Profitability and cost control have been at the forefront of CFOs' priorities in 2023. And with it, decision-making around expenses, aided by technology, has become the finance chief's mandate.
Growth inhibitors, including a looming recession, unstable banks, and even talent retention issues continue to have companies on edge. But CFOs have an arduous objective; keep people engaged, leverage technology, and cut costs. It isn't easy; CFOs must deal with new tech trends, their team's or their own involvement in the sales process, figuring out how to avoid shelfware, and making sure their employees feel involved in the process.
Spend management tech has been a part of the CFO and CIO's toolbox for years, but 2023 brings its value to the forefront. And according to global tech company Coupa’s latest business spend management benchmark report, spend control is still a primary conduit for driving all other cost-based KPIs. And the proper application of business spend management (BSM) software can drive up to 6.6% on company spend overall.
Spend Management Invisibility
Tony Tiscornia, CFO of Coupa, says the problem finance leaders face is ultimately not knowing what they don’t yet know. Leadership has either poor access to the data surrounding spend, or are unsure how to optimally leverage it.
“One of the most common problems CFOs come to us with is a lack of comprehensive visibility into company spend,” Tiscornia said to CFO. “Different teams are using different systems, or worse, a multitude of spreadsheets, and there is no single version of truth. They’re struggling to transform their spend culture — to get every department spending from the same place.”
This lack of vision in company spending becomes wasteful. With many CFOs giving themselves goals to do boost optimization and promote growth, bleeding capital because of poor data or an inability to track spending directly hinders these goals.
One of the most common problems CFOs come to us with is a lack of comprehensive visibility into company spend ... there is no single version of truth. — Tony Tiscornia, Coupa
“The first step is to fully digitize spending processes through a common technology platform, to consolidate spend and financial information into a single source of truth,” said Tiscornia. “This is ultimately about establishing a consistent and standardized source-to-settle process across the company. The result is improved visibility into company spend.”
Once companies have access to their own spend data, it becomes a tool to use in negotiations with vendors and suppliers.
“Once CFOs have complete visibility into spend, they can better control it, and then maximize the value of it,” Tiscornia said. "For example, if multiple departments are sourcing a good or service from the same supplier, they can consolidate the contracts and negotiate a discount.”
CFO and CIO Partnership
CFOs understand the need for quality data and the tech needed to generate it, but those who have overpaid for technology in the past or find themselves stuck with shelfware — software that has yet to be fully unboxed — may be hesitant to invest in more of it.
Teams must have a long-term vision when creating their tech stacks so as not to either overpay or underuse what they have invested in, Tiscornia said. And technology most likely isn’t a solution to any short-term problems.
“Technology shouldn’t be implemented if it only solves the challenges you face today. It should help you get to where you want to be in the future,” he said.
“CFOs and CIOs must act as strategic partners so that investment in technology solutions doesn’t only provide strategic value to the business, but also has high adoption rates among employees,” he said. “Technologies that increase employee productivity by eliminating manual processes and empower teams to spend time on more strategic, value additive areas, are where CFOs and CIOs should focus investments.”
3 Benchmark Takeaways for CFOs
Tiscornia highlighted three key takeaways from the Coupa KPI benchmark report.
1. Pre-Approved Spend
“Pre-approved spend increases scrutiny on each transaction before it’s committed,” said Tiscornia. “It allows teams to pull back budgets mid-period, which is critical to maintaining agility in a downturn. Spend that’s pre-approved is also more likely to go through negotiated contracts with lower prices and better payment terms.”
2. Risk Management Evaluation Completion Rate
“Companies are responsible for the actions of their suppliers and their suppliers’ suppliers,” he said. “ESG legislation around the world introduces new requirements and challenges for compliance. CFOs can reduce risk through digital questionnaires for suppliers embedded into the vetting process before onboarding, granting easy and immediate access to supplier risk data for audits and automated third-party risk management.”
3. First-Time Match Rate
“To increase agility, CFOs should integrate procurement and invoicing functions together. When suppliers can easily attach invoices to already approved POs in a single system, it leads to high match rates,” he said. “This also improves visibility into upcoming and planned payments, which helps CFOs better manage liquidity, and optimize cash flow and working capital.”