7 Steps to Effective Spend Management

June 16, 2022

As a startup, managing your finances can be a daunting task as your company continues to grow and expand. It's important to strike a balance between spending and profits, while ensuring quality products and services.

Spend management is a crucial practice that helps reduce procurement costs and ensures efficient and time-saving expenditure management. In this post, we'll explore seven simple steps to effective spend management that will help you make informed decisions, streamline your procurement process, and maximize profits. This post is especially relevant to hardware-centric, procurement-heavy startups that need to manage expenditure effectively to ensure the success of their business.

By implementing these steps, you'll be able to create a centralized, big-data repository of your expenditure, categorize and analyze your spend data, and use it to inform management decisions and predict expenditure risks. Don't delay, start your spend management strategy today with ControlHub to ensure the success of your business!

What is Effective Spend Management?

Spend management is essentially the practice of reducing procurement costs by managing your expenditure in a way that is efficient and time-saving. Spend management strategies involve collating, collecting, categorizing, defining preferred suppliers, and evaluating spend data, then using the insights obtained to make informed decisions about other sectors in your company. 

Decisions made from spend management affect all aspects of the procurement process in a company. From requisition processing, budgeting, planning, supplier management, contract management, inventory management, sourcing, and product development; spend management will determine how successful they are. 

You need an effective strategy especially when your company is getting bigger. Fortunately, spend management is something you can get done in several straightforward steps. Read on to find out how. 

The 7 Steps to Spend Management

Here is how to begin your spend management strategy plan:

STEP 1: Document All Sources of Expenditure

The first step in spend management is to figure out how you spend money. What exactly do you spend in your procurement process? Although the specific areas of expenditure will vary from business to business, here is some common expenditure you can start with:

  • Salaries and benefits for employees
  • Premises rent, mortgage or property tax,  
  • Licenses and subscriptions, 
  • Advertising and marketing, 
  • Insurance premiums, 
  • Training 

However, creating an exhaustive and detailed list of expenditures can be daunting. You can fix this by collecting expenditure data the moment it happens using automated tools, or delegating the responsibility to department heads. 

After having a list of all you spend and a clearly outlined procurement process, you need to evaluate it. Find out what things are essential, which can be removed, and whether or not you are prioritizing, and spending on things that reflect your values. Here are a few questions you ask yourself to help you outline your procurement strategies for spend management:

  • Which departments need the best quality facilities and equipment?
  • Which areas have the best profit returns?
  • Which are the biggest saving opportunities?
  • Where is there unnecessary spending?
  • Where can I employ strategic sourcing to cut down procurement costs?

Ask yourself whether adding or subtracting expenditure in a certain area will maximize profits, even if it will do so indirectly or in the long term.

STEP 2: Create a Repository of Expenditure Data

The information about expenditure should then be stored in a centralized, big-data repository managed by the accounts department. The department should be equipped with enough tools to automatically record and maintain spending data.

You need to remember that there may be some expenditures that are not directly handled by the accounts department. This is why doing the initial documentation of all expenditures is crucial.

As you create this repository, there are a few things you should pay special attention to:

Make Good Use of Automated Management Software

Anything that has to be done manually is bound to be cumbersome and inefficient. Especially anything involving big data. For efficient spend management, employ the use of cloud-based spend management software. Or sign up the help of a purchasing software like Control Hub.

Such a platform will not only help you maintain your expenditure repository but also give you numerous extra tools to manage it. For instance, it will let you see the highest value items in the procurement chain, show you your customers’ purchasing habits and also help you calculate the best price for your goods and services. With these capabilities at your disposal, you can easily provide an ROI of your spend management.

Finally, remember when we talked about recording expenditure as it happens? An automated system will help you do this. In this way, you will be killing two birds with one stone.

Avoid Paper Receipts

Paper receipts can be bulky and inefficient. If you have physical receipts, the best thing to do is devise a mechanism to scan them immediately and store the data instead. To make this more effective, you can set up alerts for specific thresholds that would be easier to observe with physical receipts. For example, if you want to know how much an employee spends in a certain duration.

Establish a Clear Contract Management System 

Managing contracts is crucial to managing your expenditure. You need to set up a clear system where employees can collaborate in submitting new quotes or reviewing existing ones, then negotiating and approving them.

You can also use your automated spend management platform to manage your contracts. In this way, all quotes can even be evaluated automatically and immediately stored in the repository for easy spend analysis.

what is effective spend management
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STEP 3: Verify and Clean Expenditure Data 

Even with a careful recording of transactions, all data needs to be cleaned and verified before concluding it. Cleaning data means finding and removing any inaccuracies within it. Inaccuracies could be in the form of duplicates, incomplete, or corrupted data. Verifying data means ensuring that data integrity is maintained after data migration. It involves comparing recorded data with its alleged sources to ensure consistency.

However, due to the manual processes involved, it is still possible to have inaccuracies in data. You should create a simple and uniform method for recording data to make data entry as straightforward as possible.

STEP 4: Categorize the Data 

The next step is categorizing your spending data depending on your company’s objectives and operations. This means making categories based on what you need to focus on and know from the data.

In a company that sells software that comes with different packages, for example, a company may decide to have a category named ‘Standard Package Purchases’ and compare it with other packages to see how well it is going.

Every company needs to understand what it hopes to gain from its data. Usually, these needs are related to the overall company goals. Therefore, you just need to ask yourself what you would need to know to satisfy your customers better and find ways of getting the necessary data.

STEP 5: Critical Spend Analysis of Data 

Now that the data has been collected, cleaned, verified, and classified, it needs to be analyzed. From the spend analysis, helpful conclusions will be drawn that will inform effective spend management.

To properly understand what your data is telling you, advanced skills and tools are needed. Hire a professional data analyst, who may be costly but highly skilled. You could use big data technologies such as AI (Artificial Intelligence) and ML (Machine Learning), alongside the services of a professional analyst.

Finally, once you get the spend analysis data, you can compare what you spend with what your industry competitors spend. Doing this in addition to streamlining your expenditure to your goals is the swimming formula. 

STEP 6: Implement Budget Changes and Budget Control

After a professional gives you your spend analysis, and you identify areas of concern, you need to act. Create workable strategies to achieve new goals. For any changes, provide light training for your employees so that they can adapt easily. Also, before you implement any major changes, conduct research to determine how stakeholders will receive the change.

The second part of this stage is budget control. Budget control techniques help you stop any money waste before it even has a chance to happen. Here are a few ideas on how you can implement budget control:

Facilitate Virtual Cards for Employees

Virtual cards allow you to attach spend limits. Taking this measure ensures that there is never any excess expenditure. The card only holds a pre-calculated amount for a certain period.

Create Flexible Contingency Plans for Unexpected Expenditure

Sometimes, unexpected expenses may arise. Calculating extra money to allow for an error margin, or keeping aside savings would help. For example, with virtual cards: if there has to be some extra spending, then a request would need to be made. This would make tracking expenditure easier.

STEP 7: Use Data to Predict Expenditure Risks

Finally, use your spend analysis data to observe trends and make scientific predictions. Every business involves a level of risk, but going in with data allows you to make educated risks. You will know where to spend extra funds, which marketing strategies did not work out well, and most importantly: what your clients want.

Summary: Effective Spend Management

You can achieve effective spend management today in these seven steps:

  1. Document all sources of expenditure
  2. Create a repository of expenditure data
  3. Verify and clean data
  4. Categorize the date
  5. Critical analysis of data
  6. Implement budget changes and budget control
  7. Use data to predict risk and inform management 

Important ideas to highlight here are the use of spend management software (or a procurement solution), effective communication with stakeholders, and budget control systems. Also, start as soon as possible! The more data you have at your disposal, the better.

Get Started on Spend Management with ControlHub

The moment your company starts expanding, expenditure will grow. The more expenditure you have, the more important spend analysis and management become.

Without a proper spend management strategy, you may start spending more than you earn and you will not be in a position to maximize your sales. Failing to keep an eye on expenditure could also affect the livelihood of your employees who may not get fair compensation for their services.

Any business is about careful risk assessment and effective management. By avoiding the risks involved in poor spending practices, and leveraging the power of effective spend management strategies, your business is sure to succeed.


Effective spend management is crucial for hardware-centric startups that deal with procurement-heavy operations. As a company grows, the need for more staff members, raw materials, and investments becomes more significant, and managing expenditure can become a full-time job. The key to managing expenditure is to find effective spending management strategies that make the process easy, observable, predictable, and risk-resistant.

The post outlines seven critical steps for effective spend management that startups should implement. The first step is to document all sources of expenditure and evaluate it to determine what things are essential, what can be removed, and whether spending aligns with the company's values. The next step is to create a repository of expenditure data and use automated tools to manage and record spending data.

Once the data has been collected, the third step is to verify and clean expenditure data to remove any inaccuracies within it. The next step is to categorize spending data depending on the company's objectives and operations. The fifth step is to conduct a critical analysis of the data to draw conclusions that will inform effective spend management.

The sixth step is to implement budget changes and budget control, which involves providing light training for employees to adapt to changes and creating flexible contingency plans for unexpected expenditure. Finally, the seventh step is to use data to predict expenditure risks and observe trends to make scientific predictions.

The post highlights the importance of using management software, effective communication with stakeholders, and budget control systems in effective spend management. The failure to keep an eye on expenditure could lead to spending more than the company earns and affect the livelihood of employees who may not receive fair compensation for their services. Therefore, implementing effective spend management strategies is crucial for startups to maximize sales, reduce procurement costs, and mitigate expenditure risks.

Frequently Asked Questions

What is Procure-to-Pay?

Procurement is acritical component in any company's supply chain because it determines whatresources are going to be used to operate a business, and which suppliers aregoing to be chosen to procure the required goods and services. Procure-to-pay(P2P) consolidates the procure-to-pay process by combining all procurementactivities with an organization's cash management system. 

This includesreceiving invoices from suppliers, making payments to suppliers by credit cardor e-check, and capturing and reconciling invoices with POs.

What is spend management, and why is it crucial for startups?

Spend management is the key to taming the wild dragon of finances for startups. It's all about tracking where your hard-earned money goes, organizing data, and making data-driven decisions. With effective spend management, your startup can achieve growth and success like never before!

How do I start with spend management for my startup?

Easy-peasy! Begin by listing all your expenditures, from salaries to marketing and more. You can automate or delegate the task to your department heads for a seamless process. Then, gather all your spend data in a centralized, big-data repository to ensure nothing slips through the cracks.

What's the best way to manage spend data efficiently?

Welcome to the future! Embrace cloud-based spend management software for magic in your pocket. It simplifies data management, analysis, and gives you nifty tools to keep everything organized – ka-ching!

How can I clean and organize my spend data effectively?

Cleaning data is a breeze! Spot duplicates, incomplete bits, and ensure data accuracy. Then, create categories to organize the data, like 'Standard Package Purchases,' to align with your business goals – sweet, huh?

Why should I analyze my spend data and how can it benefit my startup?

Uncover hidden treasures in your data with the help of data analysts and the power of AI and Machine Learning. By comparing your spend with industry peers, you'll optimize your expenditure to fit your goals like a glove – winning!

What's the next step after analyzing my spend data?

It's game time! Put your strategies into action, but remember to communicate with your team and celebrate change. Be a savvy spender with virtual cards and flexible contingency plans for unexpected surprises.

How can spend management help me predict risks?

Embrace your inner superhero! With thorough analysis, you'll predict risks like a pro. Allocate funds wisely and be prepared for any challenges that may come your way – it's like having a superpower!

How can ControlHub help my startup with spend management?

ControlHub is your ultimate ally! It empowers you to unleash the power of spend management, ensuring your hard-earned cash stays where it should be. Say goodbye to financial stress and watch your startup soar to new heights of success!

What is Source to Pay?

At the core of S2P lies a strategic sourcing model.Hardware-centered companies embracing S2P benefit from end-to-end procurementoptimization, reducing cycle times, and increasing procurement efficiency. Thismodel facilitates effective vendor management, enabling executives to makeinformed decisions while ensuring seamless supply chain operations.

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