Much like work from home orders changed the way we think of our jobs, the rise of decentralized spending has made us rethink the way that businesses make purchasing decisions.
Knowing this, the move to decentralize purchasing, when handled properly, can streamline decision making, increase productivity, and reduce hassles for everything from travel to software. However, when poorly implemented, a decentralized spending process can become wasteful and inefficient.
As the person who’s in charge of the accounting decisions and day to day financial operations at your company, the decision to let go of the reins may be one that leaves you with a little bit of anxiety. But understandably, as your firm grows, you can’t afford to micromanage every single decision. Today, we’d like to explore what goes into creating a decentralized spend landscape and how to plan the move.
Why Decentralization Matters
There are many reasons to look towards spending decentralization. According to HBR, decentralization is all about responsiveness, allowing businesses to be acutely alert to business opportunities and threats, and to be capable of grabbing the opportunity or fending off the threat fast and effectively.
Decentralized spending takes the responsiveness and applies it to the purchasing decisions, allowing the people who know best to get what they need (within reason). What once was limited to T&E has evolved to include software products, services, and more to accomplish specific tasks.
Now, your development team can renew their own hosting subscription, your marketing team can buy digital ad space, and your office manager can buy snacks for the office with fewer hoops to jump through and fewer layers of complexity.
- Putting Experts in Charge: It’s likely your IT team knows more about the software they need and your marketing team can get a better deal on ad space than your purchasing department. In turn, giving team members the opportunity to select the products or services that work best for them will leverage that knowledge.
- It Boosts Morale: Spendesk puts it perfectly. “You want a company full of players who truly care about the success or failure of the business. When they make decisions and create new strategies, they are inherently more invested in outcomes than if you simply tell them what to do.”
- It Scales: Especially for growing firms, it’s easy to lose some of the agility that you had when you were starting out. However, by empowering your teams to make decisions without bureaucracy, you can keep some of that magic around as you keep growing.
How to Make Decentralized Spend Work
Even if there are benefits, it understandably takes away oversight and could lead to overspending. Pair this with concerns from other departments that you may not be able to connect the spending, and it may take a bit of work to mitigate risk. But many companies have made it work. According to a recent Airbase blog, there are a variety of ways to address the spend challenges.
- Avoid Disjointed Processes: Too often, finance teams rely on a series of disjointed processes that make decentralization hard. Workflows make the job harder, poorly designed integration results in wasted time and effort, and many companies often waste more money than its worth trying to track spending.
- Stick to the Budget: Possibly the most important part of spend management is to embrace and focus on budgeting and planning. Once that budget is determined, it is important for line management to track ongoing expenditures against the agreed plan.
- Simplify Oversight: Much like a travel policy, it’s vital to put clear policies in place that can keep people on path. From approval workflows to approved spend, the goal here is to make the spending easy and avoid bottlenecks.
Spend Smarter with Tips from the Controllers Council
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