Spending Management

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Spending Management…as a Service


During this Training Event You Will…

1. Explore specific types of spending management services you can offer your clients.

2. Determine which spending management services work best for your each of your client’s business model and operations.

3. Survey specific tools, solutions and strategies that will equip you to begin offering spending management services immediately. (A Conversation with Denise Bailey)

4. Discover pricing strategies for adding spending management services to your existing bookkeeping engagements.


What is Spending Management?

• The Collecting and Classification of Expenditure Data (i.e., Bookkeeping)

• The Review of Expenditure Data to Determine

• Accuracy

• Compliance with Policies and Procedures

• Over or Under Payments

• The Analysis of Expenditure Data to…

• Improve efficiencies

• Monitor controls

• Verify that expenditures are necessary for business operations

• Ultimately…reduce cash outlay to drive increases in gross profit margin (for costs) and net income (for operating expenses)


The Value Proposition of Spending Management

3%Out of Policy Spending

3% Maverick Spending

2% Fraud Exposure

5%Overcharges by Vendors

2% Process Cost

1% Software Cost


Leading Causes for Cost and Expense Overruns

• No company (P&L level) budgets and/or budget enforcement

• Lack of alignment on project expectations (e.g., revenue forecasts) and no clearly defined project budgets (e.g., expense forecasts)

• Data entry errors

• Erroneous, incomplete or dated project related information

• Incomplete or missing due dates for receivables or payables

• No defined procedures for receipt of deliveries, inspection of shipped products and return policies.

• No clearly stated, formal policies and procedures around costs and expenses

• Lack of transaction monitoring

• Poor technology and/or reporting systems


Examples of Spending Management Services and Determining Which Clients Benefit from Each Type of

Service

Section 1


Budget Creation, Curation and Enforcement

• Most Small Businesses Operate without Any Formal Budgeting or Forecasting

• Most Businesses That Do Set a Budget Do not Curate the Budget throughout the Year

• Most Businesses that Do Curate their Budgets Have No Formal Structure for Budget Enforcement

• Most Businesses that Do All of the Above Budget Based on Cash Availability Rather than Profit Margin or EBITDA Targets

• Recommended Software: The Company’s General Ledger Solution Supported with Spreadsheets as Needed

Tip: Combine budget creation, curation and enforcement services with cash flow projection

and Accounts Receivable monitoring.


Expense and Reimbursement Policies and Procedures

• Most Small Businesses Operate with No Formal Expense and Reimbursement Policies or Procedures

• Most Businesses that Do Have These Policies and Procedures Have No Formal Structure for Expense Reporting and Approvals → No Enforcement

• One Size Does Not Fit All – Start with the Most Comprehensive and Highly Governed Policies and Adjust for Your Client’s Specific Needs

• Deploy formal purchase authorization procedures (e.g., Purchase Orders) for clients with employees who are authorized to spend money on behalf of the company without the direct and prior approval of ownership.

• Recommended Software: The company’s General Ledger for Purchase Orders. For companies with warehouse management, route purchase orders through an inventory management solution that integrates with the company’s General Ledger.

Tip: Use a per diem process for travel expenses to streamline administration and to mitigate the risk of travel expense overruns.

Tip: Use software-driven spending cards, when possible, to minimize or eliminate the need for formal purchase orders.


Tips for Common Reimbursable Expenses

• Ground Transportation (Tip: Check with your attorney about liabilities associated with requiring or recommended shared ride services)

• Baggage Fees (Tip: Limit checked bag options for short term travel)

• Meals (Tip: Simplify expense management and controls by using a per-diem)

• Lodging (Tip: Create a list of approved hotel brands and/or make hotel spending guidelines variable by city and/or travel season.)

• Meals and Entertainment• The meal or entertainment must be an “ordinary and necessary” business

expense in conducting company business;

• The expenditure cannot be lavish or extravagant;

• There must be a substantial business discussion during, directly before or directly after the meal or entertainment;

• An employee of [Company Name] must be present at the meal or entertainment.


Expense Reporting Management

• Receipt Tie Back

• Compliance Check with Spending Policies and Procedures

• Compliance Check with Any Applicable Budgeting Tolerances

• Vendor Relationship Management (e.g., Membership and Volume Discount Programs)

• Recommended Software• Software-Driven, GL-Integrated Corporate Spending

Cards• Expense Reporting Software

• Go as Simple as You Can (Spending Cards Often Offer this as Part of their Solution)

• Use Fully-Featured Expense Reporting Solutions Only When Absolutely Necessary (e.g., Compliance with DCAA regulations)

• Use Only Solutions that Fully Integrate with the Client’s General Ledger Solution

About DCAA: The DCAA (Defense Contract Audit Agency) performs contract audits for the Defense

Department and many other government agencies.


Transaction Monitoring and Strategic Purchasing

• Software Subscription (SaaS) Monitoring

• Duplicate payments within a single subscription payment period.

• Subscription expiration/termination tracking

• Software feature ROI (e.g., overlap with other systems or changes in operations reduce the value of the software solution)

• Service provider/utility bundling opportunities

• Automated Recurring Payments (Non-Software Services)

• Expected loan or credit card payoff timelines

• Compliance with Same as Cash Programs

• Associated stop days on auto-payments

• Expired or terminated services for administrative vendors

• Periodic Renegotiation of Pricing for Utility Services (at Least Annually or at the end of each contract cycle)

Tip: If the company uses Microsoft 365, they are often over-purchasing on other software

solutions like calendar links, meeting solutions and even on their telephone service!


Transaction Monitoring and Strategic Purchasing

• Duplicate Payments

• Interest Expense and Penalty Mitigation

• Purchasing Strategies

• Early Payment Discount Negotiation and Compliance

• Inventory/Stock Purchasing Strategies

• Just in Time Inventory Management

• Intentional Overstocking to Maximize Supplier Special Offers, Market Factors and/or Seasonal Pricing Patterns

• Benchmarking: Whenever Possible, Compare all Company Expenditures and Purchases Against Industry Benchmarks

Tip: Create a Custom Transaction Detail report set to the last 12 months grouped by vendor. Check the number of payments as compared

to the frequency of the vendor billing.


Specific tools, solutions and strategies that will

equip you to offer spending management services.

Section 2


A Conversation with Denise Bailey

Joe Woodard, CEO Denise Bailey, Principal


Pricing strategies for adding spending

management services to your existing bookkeeping

engagements

Section 3


4 Steps: Pricing Spending Management Services• Conduct a One Time Spending Assessment and Provide the

Client with a Report of Your Findings (Bill for this Service!)

• Using the needs analysis report

• Determine what services you need to perform

• The value of the outcome and the estimated cost to provide those services

• Determine the price with considerations for the cost of production and the resulting value for the client.

• Adjust the Pricing as Follows:

a) Monitor scope and issue a change order for anything outside of scope

b) Increase fees annually and arbitrarily by at least 10%

c) Perpetually upsell the scope of the engagement (e.g., financial analysis and advanced reporting services)


Spending Management…as a Service

Date post:	19-Feb-2022
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Spending Management

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