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What is spend visibility?

What is spend visibility?

The parable of the blind men and an elephant tells the story of a group of blind men trying to figure out what an elephant is by touching different parts of the elephant’s body.

This causes problems as each man touching a different part of the body will get a different picture of what the animal is. Through their limited experience, they jump to conflicting conclusions.

You might experience something similar with your expense management: different people will come to different conclusions about the business’s spending because they’re only seeing part of the picture.

To truly understand spending, make meaningful inferences, and implement impactful strategy, you first need to invest in giving everyone the same picture. You do this by improving spend visibility.

Key takeaways

Spend visibility means knowing who buys what, how, and how often

Improving spend visibility helps you save money and plan better

With tools like BILL Spend & Expense, you can improve both your control of and visibility into spending

What is spend visibility

Spend visibility refers to how a business tracks and analyzes what it’s spending money on.

It refers to what information you have available to you to understand the nuance of your spending beyond expense totals.

While similar to expense tracking, spend visibility includes other information like:

  • Who made the purchase
  • What was purchased
  • How the purchase was processed
  • The prices of each item or part of a service
  • How often a purchase is made
  • How these factors change over time

What is spend visibility composed of?

There are three main factors that affect a business’s spend visibility:

  1. Capturing: How spending is being tracked as it happens
  2. Reporting: How spending is being organized and presented
  3. Analyzing: What’s being learned and turned into action

Each of these factors are determined by the business’s financial tools and processes. 

For example, choosing a credit card that integrates with your accounting system over one that doesn’t, affects the capturing aspect and improves spend visibility.

Why businesses struggle with spend visibility

Sometimes, running a business feels like building a plane while it’s flying. Days can go by where everyone’s working hard just to keep operations running smoothly.

But if you’re building a plane while it’s flying, you don’t have time to think about the design or how it could be improved.

Any bad habits from the early days might linger on too long. Maybe a fragmented financial process that worked for tens of transactions monthly doesn’t work when it’s hundreds.

Improving spend visibility means taking time to diagnose the problems, come up with solutions, and then implement the change.

While it’s tough to quantify the exact return on investment when improving spend visibility, it’s an investment in the scalability of a business with potential savings on unnecessary expenses.

The benefits of spend visibility

By investing in improving your spend visibility, you’re investing in a more efficient usage of resources, better financial performance, and more. 

Here are five big benefits of spend visibility.

Identify cost-saving opportunities

The first step to optimizing your spending is understanding its current state.

When you have a high level of spend visibility, you understand the drivers behind costs.

Beyond looking at spend totals for expense categories, you see what was being purchased by whom which uncovers informative trends.

Instead of having a goal like “we need to spend less on office supplies,” you can see what’s driving the high spending amount on office supplies and come up with a more meaningful plan. 

Maybe you notice frequent purchases of printer ink so you find a bulk supply that’s less per ink cartridge for a larger amount bought.

Simply put, spend visibility helps you both identify where you can save money and what you can do to realize those savings.

Improve cash flow forecasting

Cash flow is more than what’s coming in and going out. It’s also when money is coming in and going out.

Forecasting cash flow is an invaluable practice that helps you avoid being caught without the cash to cover a payment. When you know a payment is coming up, you can plan on how you’re going to cover it.

The information you get from high spend visibility helps you forecast cash flow with greater accuracy.

Once you’ve generated a cash flow forecast, if you see any potential dips you can start to look at the expected expenses and come up with a plan to prevent disruptions. Maybe there are expenses that can be pushed out past when cash levels bounce back.

Better supplier negotiations

By breaking down your buying relationship with your suppliers, you’ll start to see patterns in how much you buy, for what amounts, and on what cadence.

This information is the stepping off point for supplier negotiations. In particular, look for opportunities to:

  • Make bulk orders for smaller per unit prices
  • Get discounts on quicker payment turnaround times
  • Move invoice due dates to minimize the impact to cash flow
  • Change to a monthly “subscription” billing structure

These changes help you save money and improve your cash flow management. Any changes you make have benefits on every purchase from that supplier, meaning you benefit in perpetuity.

Enhanced compliance with financial policies

Financial policies, especially expense policies, are an essential part of keeping spending in check. But if you have poor spend visibility, you’re likely going to miss violations that need to be caught and reined in.

For example, if someone makes a purchase that violates the policy, but doesn’t submit an expense report or receipt until weeks later, that’s weeks that have gone by without catching the policy violation.

In that time, they may have made similar violations.

The better your spend visibility, the quicker you catch and understand what’s driving violations. Then you can provide training on the policy or make adjustments so the policy is more likely to be adhered to.

Finding maverick or unplanned spend

Maverick spending happens when a team or individual spends more frequently or higher amounts than what has been planned for.

In some cases, this means making purchases that wouldn’t have been approved, like a business meal on a day off. 

In other cases, it’s spending more on an item than what would have been approved, like opting for the unnecessary premium version of a product.

When itemized breakdowns are a part of your spend visibility, you see what was included in a purchase helping you understand what was behind the total amount. This helps you classify an expense as necessary or unnecessary.

Over time, you’ll start to understand who in the organization is most often making maverick spending decisions. When you do, it’s time to roll out additional training or restrict their spending privileges.

How to improve spend visibility

Get a head start on improving spend visibility by looking at one of these three potential approaches.

Enforce a spending policy

To ensure all necessary information about a transaction is being collected, enforce certain requirements through your spending policy.

The spending policy should outline:

  • What are permissible transactions
  • What are allowable payment methods
  • What documentation must be provided
  • Where documentation should be submitted
  • How long a team or employee has to provide documentation
  • Who’s responsible for consolidating the information

With clearly assigned roles and responsibilities, everyone will be on the same page as to what they need to do for each transaction they’re responsible for.

If information is missing, you’ll know who’s accountable and can start taking action to enforce the policy.

Adopt digital systems

Any processes that depend on paper reports or receipts will be more time consuming than digital processes.

With paper reports, manual entry will always be a bottleneck for updates and limit how much spend visibility you have. If you want to improve spend visibility, you need more manual input to get there.

With digital systems, automation streamlines the process of turning transaction data into usable reports.

When making the switch to digital, look for a tool that works with your accounting system and payment methods. If you can’t find an option that does both, it might be time for a bigger overhaul (and we can help with changes big or small).

Use new payment methods

Sticking with a payment method because “that’s how it’s always been done” will hold your processes back.

Take something like a checkbook which requires multiple steps for reconciling the transaction and documenting what it was for. These extra steps take time, but they also open up the possibility of making a mistake like recording something incorrectly.

Consider switching payment methods to something that contains more payment information and can be easily connected to your spend management platform to automate data imports.

With BILL Spend & Expense, you can improve both your control of and visibility into spending. 

You get access to credit cards, P-cards, and other digital payment methods that easily connect to invoices, purchase orders, and imported receipts to capture all the transaction information you need.

Making a switch like this saves you time, prevents errors, and improves your fraud protection, all while increasing your spend visibility.

Spend visibility obstacles and solutions

As you’re starting to diagnose what’s holding back your spend visibility, look for these three major obstacles. If any are starting to sound familiar, try our solution to get back on track.

Fragmented financial data and reporting

To achieve high spend visibility, all transaction information needs to be centralized and accessible. If you’re looking at multiple reports on different platforms, you’re more likely to miss the essential details.

Solution: Standardize transaction data collection and have a centralized place for all transaction information to live.

Lack of team or employee buy-in

Even the best systems can fall apart if the users don’t buy into the process.

To increase spend visibility, everyone needs to be on board with the changes you make. If they aren’t doing their responsibilities, then your spend visibility may get worse, not better.

Solution: Create a system that is easy to use and has minimal workload for your teams and employees and provide training sessions to get everyone up to speed.

Time lag between transactions and reporting

With the many benefits of improving spend visibility, one of the biggest is giving you data-driven strategic budgeting and planning.

The additional information and insights you get from spend visibility helps you save precious dollars if you act on them. 

But if updated reporting is coming days, weeks, or months down the line, the inefficiencies you identify will have impacted your financial performance for longer than necessary. The closer you get to real-time reporting, the faster you make changes that improve performance.

Solution: Minimize time lag by using automation when possible and setting strict timelines in which reports need to be updated. (hint: we have you covered)

An example of improved spend visibility in action

Let’s break down the importance of spend visibility with a fictional example.

Over the last couple of months, the finance team for a golf merchandise manufacturer called Love Fore the Game had noticed that the business was consistently going over budget.

The business was struggling with a largely paper based expense report and procurement process. This was proving to be a problem as a large portion of their employees were traveling to strike up deals with retailers to get distribution and manufacturers to cut down on input costs.

As a result, reports and documentation wasn’t being provided until employees got back, often taking weeks or even months to finally compile information.

When reports were received, the finance team would manually update an Excel sheet that the expenses were being tracked in. The process started to feel like a dog chasing its tail as by the time they had finally updated the sheet, there’d be more outdated expenses and reports to continue updating the sheet.

The finance team was struggling to do its work because it spent so much time updating reports that it couldn’t spend time analyzing the data.

To get on top of spending and budgets, the team got buy-in to improve spend visibility by making two major changes:

  1. Issuing P-cards with insights and spend controls to traveling employees
  2. Switching to a new expense management platform that integrates with the P-cards to update in real-time

By getting real-time data, the finance team noticed that the biggest causes of overspending were from a few select traveling employees. 

A combination of overspending on travel expenses and extravagant business meals with retailers were causing Love Fore the Game to go over budget.

Once they noticed this trend, they took the following actions:

  1. Impose stricter spending limits on the P-cards of the overspending employees
  2. Revising the financial policy with terms and conditions on business meals and travel expenses
  3. Spending time negotiating corporate deals with hotels for reduced rates

With spend visibility improved, the finance team was finally able to spend the necessary time analyzing data as it came in. 

In turn, they implemented solutions that cut down spending and made impactful cost savings that keep budgets in check.

Simplify spend visibility and control

Increasing spend visibility doesn’t need to come with manual processes that mean more work for teams and employees.

With BILL, you get instant tracking of what’s being spent to monitor budgets, forecast the future, and stay up-to-date with trends. 

Whether it’s answering your burning questions or catching something you hadn’t yet thought of, we deliver the reporting that helps stick to plan and policy. Get started.

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