August 17, 2023

How Spend Management Software Can Improve Budget Tracking and Forecasting

How Spend Management Software Can Improve Budget Tracking and Forecasting
Spend data powers a virtuous cycle - accurate forecasts enable precise budgets, which drive good spending decisions, resulting in further forecast reliability.

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The Critical Link Between Spend Management and Planning

For finance teams, spend visibility is the foundation for accurate budgets and forecasts. Without clear insight into expenditures, projections easily miss the mark. Manual expense tracking through spreadsheets leaves too many blindspots in the underlying spend data.

That's where comprehensive spend management solutions come in. Leading platforms like Tropic and Brex centralize expense reporting, corporate cards, invoices, and more to shine a light across all areas of outlay.

Automating the capture and categorization of spend provides the clean, real-time data needed to enhance budgeting and forecasting. Teams gain an analytical edge to predict performance rather than react after month-end close.

Weaknesses of Siloed Spend Management Approaches

Many organizations still rely on limited, siloed spend tracking methods like:

Corporate Cards - Provide visibility into T&E but miss other types of expenditures

Legacy Procurement Systems - Only cover purchase orders, not true end-to-end spend

Basic Expense Reporting - Lack integration with broader systems for holistic analysis

These fragmented approaches result in incomplete data. For example, a corporate card program may reveal T&E patterns. But without invoices and vendor spend included, the full picture is obscured.

Truly unified spend management eliminates blindspots across procurement, expenses, accounts payable, and cards.

How Automated Spend Insights Strengthen Budgeting

Robust spend analytics should anchor budget planning cycles. With real-time centralized data, finance leaders can:

  • Categorize budgets precisely - Granular insights into historical spend patterns enable accurate budget codes.
  • Spot trend shifts - Anomalies in seasonal or category spend help identify needs for budget adjustments.
  • Allocate strategically - Understanding where and how money was spent drives smarter future resource allocation.
  • Tighten control - Global visibility into expenditures allows tighter budgets with less padding.

For example, Tropic's analytics helped Broadlume save nearly 200k in the first month by building a single source of truth with respect to insights in spend.

The Limitations of Budgeting in Silos

Without an integrated spend management platform, budgets get built in functional silos based on limited data. Problems that arise include:

  • Finance budgets based primarily on historical trends rather than real-time insights
  • Business units create unsupported budgets to protect their turf
  • IT budgets hardware and services reactively versus aligning to growth plans
  • Marketing budgets based on previous ad hoc spending and guesses versus data-driven needs

Breaking down silos with unified spend management analytics fosters collaboration and alignment during planning.

How Spend Analysis Powers Accurate Forecasting

Spend data powers a virtuous cycle - accurate forecasts enable precise budgets, which drive good spending decisions, resulting in further forecast reliability.

With interactive self-serve analytics from solutions like Spendesk, finance leaders can model scenarios and detect anomalies. Having spend data integrated with ERP and CRM systems enriches insights even further.

Airbase's platform uses AI and ML techniques to generate accurate forecasts through effective close leads: A continuous close is achieved when automated processes and workflows keep the books updated and balanced in real time. That’s in contrast to a monthly close, where financial operations follow a rigid monthly calendar.

Flaws of Forecasting in a Data Vacuum

Without fact-based spend analytics, forecasts suffer from:

  • Recency bias - Over-reliance on recent spend periods distorts longer-term predictions
  • Hindsight blindspots - Failure to account for past cyclical fluctuations in certain expenses
  • Growth miscalculations - Lack of data on current spend patterns undermines modeling of future budgets
  • Complacency - Tendency to rely on unchanged vendor contracts without proactive analysis and negotiations
  • Surprise overages - Unexpected spend spikes from new initiatives or projects

Strengthening Governance Via Better Budget Monitoring

Ongoing budget tracking is strengthened with up-to-the-minute spend data direct from the source. Finance gains visibility to:

  • Analyze performance by department, category, or cost center
  • Detect budget overages in real-time to drive corrective actions
  • Keep stakeholders aligned with self-serve reporting tools
  • Update budgets through informed collaborations versus top-down decrees

Automatic notifications from Pleo's spend management platform enables managers to address overspending before invoices arrive. This near-time oversight prevents surprise budget overruns.

Enhancing Agility Through Continuous Planning

Rather than distinct annual budgeting cycles, leading organizations embrace continuous planning fueled by live spend analytics.

With systems like Payhawk, budgets remain perpetually up-to-date based on the latest data. Planning becomes a recurring touchpoint across finance and business units versus an isolated annual exercise.

Continuous monitoring ensures agile responses to new initiatives, growth opportunities, and market changes. Ongoing fine-tuning trumps reactive revisions.

Asking the Right Questions with Spend Analytics

Beyond budgets and forecasts, contextualized spend insights answer critical strategic questions:

  • Where can redundantVendor relationships be consolidated for better terms?
  • What spend categories present opportunities for demand aggregation?
  • How can travel policies balance compliance with changing workforce expectations?
  • What budget shifts can better align expenses to corporate ESG initiatives?
  • What departments show changes in seasonal expenditure patterns?


CFOs Gain a Competitive Edge

With real-time spend visibility and AI-driven analytics, finance leaders gain an undeniable competitive advantage.

The guesswork is eliminated from planning and performance management. Teams move from reactionary to optimally predictive. Every dollar spent is strategically maximized.

The future of finance rests on unlocking the full value of enterprise-wide spend data. As Gartner noted, 78% of CFOs Will Increase or Maintain Enterprise Digital Investments Through 2023 Even if Inflation Persists

Facilitating Collaboration with Self-Serve Spend Analytics

Easy self-service access to spend insights breaks down the budgeting status quo.

Inclusive participation creates alignment versus rote top-down number distribution. Business leaders gain license to drill into details and spot new opportunities.

Solutions like Pleo and Brex include interactive dashboards suitable for stakeholders across the organization. This democratization of spend analysis fosters collaboration.

Getting Started with Data-Driven Planning

For finance leaders seeking to strengthen forecasting, reporting, and strategy through spend management automation, leading solutions make it fast and frictionless.

Follow our blueprint to assess feature needs, build the business case for change, engineer new processes, and maximize adoption. With the right platform, data foundations, and executive mindset, finance can transform from collector to strategic navigator of corporate spend.