Gaining Insights into Your Employee-Initiated Spending

This article is an excerpt from GovLoop’s recent guide, “7 State & Local Tech Trends to Watch.” Download the full guide here.

Every dollar counts when it comes to state and local governments and their citizens. Agencies that poorly track their spending risk mishandling their money and disappointing their constituents.

It’s a problem that grows once employee-initiated spending enters the equation. Employee-initiated spending involves any purchase an employee makes on an agency’s behalf without a traditional purchase order process. Agencies that haven’t modernized their IT infrastructures are missing insights into where this spending is happening. It’s a situation where potential savings remain hidden in the details.

GovLoop sat down with Matt Gibbons, Senior Director of Sales for Public Sector at SAP Concur, to learn how state and local governments can gain more insights into their employee-initiated spending. SAP Concur is a leading provider of travel, expense and invoice management services.

“Employee-initiated spending is typically the second largest controllable expense that state and local governments have after payrolls,” he said. “Historically, it’s also one of the most difficult areas to manage because of the lack of insight that organizations have into their spending.”

Spending visibility is an issue because many agencies remain chained to their legacy systems or have a paper-based process in place. These organizations would gain better insights from upgrading their travel, expense and invoice systems. Though it’s a move that’s affordable in the long run, agencies only have so much funding available now.

“They’ve put themselves into a corner,” Gibbons said. “They need to move from legacy technology to a cloud solution that lowers their technology debt and delivers greater value.” However, agencies are often prevented from this change due to the costs associated with maintaining their legacy systems.

Agencies must also address the procurement process itself. In many agencies, the employee-initiated spend process involves multiple, often manual steps. Individuals research their purchase, request approval for it, procure their item or items, reconcile the purchase and then have it reimbursed. Legacy systems and processes often isolate these stages from one another, are prone to human error and prevent agencies from seeing their overall expenditures.

“Once you start introducing multiple systems into this process, it causes those parts to be disjointed,” Gibbons said. “You lose the ability to make sure that you’re effectively managing your organization’s policies.”

Unfortunately, missed savings isn’t the only problem caused by employee-initiated spending. It can also produce negative headlines and damaged reputations for organizations.

“Employee-initiated spending is a high-risk environment for fraud, waste and abuse,” Gibbons said. “The one thing that organizations never want to be is on the front page of their community’s newspaper.”

Another challenge faced by agencies is ensuring that their workforces comply with their spending rules and regulations. Many employees are unfamiliar with their organization’s guidelines, making it increasingly difficult to ensure funds are appropriately spent.

“Governments can have travel and expense policies that are hundreds of pages long,” Gibbons said. “For an individual who’s traveling once or twice annually, having full insight into them is difficult.”

Software-as-a-Service (SaaS) can help state and local governments overcome these obstacles and see their spending more clearly and holistically. SaaS providers like SAP Concur license their software to organizations on a subscription basis. These solutions give agencies multiple benefits, including a hosted and secure environment which is serviced and maintained by the provider.

“The ability to see the entire transaction lifecycle in a single platform allows you to manage it more effectively, making sure that you’re adhering to the policies, procedures and regulations that your organization has,” Gibbons said. “From a reconciliation standpoint, you’re also automating the process and removing the potential for human error.”

SaaS solutions are flexible based on organizational needs, making them useful for the wide variety of state and local governments. Agencies can quickly and securely deploy the necessary software for managing their unique budgets.

“We don’t customize, we configure,” Gibbons said. “Organizations can personalize the experiences that they have with SAP Concur. Their rules and policies are laying on top of the system and they’re driving the decision process how they want to for their employees to follow.”

It’s important that state and local governments monitor all their spending, including the kind initiated by their employees. Better control of and insights into employee-initiated spending can save organizations time and money that’s best directed to delivering citizen services.