Procurement is one of those wild-west types of departments in the business. In other words, there’s a lot of activity that falls under the umbrella of procurement, and oftentimes, not every company defines procurement in the same way. This makes it, as mentioned above, a bit lawless feeling at times, or more simply: chaotic. One of those ameba-type business activities that sometimes falls under procurement, and sometimes doesn’t, is the expense reporting and expense management process. 

Whether it stems from travel, necessary office supplies or other indirect procurement activities, or any other number of roots; expense management is an important aspect in many industries. 

Defining Expense Management

Expense management refers to the systems and processes that organizations employ to recognize, authenticate, and authorize payment for employee-initiated expenses. One of the most common examples of this is travel. Before the days of the virtual economy, and in consultancies especially, travel was a major part of doing business. Consultants and other colleagues would fly all over the nation, if not the world, to visit high-profile clients, to make business presentations, and to close deals. 

While the past year has dampened the travel industry and the necessity of travel in business quite significantly, other types of employees’ spend certainly still exist. As such, having an expense management system is still widely recognized as an industry best practice.

Indirect procurement is an area in which an expense management system is helpful even with the more virtual economy that we’re experiencing. This type of procurement covers; contracts, purchase orders, and purchase requisitions that facilitate the day-to-day operations of the firm.

However, it doesn’t necessarily directly contribute to the goods or services being offered by the organization. This means, that many of these purchase orders and requisitions are employee-generated and therefore need to be filtered through the expense management system. 

The Value of Expense Management

Any organization that has employee-initiated expenses needs an expense management system. The value of an expense management solution is threefold. Firstly, there’s security and authentication. Without an expense management system, employees with access to any sort of company fund would, in theory, have the ability to take complete and total advantage of that organization. Implementing an expense management system, however, ensures that the expenses submitted by employees are official and get valid approval. This prevents excessive and unnecessary spending and manages employee expenses.

Beyond security, is efficiency. With expense management systems, employees and organizations both benefit from how easy it becomes to submit and approve expense reports. The easier and more effective the system, the better it is for everyone involved. Employees certainly don’t want to spend their valuable days fighting with the expense report system. An important note to make here is that a bulky and ineffective expense management system will actually discourage employees from properly submitting expense reports, and therefore add to the very issue the system is supposed to be addressing. 

With an effective expense management system, though, employees save time, and can swiftly and conveniently upload expenses through a variety of methods. Most modern systems, in fact, offer a large variety of submission avenues from snapping a picture of receipts with your smartphone, to a quick bulk scan. There are plenty of options for all types of organizations and solutions that will meet your specific expense management needs. 

Strategic Spend Management 

Strategic management is another element that plays into an organization’s expense management strategy. Strategic spend management is a procurement tactic in which procurement professionals target contracts and bids with the lowest possible cost. While this is sometimes thought of as searching for the lowest-purchase-point, this is a gross misinterpretation. 

Rather than aiming for contracts and bids at the lowest purchase point, strategic spend management targets contracts that deliver the most lifetime value. In other words, strategic spend management takes more factors into account that paints a much more vivid portrait of a supplier’s lifetime value over the term of a contract. This plays into the goal of expense management by finding highly cost-effective suppliers for indirect procurement contracts, and other employee-initiated purchase orders and purchase requisitions. 

Whenever supplier and vendor terms are involved, contract management is another procurement department that needs to be looped in. Contract management is one of the most important aspects of most procurement activities and is involved in almost the entire vertical of a procurement department. Having one of the best contract management software on the market can greatly elevate your procurement department, and therefore, your organization as a whole. 

A Quick Wrap Up

While the world continues to embrace a more mobile society and virtual economy, the necessity of an effective and efficient expense management system is far from dissipated. Expense management systems allow your firm a stronger sense of control over employee generated expenses that facilitate business and operations. 

For more information on expense management systems, strategic spend management, contract management, or anything procurement, keep browsing the ProcurePort content library. ProcurePort is the internet’s premier place for everything procurement from technology and software, to knowledge and information, and anything in between.