Is the cash flow of your business a top priority? For most businesses, the answer is likely to be yes. If you’re wondering how you can optimize cash flow and keep your business healthy, a firm handle on your company’s spending is a good place to start. For one, being able to approve, monitor, and analyze the money being spent in your company in real time will give you better visibility on how much cash you have on hand. In addition to this, having a strong understanding of employee expenses will offer you more oversight on upcoming reimbursements and money going out of the business. If this is completely new territory for you, read on as we set the terminology straight and share some insights.

What’s the difference between spend management and expense management?

In a nutshell, spend management is a set of processes that optimizes the spending elements of an entire business. Once you collate all your company’s spending, you can then use this spend data to identify every dollar spent and how to maximize profitability. This data can also be used to inform workflows, approve essential purchase orders, manage provider relationships, prioritize procurement for your business needs, and depending on your industry, manage elements of the supply chain.

Expense management, on the other hand, is a sub-categorization of spend management. It focuses on understanding, managing, and reimbursing employee expenses. Streamlining the expense management process makes it much easier for employees to submit expenses in a timely and efficient manner while providing your business with the right amount of oversight so you know what to expect.

What’s the difference between organizational spend and employee spend?

Organizational spend

Organizational spend refers to big-ticket corporate expenses, such as rent or equipment purchases. These are considered fixed costs and they are generally well managed as the amount doesn’t change much. This makes it much easier for companies to benchmark, forecast, plan, and manage this type of spend to find cost savings. For instance, these insights may highlight the importance of prioritizing funding or that there’s a need to negotiate better rates with suppliers. Such data also conveys a better picture of how you can cover current and future expenses, and how much cash injection may or may not be required.

There’s a robust procurement process associated with these expenses for which companies can generally take advantage of established supplier relationships. Such costs seamlessly flow through the appropriate approval processes and pass through accounts payable for easy categorization.

Employee or tail-end spend

Challenges arise with the remaining part of a company’s total spend, the tail-end spend. This type of spend is not as straightforward as it varies in value and pricing from one line item to the next and changes in times of uncertainty.

Often, tail-end expenses are not visible to finance teams until the expense hits the books and impacts the bottom line. At this point, it’s too late to do anything about finding a better deal, negotiating a better rate, or even deciding if a transaction should have occurred in the first place.

Although the value of these purchases may be small, as a whole, they add up to represent a significant spend category. That’s why it’s important to conduct a spending analysis of tail-end spend to better manage and plan overall cash flow. These expenses tend to be spread out over many vendors or are made ad hoc, meaning stakeholders do not have the spending visibility they need to plan strategic sourcing, record keeping, and analysis.

Additionally, while employees are engaging in time-consuming purchases of goods and services, they are not focused on doing their day-to-day job.

How to simplify spend and expense management

Properly managing the disparate expenditures of employee spend can lead to a huge drain on time and productivity. Not to mention, it also means that the finance team has less oversight and visibility on what employees are spending money on. Luckily, this can be a quick and easy fix. By streamlining the employee expenditure process with a spend management solution or software, you can help improve cash flow as well as the general productivity of your employees.

To keep up with individual expenses on credit cards and to ditch the growing list of spreadsheets and manual processes, a business spend management system like Amex GBT Neo1 (Neo1^TM) is helpful.

Neo1 is a free-to-subscribe employee spend management platform that helps manage all employee spend in one place from budget requests to approvals. It also centralizes purchasing with an integrated Amazon Business account, including receipt capture and reconciliation.

Neo1’s features also support the automation of reporting employee expenses so you can create expense reports easily and streamline the pay process for reimbursements. This feature will offer your business the kind of visibility that you need to manage cash flow better.

Neo1 also supports many spend management tools. This includes features, such as:

• Dashboards for finance leaders, team leaders, and risk management with real-time visibility.
• Condensed supplier management for repeat or frequent purchases.
• Integration with procurement software solutions.

How to create a spend management strategy

A consolidated approach to spend management processes is essential to planning, purchasing, reporting, reviewing, and managing business and employee spending.

To define your spend management strategy, you’ll want to review your spend analytics to see if end-to-end processes are being followed across all purchasing processes.

Spend management processes can ultimately be broken down into four stages:

• Data collection: Collect your spend data from invoices, POs, and receipts.
• Data cleansing: Validate the accuracy and accounting of the spend data.
• Data analysis: Use accurate data to locate trends and essential spend.
• Data reporting: Automate the collection, cleaning, and analysis of spend trends through visualizations and

As you can see, a good spend management strategy starts and ends with having accurate spend data. Without it, it’s very difficult to properly discern where the challenges and opportunities lie. Using Neo1, your team can manage current and future spending of the organization with clear data and insights. These insights can then be used to maximize profitability, improve cash flow, streamline spend management, and ultimately make a difference to your bottom line.

Register for Neo1 now to set up your business for the free-to-subscribe service. It only takes five minutes to set up and you can start getting a handle on your employee spend right away.