How to Prevent Spending Leakages & Recommended Software

Many companies are still unaware that they have experienced spending leakages. These leakages go unnoticed because they generally occur in small transactions and uncontrolled purchases, resulting in a gradual decline in profits.

If not handled with the right system, spending leakages can impact operational efficiency, cash flow, and company profits.

What are spending leakages?

Spending leakages occur when a company unintentionally spends money outside of company policy without supervision. In the context of procurement, this happens when vendor payments are not included in the official supplier list.

Spending leakages also include several types of fund leakage in daily operations, such as duplicate payments, purchases outside of policy, and the use of personal cards for business needs.

Research from Procol shows that uncontrolled spending can cost companies around 10%-20% of their potential cost savings.

The main problem generally occurs when companies have difficulty tracking purchases, vendor payments, and hidden costs in operations. Even small, unmonitored transactions can become a significant financial burden.

Baca Juga: Company Expense Policy Guideline: How to Create & Start Easily

Differences between spending leakages and budget leakages

Although they appear similar, spending leakages and budget leakages have several significant differences in the context of business spending.

Spending leakages occur when daily operational costs exceed the output produced or sold, such as inventory or production. This type of expenditure is usually related to inefficiencies in the supply chain, which directly impacts profitability and production efficiency.

Meanwhile, budget leakages are budget leaks that occur due to small, unnoticed but recurring transactions, such as automatic payments, service subscriptions, and small transactions that accumulate.

Causes of spending leakages in business

Here are five common causes of spending leakages in business

1. Uncontrolled subscription costs

Software or digital service subscription costs are often overlooked and continue to run even when not in use. Without regular audits, these costs can accumulate and disrupt cash flow.

2. Manual expense reports

Financial reports that are done manually carry the risk of input errors, double claims, and undocumented expenses. Poor reporting also makes it difficult to track expenses for verification.

3. Purchasing expenses

Large purchases of equipment without supervision often result in budget waste. Therefore, companies must set limits to control expenses.

4. Inefficient business expenses

Without applicable policies and transparency, business travel expenses can increase. Companies should establish policies regarding business travel limits.

5. Lack of negotiation with vendors

In order not to lose potential savings, renegotiate with vendors after the initial offer. Renegotiate contracts, look for competitive offers, and build long-term relationships with vendors.

Baca Juga: How to Build a Cost Effective Strategy to Scale A Business

How to prevent spending leakages in business

To prevent spending leakages in business, a combination of operational controls and integrated systems is required.

• Evaluate inventory and production: Avoid excess products and overstocking, which result in wasted costs and labor.
• Control material and resource costs: Ensure that material purchases are in line with needs and efficient in their use of resources.
• Take transportation costs into account: Make accurate estimates of logistics costs to avoid unexpected cost spikes.
• Monitor finances regularly: Monitor and analyze expenditure flows regularly to detect waste before it develops into a major problem.
• Customize policies: Create automatic spending policies and set limits based on teams or projects using spend management software.

Recommended spend management software to prevent spending leakages

To overcome spending leakages, companies need a system that can automate expenses in real time. Here are our recommendations.

1. Mekari Expense

As spend management software, Mekari Expense can help companies prevent spending leakages through its custom policy feature.

Set limits, shopping categories, and business travel rules automatically according to business needs in one integrated system to prevent spending leakages and control expenses more efficiently.

Advantages of using Mekari Expense:

• Faster process: Set rules, limits, and approval flows to speed up the reimbursement process.
• Accurate budget: Set budgets per category, team, or project to keep budget usage on track and cash flow under control.
• Full transparency: Every transaction activity is automatically recorded according to the budget, keeping cash flow healthy and accurate.
• Audit reports: Every transaction is clearly recorded with approval history, making it easy for teams to conduct audits.
• Branch control: Set policies based on team, position, or location in a single dashboard.
• Prevent fraud: Implement automatic policies when claims are submitted to reduce the risk of fraud.

2. Spendesk

Spendesk helps companies manage spending leakages by connecting budgets with approval workflows from the purchase request stage. It makes it easier for finance teams to track budget allocations in real time.

Advantages of using Spendesk:

• Helps finance teams ensure budget owners are accountable for budget usage through centralized control.
• Real-time visibility into current financial conditions to accelerate data-driven decision making.
• Aligns every purchase with the budget to prevent overspending.
• Structured approval workflow to support seamless payment processing.

3. Fraxion

Fraxion provides solutions to help companies proactively manage their expenses. Every transaction will be automatically recorded, tracked, and approved in accordance with the established budget policy.

Advantages of using Fraxion:

• Easy end-to-end purchasing process from PR to PO to ensure a controlled and structured procurement process.
• Optimizes AI-based AP processes to speed up payments while reducing the risk of data entry errors.
• Provides comprehensive reports and insights to help companies make data-driven decisions.
• Provides complete visibility into expenses, equipped with analytics and internal controls.

4. Coupa

As a community-generated AI-based spend management platform, Coupa helps companies manage expenses and automate decisions carefully to improve operating margins.

Advantages of using Coupa:

• Instant visibility into cash flow, making it easier for companies to predict future financial conditions.
• Simplifies the payment management process through a multi-banking portal with universal access.
• Comprehensive reports and analysis to support data-driven decision making.
• Improves compliance and minimizes the risk of payment fraud in business.

5. Ramp

Ramp is a spend software solution that combines corporate cards with expense management in one system, making it easier for companies to manage budgets in a single integrated dashboard.

Advantages of using Ramp:

• Automates spending in accordance with company policy.
• Speeds up the approval process based on budgets and fund allocations.
• Automatically detects transactions that are outside of the established policy.
• Provides an audit trail to ensure transparency and accountability.

The best spend management software to prevent spending leakages in business

Prevent spending leakages by using a system specifically designed to provide real-time control over all company transactions.

Mekari Expense is a spend management software solution in Indonesia that helps companies prevent spending leakages by establishing a budget control system.

Mekari Expense helps companies prevent spending leakages through:

• Mekari Limitless Card: Physical and virtual business payment cards with adjustable limits to manage business expenses in a more structured manner.
• Multi-level approval: A digital approval flow to facilitate the verification and approval process for expenses such as reimbursements, business trips, and vendor payments.
• Custom policy: Automatically set limits, spending categories, and business travel rules according to business needs.
• Budget allocation: Manage budgets separately by categorizing them based on branch, team, or project.
• Centralized visibility: Manage various budget accounts from a single integrated dashboard for more transparent cash control.
• Integration with the Mekari ecosystem: Connect with Mekari Jurnal and Mekari Talenta for fast reconciliation and reporting processes.
• International security: ISO 27001 international standard certification to ensure the security of company financial data. 

Prevent spending leakages early on and optimize your business expenses with Mekari Expense.

Reference

Procol. “What is spend management? | Importance & best practices”