, and other religious items to their employees during Ramadan as a way to show appreciation and respect for their faith.
You could also delight your employees with a gift that they can use to enjoy dinner with their families. One way of doing this is by issuing Pluto corporate cards for your employees with an allocated budget on them. For e.g., you can issue a your employee a Pluto corporate card with a 500 AED spend limit to be used a restaurant of their choice.
Charitable donations
Some companies may choose to make charitable donations on behalf of their employees during Ramadan as a way to give back to the community and show solidarity with those in need.
You can add on to that by giving your employees the opportunity to pick what charity they would like the company to donate to.
It's worth noting that corporate gift and bonus programs during Ramadan should not be seen as an obligation or a substitute for fair compensation and benefits throughout the year. Rather, they are a way to show appreciation and strengthen the relationship between employer and employees.
Iftar and Suhoor Programs
Iftar and Suhoor are the two main meals that Muslims consume during Ramadan.
Iftar is the meal that is eaten after breaking the fast at sunset, while suhoor is the pre-dawn meal that is eaten before the fast begins.
These meals have significant cultural and religious importance, and hosting iftar and suhoor programs can provide a sense of community and inclusivity in the workplace during Ramadan.
Importance of iftar and suhoor programs
Iftar and suhoor programs provide the opportunity for employees to come together and share in the spiritual significance of Ramadan.
These types of activities are also beneficial for team building, as they create an atmosphere of camaraderie among colleagues and foster a stronger work culture.
Its importance can be categorized into three main points:
- Connection: Sharing a meal with colleagues can help to strengthen connections and build relationships, fostering a sense of community in the workplace.
- Cultural awareness: Hosting iftar and suhoor programs can provide an opportunity for employees of different backgrounds and faiths to learn about Ramadan and its traditions.
- Appreciation: Providing meals for employees during these times shows that the company values and appreciates its employees and their religious beliefs.
Examples of iftar and suhoor programs for employees and how to host one:
- Potluck iftar: Organize a potluck iftar at the office, where employees bring their favorite dish to share with their colleagues.
- Company-sponsored iftar: Host an iftar event at a restaurant, where the company provides food and drinks for employees to break their fast [see list of recommended restaurants below].
- Virtual iftar: For remote workers or those who cannot attend in person, host a virtual iftar.
- Charity iftar: Host an iftar event where a portion of the proceeds goes to a charity or non-profit organization. (Please make sure you are in line with UAE charity regulations before doing so. Learn more here)
- Catered iftar: Hire a catering company to provide a full meal for employees to break their fast [see list of recommended catering companies below].
- Suhoor breakfast: Host a breakfast event before the start of the workday for employees who are fasting.
- Iftar meal delivery: Deliver meals to employees who are working late or unable to attend the in-person event.
- Ramadan decorations: Decorate the workplace with Ramadan-themed decorations to create a festive atmosphere.
- Ramadan trivia: Host a trivia game related to Ramadan and its traditions during the iftar or suhoor event.
- Ramadan volunteer day: Organize a volunteer day where employees can give back to the community during the month of Ramadan.
Prayer programs
Observing taraweeh and Laylat al-Qadr during Ramadan helps Muslims to deepen their faith and spirituality, and it provides an opportunity to reflect on their actions and intentions throughout the year.
An employee prayer program during Ramadan can have numerous benefits for companies and their employees, including promoting diversity and inclusion, improving morale and relationships, and fulfilling social responsibility.
Taraweeh
Taraweeh prayers are additional prayers that Muslims perform during the holy month of Ramadan after the Isha prayer. These prayers are performed in congregation and typically consist of 8 to 20 cycles of prayer, depending on the tradition.
Companies can host taraweeh prayers at a mosque or the office on specific days of the week, such as Tuesdays, to create a sense of belonging and inclusivity among employees.
Laylet al-Qadr
Laylat al-Qadr, also known as the Night of Power, is considered to be one of the holiest nights in Islam. It is believed to be the night when the first verses of the Quran were revealed to the Prophet Muhammad, and it is said to be a night of forgiveness and mercy.
With laylat al-qadr being the most important night of Ramadan, it is important for your company to offer benefits during this day, such as:
- Consider giving the following day as PTO, since most Muslims stay up all night in prayer and reflection.
- Offer a transportation stipend to the mosque in order to show the company’s support of their employees religious beliefs.
- You can do so using Pluto’s platform by offereing a one-time purchase card with a set limit that can only be used with taxis, Careems, Uber or for gas.
Ramadan email templates that can be shared with employees
There is a lot to take care of when preparing for Ramadan. We've put together some sample email templates for various corporate initiatives to make your job easier.
Email Template 1: Announcing flexible working hours during Ramadan
Subject: Ramadan Working Hours
Dear [Employee Name],
As the holy month of Ramadan approaches, we would like to inform you that we will be implementing flexible working hours during this time to accommodate those who will be observing the fast.
Our office will be open from [start time] to [end time]. We understand that some employees may need to adjust their schedules due to the early morning and evening prayers, as well as breaking their fast in the evenings.
If you need to adjust your working hours, please speak to your line manager, who will be happy to discuss the best option for you.
Our company values diversity and inclusivity, and we hope that this initiative will help our employees observe Ramadan comfortably.
We wish all our staff observing Ramadan a blessed month, and may you get the best out of this spiritual journey.
Ramadan Mubarak!
Best regards,
[Your Name]
Email Template 2: Announcing company charitable donations during Ramadan
Subject: Ramadan Charitable Donations
Dear [Employee Name],
As we approach the holy month of Ramadan, we would like to remind you that our company values generosity and charitable giving. In line with this, we have decided to make a donation to [charity name], which supports [cause].
We believe that this is a great opportunity to give back to those in need and demonstrate our commitment to making a positive impact in the community. We hope that this donation will inspire you to consider making a charitable contribution during this holy month.
Thank you for being part of our company, and we wish you a blessed Ramadan.
Best regards,
[Your Name]
Email Template 3: Inviting employees to an Iftar meal
Subject: [Company Name] invites you to an Iftar Meal
Dear [Employee Name],
We would like to invite you to an Iftar meal on [date and time], which will be held at [location]. This event is an opportunity for our employees to come together and break their fasts as a community.
Please RSVP to [email/phone number] by [RSVP deadline] to confirm your attendance. If you have any dietary requirements, please let us know, and we will do our best to accommodate them.
We hope that this event will be an enjoyable experience for everyone and that it will help to strengthen our company culture.
Thank you for your hard work and dedication, and we wish you a blessed Ramadan.
Best regards,
[Your Name]
Corporate gifting list
- Sabr prayer mats (https://www.thesabrmat.com/)
- Bateel dates (https://bateel.com/)
- Ramadan themed candles (https://silsal.com/)
- Kitchen gift set (https://sittisoap.com/)
- Olive oil (https://almisk.ae/)
Iftar or suhoor restaurant list
- Asateer Tent at Atlantis the Palm
- Sufra
- The Majlis
- Allo Beirut
- Hutong
- Terrace on the Corniche at St. Regis Abu Dhabi
- The Royal Majlis
- Eunoia By Carine
- Bombay Bungalow
- Brasserie Boulud
- Ibn AlBahr
- Al Falak Ballroom
- Karam Al Bahr
Company catering list
- Ogram
- Blast catering
- Eat catering
- The Majlis
- Dish
Conclusion
Ultimately, providing Ramadan benefits demonstrates an employer and HR's commitment to promoting diversity and religious freedom in the workplace.
It also helps create a sense of community among employees that can lead to increased morale, collaboration, communication, and overall productivity.
By offering an employee benefits program during the holy month of Ramadan, employers can show their dedication to creating a supportive and inclusive environment for all of their employees, regardless of faith or background.
Ramadan benefits can thus be an important part of workplace culture, helping to create a positive atmosphere in which everyone feels welcome, respected, and valued.
•
Vlad Falin
Procure-to-Pay Process: What it is, Benefits, and Steps Involved
The procure-to-pay process doesn’t mean the procurement process. It is a subset of procurement that integrates purchasing and accounts payable.
Traditionally, the procurement process is scattered across the business, and the procurement team needs help to gain visibility or control. The employees purchase from different vendors, the approval process is chaotic and delayed, the stakeholders are stuck in email threads to review the expenses, and the procurement team struggles to get an overview of the organization’s needs.
Procuring the best goods and services becomes problematic since the team is left with open information loops. As a result, it spends more time optimizing the procurement cost and improving the bottom line.
What is the Procure-to-Pay Process?
The procure-to-pay process streamlines the scattered procurement parts to combine purchases and payments. Instead of a process spread across different software, the procurement process shifts to a centralized platform.
The employees get a dedicated platform to raise purchase requests and obtain approvals. The platform notifies stakeholders, such as managers, legal teams, finance teams, IT teams, and other relevant decision-makers to review and approve the proposals. As a result, the procurement team seamlessly moves to the vendor evaluation and negotiation stage without worrying about approvals or delays. The finance team efficiently handles accounts payable since the purchase and payment process is integrated.
So, while earlier, the purchases were handled solely by the procurement team and payments solely by the finance teams, the procure-to-pay process gives both teams an overview of the process from start to finish. In this post, we will discuss how this procure-to-pay process helps you optimize your procurement function and improve your bottom line.
Why Do You Need a Procure-to-Pay Process?
The procure-to-pay process is not just for your finance team or procurement team. It helps the entire organization to gain resources efficiently. Here are eight ways that demonstrate how moving to a streamlined process benefits you:
1. Visibility
All the relevant stakeholders get visibility into the process and the status. Be it the employee, managers, finance team, legal team, IT team, or procurement team — each one can track the progress without delving into multiple email threads. Additionally, teams get insights that help procurement teams optimize costs with data-driven decision-making.
2. Compliance and Control
You can implement advanced controls, such as customized approval workflows and spending budgets, without micromanaging the teams. You can successfully enforce internal control over financial reporting without creating unnecessary team resentment.
So, for instance, if any expenses or purchases beyond $50,000 require additional approval from the legal and IT team, you can easily configure those controls within the approval workflow.
3. Streamline Workflows
The traditional process demands the employees to go from one office to another or spend days on email and Slack conversations before the managers give the green signal. At times, approval of a critical stakeholder is missed, causing delays and disrupting the workflow.
With the procure-to-pay process, you can create custom workflows depending on the purchase category, department, amount, etc. This accelerates workflow, and all the relevant stakeholders get notified right away.
4. Centralized Management
The procure-to-pay process integrates purchases and payments to bring all the critical information on a single dashboard. As a result, any discrepancies in the procurement process are identified in minutes. The entire procedure accelerates the real-time visibility of each stage.
5. Reconciliation
A centralized management system makes collecting and storing documents easy; additionally, since it integrates purchases and payments, the information syncs across accounting systems and ERPs.
During the audit season, this becomes a blessing where the finance team doesn’t have to chase teams for complete records. Also, it becomes easier to store and lock all the transactions and share these records with external parties.
6. Risk Management
The procurement operation is prone to financial, operational, and reputational risks. With the procure-to-pay process, teams can efficiently manage the vendors, purchase requests, approvals, and payments on a centralized platform in real time. It reduces the risk of fraud, ensures policy compliance, and provides visibility into spending patterns without burdening any team.
7. Insights
You can easily see the inside out of your procurement process, whether you want to know how much the marketing team spends or which vendor costs you the most. It makes it more convenient to reduce procurement costs and optimize purchases to improve the bottom line. Also, as all the information is centralized, there are no gaps or missing loopholes, providing complete transparency of your expenses.
8. Invoice Management
The procure-to-pay process ensures that all the invoices are captured and extracted into a centralized platform. This facilitates two-way and three-way matching without causing delays. Moreover, the reconciliation process becomes easy as all the records are systematically recorded.
So, whether you receive an invoice via email, WhatsApp, or physical copy, you can easily add it to the system without risking losing an invoice.
What are the Stages in the Procure-to-Pay Process?
The traditional procurement process has over nine steps strewed across different platforms. These include identifying goods and services, purchase requests, vendor selection, negotiation, purchase orders, inspection of the goods received, three-way matching, approvals, and payment and reconciliation.
While the procure-to-pay process doesn’t alter these stages, it integrates them for a streamlined workflow. So, earlier, if the approvals took days or weeks, keeping employees and the procurement team on hold, now it only takes a few minutes or hours. You centralize the procurement process and save money and time.
Here are five key stages in the procure-to-pay process:
1. Purchase Request
Employees no longer need to travel from one office to another, seeking approvals manually from managers. The streamlined procure-to-pay process gives employees a centralized dashboard to raise requests and specify their needs. It helps the procurement team to understand what the employee needs as well as examine the purchase details. Moreover, the stakeholders can quickly approve or reject the requests from the dedicated platform.
Administrators add customized approval flows to enforce internal policies. They create trigger-based approval workflows based on the expense amount, category, and department to accommodate intricate hierarchies.
For instance, they have the option to create separate workflows for expenses below $5000 and those exceeding a certain budget. Similarly, they can add specific stakeholders to the custom workflows for minimum friction and delay.
2. Purchase Order
While the vendor evaluation, selection, and negotiation happen on dedicated ERPs, the procure-to-pay process enables you to bring all this information on a consolidated platform. You maintain a synced and consistent database to make purchases faster and more secure.
Pluto integrates with your ERPs and allows you to maintain a centralized vendor database. You can add the vendor directly to the platform and systematically record information. You can add a field in your approval workflow to determine whether the employees are purchasing from a vendor list or a new vendor.
A systematic list helps you consolidate expenses and optimize costs. Moreover, ordering becomes more accessible with a unified platform for raising and approving purchase requests and maintaining an ERP-synced vendor database.
3, Invoice Management
Traditionally, vendors send invoices to a dedicated email or an address. The employees send them for approval and payment. It takes days to clear the expenses. Additionally, the accounting team spends considerable time and energy on maintaining records.
The procure-to-pay strategy reduces this effort and streamlines the procedure. It captures and extracts the invoice from the emails and attaches to a dedicated purchase request and order. This helps the teams match the purchase order, invoice and goods received note (GRN) without juggling multiple platforms.
It pulls all the information with optical character recognition (OCR) technology, reducing manual data entry. Since this platform syncs with the accounting system, the accounting team spends minimal time on data entry.
4. Payment Processing
Processing payments becomes a task when the finance team has to chase employees for invoices and wait for approvals and verification. The procure-to-pay technique centralizes the entire process, giving real-time visibility and helping finance teams make timely payments.
Moreover, with Pluto, you can integrate your procurement software with the payment gateways to ease the payment process further. Also, you get better Forex rates than banks, helping you save more money. Overall, with the approvals and invoices streamlined, payment processing becomes easy.
5. Reconciliation
Reconciliation is the hardest part, even when you perform the data entry and data sync monthly. You risk losing documentation and creating gaps in the records.
The procure-to-pay process consolidates the entire procurement cycle to bring all the critical information on a single platform. There are minimal gaps; records are up-to-date due to real-time tracking and recording.
With Pluto, you can integrate with platforms like MS Dynamics, Oracle Netsuite, QuickBooks, etc. So, with your ERPs and accounting software synced, you can easily record all the transactions digitally and securely.
Pluto further enables you to lock the transactions to avoid fraud once approved. Moreover, you can create view-only access for your records to simplify auditing for external parties.
Improve Your Bottom Line With the Right Procure-To-Pay Solution
Overall, the procure-to-pay process helps you automate your procurement process without changing your approach too much. You just need to find the right solution that assists your procurement process.
We discussed more about this in our procure-to-pay solutions post, where you will find what procure-to-pay software does and how to pick the right one.
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