The Benefits of Moving Spend Management to the Cloud
Picture this: A business has locations in Chicago, Seattle, and San Francisco, and is utilising traditional, paper-based processes for their procurement and expense management. How exactly would that work? This process is inefficient and doesn’t allow for flexibility or a comprehensive view into expense control. What happens if an invoice gets lost in a desk or there is a slight misphrasing? This is why many organisations are moving various aspects of their operations to the cloud – one vital area being spend management.
A 2018 IDG Cloud Computing Study found that 73% of businesses have at least one application in the cloud. However, from spend analysis to invoicing, the spend management industry is often stuck utilising outdated, paper-based or on-premise processes that cause inefficiency and budgetary mishaps.
In order to run the procure-to-pay process at maximum operational efficiency, it’s time for the spend management industry to migrate to the cloud. Stanton Jandrell, Fraxion’s CEO, discusses the four ways in which moving spend management to the cloud would benefit your business.
Improved efficiency and productivity
Research from the Tungsten Network found that businesses waste an average 6,500 man hours annually because of inefficient, paper-based payment processes. Unfortunately, many organisations still handle spend management with this traditional model leading millions of invoices to be written out by hand, sometimes even on simple notebook paper like the image below. With this system in place, invoices or other documents are more likely to get lost or misfiled – and even a small misfiling is costly. In fact, a misfiling rate of 0.5% in a four-drawer cabinet can lead to 1,000 misfiled documents.
Utilising a cloud solution for spend management boosts productivity by implementing simple automation that drives efficiency and removes the need for paperwork — for example, moving requisition requests to an automated form that submits the request and notifies appropriate approvers. According to a Harvard Business Review study, 74% of organisations reported that cloud services have given them a competitive advantage because of the ease and speed. As information is hosted in the cloud, this also makes remote access easier for stakeholders through mobile applications. This way, if an error occurs or a request must be handled immediately, employees can still access the system to provide a quick response.
With the heightened visibility of cybersecurity disasters over the past few years, many businesses assume that, once data is in the cloud, it’s more likely to fall into the wrong hands. And, when money is involved, this concern becomes even more prevalent.
Organisations that run manual processes have limited or no view of the budgetary impact that a requisition may have. Worse still is that the impact against the budget is typically only visible in a budget variance report that gets generated a few weeks after month end. At this point, intervention is impossible.
While a tremendous amount of effort goes into building a budget, if organisations aren’t able to “operationalise” the budget insight into the approval process, the efforts are wasted.
Improved cash flow oversight
Cash flow can make or break a business. Often, businesses see budgetary discretions because of unapproved spend or overestimated funds. In reality, the overall lack of visibility into what the business is spending day to day can add up to 40% of the total spend. Spend management systems operating in the cloud provide greater control over cash flow through the automatic authorisation of suppliers, enforcement of budgets and recommendation of approval processes before any costs are incurred. Cloud-based systems provide a comprehensive audit trail and detailed view of the entire process, providing stakeholders with greater insight into each step. This helps create a more efficient and regulated spend management process — which is vital to business success, especially when you consider that companies lose 20 to 30% in revenue every year due to inefficiencies and errors.
Detailed reporting and analytics
Leveraging a cloud system for spend forecasting allows businesses to shift from the ‘management’ of spend to the ‘enablement’ of smarter spending through improved visibility into needs, budgets and costs. Analytics and back-end insights are vital for the success of a cloud system – and CIOs are recognising this fact, with 66% planning to invest more time in cloud-based analytics throughout 2019. As data is gathered with each requisition, approval and transaction, cloud systems have the ability to provide detailed analytics that can help identify spending trends and augment forecasting. The ability to effectively forecast leads to long-term bottom line savings through more effective management of the dollars in and out of the business.
When you move spend management to the cloud, data remains safe from damage or loss of physical storage like a mobile device, laptop or paper documentation.
One concern that often comes up in internal conversations about cloud migration is security and data protection. With the heightened visibility of cybersecurity disasters over the past few years, many businesses assume that, once data is in the cloud, it’s more likely to fall into the wrong hands. And, when money is involved, this concern becomes even more prevalent. However, this is not the case. In fact, paper-based or on-premise processes are much more likely to face security threats since there is not an established and visible trail of spend in place. On average, on-premise users experience 61.4 attacks while cloud systems only experience 27.8.
When you move spend management to the cloud, data remains safe from damage or loss of physical storage like a mobile device, laptop or paper documentation. This is because the cloud provides the opportunity for comprehensive data backups that can be recovered in case of an emergency.
Effective spend management is vital for the success of businesses across various industries. By utilising a cloud-based spend management system, businesses can see improved productivity, greater visibility into spend, more control over policies and procedures, improved forecasting and better data security. In order to maximise operational effectiveness, it’s time for businesses to move away from the outdated, paper-based processes of the past and dive into the future with a cloud platform.