Owning and operating a growing business is exciting and can be a rewarding experience for founders who have spilled sweat and tears to build their venture from scratch.
However, most new entrepreneurs ignore the financial caveats and challenges of operating a company that is growing across the board, meaning that headcount is increasing, budgets are flying, and individual expenditures are getting more difficult to keep track of.
For a business that is scaling up rapidly, relying on an adequate spend management platform can make the difference between moving or staying in the green zone and drifting to the red when it comes to profitability.
In this article, we dig deeper into the importance of spend management software and how it can help you in scaling up profitably.
The challenges of a growing business
From a purely financial standpoint, a growing business will face some of the following challenges:
- Difficulties to track the individual performance of different cost centers
A company that is expanding will typically build new departments rapidly and tracking their individual financial impact can be complicated unless there is a system that is properly designed and structured to accomplish this goal.
- Assigning payment methods to department heads
As the business gets bigger, more people aside from the founder alone must have the capacity to make payments on behalf of the company and this gets messy if business cards start to roll down without appropriate controls being set in place to prevent excessive spending and other similar issues.
- Detailed reporting and forecasting capabilities
In the absence of systems that perform this task, obtaining detailed reports about how money is being spent by each department and unit can be complicated, and generating them manually can be time-consuming for the accounting team.
Moreover, understanding the nature and impact of certain individual expenditures on the firm’s budget becomes crucial for forecasting purposes.
How can spend management software help?
Spend management software has been designed to help businesses keep track of where the money is going.
As a result, money drains can be addressed and measures can be adopted rapidly to ensure the company’s financial success.
The best spend management software nowadays helps entrepreneurs by producing real-time reports about how money is being spent and by who, by integrating all the different payment methods and end-point tools used by the business to disburse money.
For example, credit cards can be synchronized with the platform so the system is updated in real-time since all expenses will be immediately accounted for.
Moreover, permissions can be extended to those who have the responsibility of making payments on behalf of the company for different purposes and roles can be established for others who may be in charge of overseeing or approving these expenditures before they are made.
As a result, some of the riddles that founders will typically experience if their business starts to grow rapidly will be solved by a top-notch spend management platform.
4 things to look for when picking spend management software
There are dozens of spend management platforms out there that claim to offer entrepreneurs tools to manage their company’s money better.
However, the following four are among the most relevant characteristics you should look for when picking the best spend management platform for your business:
- As many supported payment methods as possible
Spend management platforms work best if they support many payment methods including credit and debit cards and electronic wallets to facilitate the process of keeping track of where money is going without having to add transactions manually.
- Rewards and other similar perks
Since spend management platforms will be handling a lot of data from the businesses they serve, they can typically offer cash-back rewards and even discounts with some affiliated partners and that is another positive characteristic to look for in a prospective provider.
- An affordable pricing
For a growing business, keeping expenditures in check is an important goal and a spend management platform should not be among the most expensive items on your list. Keep in mind that some providers even offer their services for free.
- A secure ecosystem
There will be a lot of sensitive data flowing through a spend management platform and this increases the importance of making sure that their systems comply with the stricter IT and data security protocols. By doing so, you can rest assured that all that information will be safely stored and shared on an as-needed basis – not sold to others.
If you are the owner of a growing business, you should probably be familiar with some of the challenges outlined above. If you do, you should be aware of how to spend management works and how it can help your organization in staying profitable during a stage that is typically volatile and difficult to manage.