ACCOUNTING SOFTWARE BEST PRACTICES  

ACCOUNTING SOFTWARE BEST PRACTICES

SPEND MANAGEMENT

Spend management has become one of the most adopted accounting software business strategies for global companies facing tightening economic outlooks and increased operational costs. Spend management includes expense management tools and processes such as travel and entertainment (T&E) systems, e-sourcing, e-procurement, e-invoicing, supplier relationship management (SRM) and spend analysis reporting systems. The newest breed and most highly adopted spend management tools are being delivered as software-as-a-service (SAAS) solutions which are normally priced by some form of utilization, most commonly on a per user per month basis.

Spend management shows businesses what they are buying and from whom. A multiple site, distributed or global company with a decentralized procurement function may have dozens of vendors for the same product or have multiple locations unknowingly using the same vendor. More often than not, these companies then fail to take advantage of the volume discounts or preferred terms they could otherwise obtain by consolidating their purchasing.

There are two common methods to improve spend management. For a professional services fee (normally $30,000 to $150,000), trained consultants will review purchase orders, supplier contracts, expense vouchers, expense reports and invoices, and then produce a spend analysis report with proposed savings opportunities. Due to the voluminous effort involved, most consultants limit their review and analysis to a single division, department, location or entity. The second method is to implement spend management software (normally $150,000 to $550,000 for software licensing or a fraction of that cost for SaaS) that is far more empowering as it will monitor, manage and govern all business entities on a continuous basis. These systems also have pre-built or packaged integration with both on-premise financial systems and software as a service accounting applications.

Forrester Research says the overall spend management software category averaged 14% annual growth between 2003 and 2008, well above the overall software market. Further, Forrester projects the spend analysis software market is staged for aggressive growth.

Software automation modules such as SRM normally integrate to commercial accounting software Accounts Payable suites and track service-level agreements (SLA), trade discounts, contractual discounts, rebates, and volume purchase agreements. These accounting system add-ons also produce periodic vendor reviews with clear supplier-performance scoring. Most SRM users indicate clear and sustained improved vendor performance by those vendors who know they are being objectively measured each period. Beyond cost savings, SRM and e-sourcing software solutions dramatically decrease procurement cycles, increase purchase terms compliance and provide a method to compare suppliers on factors other than price.

In a 2008 survey by Ariba Inc. of 600 finance, procurement and business executives, the following items were cited as the top 10 reasons for adopting spend management software solutions.

1. Correlate measurable results to bottom-line metrics
2. Access and analyze spend data
3. Identify savings opportunities more quickly
4. Increase visibility to future spend in multiple spend categories
5. Support multiple business units or geographic locations
6. Complete projects on time and within budget
7. Recruit, audit, and measure performance of vendors and suppliers
8. Build internal commitment for spend-management processes
9. Ensure end-user adoption of spend-management software solution
10. Extend coverage without adding resources

TRAVEL & ENTERTAINMENT
With surges in oil prices and travel costs, analyst firm Aberdeen Group reports that 80% of companies saw their T&E expenses rise over the past year, by an average of 14%. Many forward thinking CFO's are responding to higher business travel expenses by addressing the hidden costs of highly manual monitoring and reimbursement processes. T&E is often an atypical expense in that staff spend their own money or company money up front with significant discretion. Review or compliance typically takes place after the fact, when expense reports are submitted and violations are often discovered beyond the time of recovery.

Sometimes employees fail to book travel through designated travel agencies. Sometimes employees use their personal credit cards, instead of the granted corporate cards, simply to accumulate reward points. Low corporate credit card usage makes it difficult to determine whether staff follow procedure and use preferred airline or hotel partners. Additionally, a manual expense reporting process is time and labor intensive for both employees and the understaffed accounts payable department.

T&E software systems which combine online booking with expense reporting simplify and automate an otherwise manual process. Booking tools guide travelers to partners with which the company has negotiated volume discounts. Once a travel itinerary is selected, the expenses are immediately uploaded to the employee expense report. Expense charges are automatically inserted to the expense report as they accrue. Online booking systems can enforce accepting only corporate or designated credit cards and managing spend limits. Accounting staff or business managers then have complete spend visibility in order to proactively manage budgets or project related expenses. Accounting staff can also run reports by the expense holder, approval person, expense type or department.

According to analyst firm Aberdeen, automating expense reports cuts the filing time for travelers in half and cuts the processing costs from an average of $30 to $19 per report.

ELETRONIC INVOICING
E-invoicing is also experiencing rapid adoption. These customer facing systems are offered by both credit card companies and specialty software companies and normally integrate to commercial accounting software Accounts Receivable modules. In a typical business process, e-invoicing systems either scan paper invoices (which still make up over 80% of all invoices) or require suppliers to only forward electronic invoices. As any accounting department has experienced multiple times over, paper invoices can get lost, delayed, damaged or ignored. In electronic format they can more easily and systemically be tracked, processed, and reconciled far more quickly and with lower error rates. Electronic invoices can follow a predetermined distribution route whereby they are immediately forwarded to a designated approval person. If that person fails to respond to the document, the invoice can be automatically escalated to alternate resources.

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