How Tech Finance Teams Can Reduce Spend Blindness
Tech teams regularly spend on things like software subscriptions, client visits, employee perks and freelance support, all in a bid to keep pushing for growth. This type of fund allocation is called variable spending – the sort of spending that’s outside of regular procurement processes. It can account for up to 20% of a typical business’ spending. It’s also incredibly difficult to track, and the cause of many admin headaches.
Yet, the agility of a tech company depends on this kind of variable spending. While you, as finance leaders, don’t want to get too prescriptive when it comes to expenses because that could slow momentum and hurt morale, you do need to ensure there’s accountability for every purchase made on the company dime – especially when you consider that 82% of business failures are due to poor cash management.
Traditional spend management is inefficient
Blind spots can add up quickly, and finance teams can spend several days’ worth of administration just trying to reconcile what’s happened already. This can make it tricky to accurately predict cash flow, which in turn makes that agility difficult to finance.
Variable spending inevitably ends in blind spots, which converge in three main factors.
Blind to Overspending
Hidden spend can’t be tracked accurately, and so departments run over budget which can mean reallocations at short notice.
What happens when the new dev manager puts Github on his new company card, not realising there is a company-wide Bitbucket subscription? Blissfully found that duplicate subscriptions have increased by 80%, while orphaned app subscriptions are up almost 100% across companies of all sizes. Seemingly one-off spends can soon add up to have a major impact on budget.
Blind to Bad Accounting Practices
When you’re constantly looking backwards with your spending, it becomes tricky to track the flow of money in and out of departments.
Accrual-based systems are a struggle, and being always-reactive causes financial planning issues.
If money is being spent, you need to be able to see it, otherwise you’re introducing inefficient or inaccurate accounting processes.
Blind to A Huge Admin Burden
Micro businesses in the UK are spending 15 hours each week on financial admin; two-thirds of businesses are wasting at least £2,000 per employee every year due to an over-reliance on paper-based processes. This means valuable resources are being spent on time-consuming, manual work instead of essential analysis and strategic work.
How Spend Blindness Can Be Eliminated
So how can you achieve this holy grail of agile spending in an accountable way? You need a real time, 360-degree view of all your expenditure. Until now, that’s been but a dream for tech finance teams, resulting in a hodge-podge of tacked together APIs and different systems that can mean duplicate work. This results in just 24% of finance time being spent on insight-generating activities.
Modern finance tools mean overspending can be reduced. With Soldo, the finance function can set budgets on an individual or departmental level. Physical and virtual prepaid Mastercards can be created as “expense centres” to be shared with all team members to spend from one ring-fenced pot.
For example, one of these expense centres could be set up just for SaaS subscriptions to reduce the duplicate subscription problem. Any employee buying a subscription can use the allocated virtual card to pull money from the software expense centre pot. This spend can be set up to automatically tag the correct category as soon as that card is used, including adding the correct tax code for quick reconciliation.
Speaking of reconciliation, Soldo enables variable spending to be tagged and reconciled throughout the month; employees upload a digital receipt straight away instead of trawling through paper receipts at month-end. Soldo also integrates with accounting programs to minimise the risk of human error in data entry.
Soldo also enables the finance team to track both individual and departmental spend in real time. The dashboard is updated as soon as a card is used, which enables proactive budget management – finance can make adjustments and reallocations to avoid the credit risk of a declined payment.
Gain Visibility and Control With Soldo
Spend blindness is a real threat to the kind of agile growth that tech companies thrive on, but there is a solution at hand. Finance automation tools can deliver accurate, real time data to allow controlled variable spending. Tools like Soldo can shine a light into the dark corners of your budget challenges, and help reign in redundant subscriptions, ease the burden of expense management, and put an end to bad accounting practices.
Learn more about how Soldo can help tech finance teams to reduce spend blindness; download our eBook.