Spend Management Solutions for the Financial Services Industry
Last updated: May 4, 2022
Spend management is a procurement term to describe the process of maximizing value while minimizing costs. The end goal of spend management is to increase profit and drive company growth. With the right systems and approaches in place, improving spend management processes is within reach. Once you've optimized spend management, your operation can reap the benefits.
Why Spend Management Solutions Are Important for the Financial Services Sector
The financial services sector has a vast array of expenses to consider, from IT programs and services to marketing materials. Spend management is the solution these organizations need for more effective financial allocation. Implementing spend management solutions can lead to many advantageous outcomes.
Improve Financial Transparency and Data Accuracy
In every business, regardless of scale or industry, spending happens in silos. These silos refer to the different departments in an organization. For example, your marketing department will spend a set amount of money, as will your IT department. While these silos all contribute to your company as a whole, spending is often disjointed, and businesses lack the transparency to manage these silos effectively.
A 2020 study revealed only 39 percent of companies felt that systems and processes produced accurate data for financial projections. Spend management solutions can cultivate the transparency needed for accuracy. With a clear connection to spending across departments, your company can more effectively allocate funding and generate valuable spend data for improved decision-making.
Enhance Business-Supplier Relationships
In financial institutions, up to 60% of total spending goes to external sources like suppliers. With the significant role these vendors play, developing high-value relationships can extend your financial reach.
Supplier relationships for financial institutions are often complex ecosystems. You may have suppliers for software systems, internet phone lines and other IT processes. Credit card companies often rely on retailers, airlines and other companies for cardholder reward programs. On top of these relationships, you also need basic supplies, like pens and marketing materials.
Spend management creates the transparency you need to optimize supplier relationships. Since these vendors can offer high value to your organization, these improved relationships can lead to long-term gains. For example, choosing to partner with a single vendor for multiple retailer rewards can draw in more card members that help boost revenue.
Save Time on Manual Processes
Many modern spend management solutions leverage technology and workflow strategies to improve existing processes. With these streamlined systems, procurement teams and other departments can eliminate the time-consuming manual processes that come with traditional expense tracking.
Without optimized workflows, financial organizations will often rely on spreadsheets to track spending across departments, leading to disorganized reporting and hours spent filling in numbers with limited accuracy. Spend management solutions, whether they're organizational techniques or technology platforms, drastically reduce the time spent tracking expenses.
With less time spent on manual processes, team members can dedicate time to more financially valuable activities, like customer retention. Allocating time to growth initiatives will help your organization build revenue in the long term.
Reduce Maverick Spend and Identify Cost Savings
Maverick spend refers to supplier purchases that fall outside of your procurement plan. These expenses often go unnoticed without spend management, especially with so many silos to oversee at one time. With more transparency, your team can identify these cost-saving opportunities and make financial changes that lead to significant gains.
These expense cuts, paired with growth initiatives and improved supplier relationships, can lead to an improved bottom line. Spend management allows you to maximize the value of the expenses you do need and eliminate the ones you don't.
9 Methods That Can Help Financial Organizations Better Manage Spend
The financial services sector can introduce several techniques to improve their approaches to spend management.
1. Implement Technology and Automated Solutions
One of the most direct methods for improving your company's spend management is implementing technology and automation solutions. Spreadsheets are the traditional method for tracking spending, but they're not the most efficient or accurate process available. With so many automated financial platforms out there, leveraging technology is a simple way to transform your visibility and accuracy in spend management.
These platforms can offer multiple process improvements. They create a single accessible location for every spending silo, integrate with other programs to consolidate information and provide automated tracking for financial data.
Through these platforms, you can empower your business with data — an exhaustive tool for spend management. As these programs compile accurate spend data, you can reference them for budgeting practices, financial projections and more. From invoices to employee expenses, your connection to company spending will help you make more informed decisions.
2. Simplify Services and Processes
Financial institutions — from credit card companies to insurance providers — often accumulate a range of services and products over time. Sometimes, these new products are remarkably similar to old ones, with the same general idea and minor service improvements.
When you have these near-duplicate services, you create a more complex work environment that requires more employee resources, time and ultimately money. These duplicate products or services can go unnoticed, leading to extensive inefficiencies you may not be aware of.
Simplifying services and their associated processes should be a part of your ongoing development as a business. Take time to assess your current services and products to weed out redundant offerings. Focusing on a few core products and services can make it easier to run your operation and lead to cost savings.
You may think eliminating products and services will reflect poorly on the consumer experience, but customers rarely miss these changes. When handled correctly, you'll only eliminate the items that have functions in newer products. Consumers should still be able to access the functions they want and need from your core offerings.
3. Develop Strategic Supplier Partnerships
Improved supplier relationships are one of the benefits of spend management, but how does it work in practice? Your approach to spend management should include strategic supplier partnerships. Your first step in these strategic partnerships is identifying all your suppliers and consolidating them.
While you may think it's in your best interest to shop around and find the lowest rates for every vendor need, minimizing the number of suppliers you rely on can lead to more beneficial gains in the long term.
For example, you may count on two different IT providers for your cloud storage and your phone system to get the lowest possible rates. However, choosing just one supplier for both services can help you build a long-term partnership. In these partnerships, you and your supplier are committed to mutual growth for your businesses. This shared value may lead to more deals in your services. It even facilitates more efficient processes because your vendor is familiar with your company.
Strategic supplier partnerships can come with cost savings in multiple ways. Eliminating complexity in your supply chain also simplifies expense management for third parties, contributing to the overall goal of financial transparency.
4. Optimize Workflows and Communication
Workflows vary between your company's units. The marketing department may use different platforms and procedures than the financial or customer service department. While these workflows may be working for the team members within that department, discrepancies across all areas can lead to a lack of communication and efficiency.
In order for your business to function effectively, all the moving parts need to interact smoothly. Workflow optimization ensures one department flows seamlessly into the next when required. For instance, the customer service department may receive several complaints about your website malfunctioning. How do the team members in this department respond and send the information to IT?
Continual process improvements ensure your organization can deliver on its services and respond to changes as they occur. Increased process efficiency leads to more effective use of resources. When addressing spend management, you can have confidence that investments in technology platforms and employees contribute to a seamless system.
5. Improve Risk Management
Spend management and risk management are closely linked because your spending habits come with risk and potential risks come with costs. Improving one can be beneficial for the other.
Financial institutions face a range of potential risks, from cyber attacks to legal action. Your industry handles sensitive data regularly, making a risk management plan essential. When you have a comprehensive plan in place, your business will know how to respond when these events occur, and you can minimize the financial damage.
Risk management plans will vary based on your company's needs, but there are some general best practices for responding to specific types of risk. For example, having cyber insurance in place will protect your business in an instance where private data is exposed. Another risk management solution is employing data backup. This action is excellent for protecting sensitive information should your primary systems fail.
Consistency is favorable when addressing spend management, and risk management can help your company sidestep those large, unexpected expenses.
6. Leverage Mergers and Acquisitions (M&A)
With more costs allocated to managing risk and compliance, financial institutions need more scale to encourage organic growth. M&A is an ideal route for expanding financial capabilities and market share quickly to become more competitive and more effectively allocate resources.
The current M&A trends in the financial sector show an upward trend with an 89% increase in deals between 2020 and 2021. This upward trend is also true among fintech companies and deals between banks and fintech companies. Financial operations everywhere are realizing the benefits of M&A.
Financial institutions often operate on unsustainable profit margins, and bold business moves are among the easiest ways to improve earnings. As the financial sector becomes more competitive with fintech developments and changes in consumer demand, adding more financial resources to your team can mean an array of beneficial changes for your company.
Access to more capital allows you to effectively manage spending because you no longer face a looming low-profit margin that requires extensive budgeting and cost cuts. Implementing other organizational changes on top of an M&A can ultimately improve your bottom line.
7. Measure Staff Performance
Employee expenses make up a notable portion of your organization's spend, so paying attention to your staffing can help you make meaningful changes to your employee approach. Much like many other processes, your employees are an investment. When you allocate more time and money to their development, you can see higher returns.
Tracking performance is a helpful way to gauge what your employees succeed at and where they need more support. Through these performance metrics, you can determine which employees may not be the best fit for your business, and what training programs you can implement to improve your team's skillset.
In financial institutions, many employees are customer-facing. When they have the skills to do their jobs effectively, it reflects well on your reputation as a business and encourages new customers, helping you grow your revenue.
8. Adjust Service Channels
Brick and mortar stores are slowly becoming a thing of the past for financial services. Adjusting your current service channels to reflect modern sensibilities can lead to more streamlined spend management.
In a traditional approach, financial institutions will rely on various physical branches with a full staff. This approach leads to more physical resource requirements, employee expenses and limited consumer experience that may deter people from your business.
The modern take on financial services makes use of digital channels and call centers to eliminate the costs of physical branches. Establishing a comprehensive digital presence with mobile check deposit, account access and more makes your organization more accessible to consumers and focuses most of your resources on lower-cost IT processes.
Call centers also come at a much lower cost than maintaining several branch locations. A single call center acts as the defined point of contact for general transactional needs that a person may need to handle at a branch location. Leveraging these lower-cost, self-service channels enables your branches to handle higher-value transactions, making the money you invest into them more meaningful.
9. Work With Professionals
While your company can implement a range of structural and workflow changes to optimize spend management, you may find you need additional support. Working with a professional that specializes in spend management can assist your team throughout these changes, whether you're reorganizing supplier relationships or sharpening processes.
One of the major advantages of these spend management professionals is their flexible approach. Typically, these providers act as consultants. They take the time to understand your unique goals and help you implement changes accordingly. Investing in these providers can lead to meaningful shifts across your financial institution, and you may receive ongoing support to ensure these new processes are suitable for your needs.
Manage Indirect Procurement Spend With Dryden Group
Knowing what optimized spend management can do for your company may push you to pursue some of these best practices. While your internal methods can make a significant difference, working with a professional procurement firm like Dryden Group can help you unlock your company's complete potential.
Dryden Group specializes in indirect procurement, like marketing and advertising, working with consultants and maintaining your facility. Our services address the many aspects of indirect procurement, from negotiating contracts and building supplier relationships to optimizing programs. We strive to improve your procurement performance for enhanced spend management.
With over two decades of experience and a billion dollars in savings delivered to our clients, you can trust our process to meet your needs. Get in touch with us today to learn more about our services.