Spend management best practices every CFO should know

Perhaps this sounds familiar: The fundraising round closes, a major grant comes through, or a big contract lands, and, suddenly, your business can afford to hire, attend conferences, and buy the software that makes work easier. This momentum is exciting, but it also puts new pressure on how your company manages money. The finance team might start fielding more questions: Who needs a card? Who approved this expense? Which budget does it come from? Is there a policy for this? And this means CFOs and finance leaders have spending decisions to make and guidelines to set.

During business turning points like these, spend management often starts to shift from being a fairly straightforward admin task to something more complicated that could benefit from more infrastructure. Choosing the right systems can help your teams move quickly while giving finance leaders the visibility, controls, and accountability required to manage spending in a smart and disciplined way.

Here are spend management best practices that every CFO and finance leader should know.

Spend management refers to the systems — including policies, workflows, and reporting habits — that help companies control business spending, without slowing teams down. This includes how employees handle business expenses, from requesting and getting approvals for purchases to paying for them and submitting receipts for review. And it also spans other spending categories, such as:

• Card spend
• Reimbursement
• Vendor payments
• Bill pay
• Paying for SaaS subscriptions
• Procurement
• Department budgets

For CFOs and finance leaders, the goal of spend management is to create conditions that lead to better financial decision-making. When spending data is organized and current, finance teams can spot waste earlier, manage cash more deliberately, and help leaders understand where money is actually going.

Spend visibility is the foundation of any effective spend management strategy, since finance leaders need a clear view of spending across the company. When this information is scattered across spreadsheets, inboxes, bank statements, and other disconnected tools, finance teams end up spending too much time chasing context and not enough time analyzing decisions. But a centralized spend management platform helps bring those moving pieces together and makes it easy to track approvals and purchases and map the spending to the correct department or budget.

To develop a clear employee spending policy, be sure to cover all the pertinent details and frequently asked questions in an easy-to-follow structure. At minimum, it should cover: 

• What employees can spend on (including eligible and ineligible expenses)
• When they’ll need approval 
• Who makes approval decisions
• What documentation is required (such as receipts)
• Who owns which budgets
• How exceptions are handled
• Travel and meal rules
• Credit card limits
• Merchant rules
• Spending category restrictions
• Reimbursement timelines

The policy should be specific enough that employees can easily use it to guide decisions and simple enough that it’s not overwhelming or difficult to navigate. And the steps for submitting receipts and documentation post-purchase should be simple to follow. That way, finance won’t need to chase down details. An effective spending policy has other benefits, too. It can support better cost control, as well as improve budget accuracy and compliance. For instance, if employees know the limits before they book a trip or buy software, finance is less likely to discover surprise expenses during month-end close.

Ready to get started? For more tips, explore this guide on how to build an employee spending policy, plus this expense policy template that your teams can adapt.

Manually managing your company’s expenses can be costly in ways that are easy to underestimate. For example, finance teams could lose hours chasing receipts, confirming approvals, updating spreadsheets, and following up on reimbursements. Manual processes can also lead to inconsistencies. One employee, for instance, could get approval by email before making a purchase, but another might just submit a receipt after the fact.

Automating these routine tasks can make your spend management processes — from approvals to collecting documentation and handling reconciliation — much easier to manage at scale. You can set up automations that apply consistent rules across routine workflows, such as approval routing, expense categorization, and bill payments. For example, you could set up a system in which software purchases above a certain dollar amount get routed to the department head, IT, and finance, and card transactions over a set threshold require employees to upload receipts before they’re approved. 

Automating spend management tasks can also save your finance team hours each week. Instead of checking every routine transaction by hand, they can just review exceptions and monitor trends.

Choose corporate cards that give employees the access they need without forcing finance to give up control. Instead of relying on one shared department card, you can issue cards with limits and rules based on employee, team, vendor, category, or budget. That makes spending easier to track and reduces the number of one-off approvals that your finance team has to manage.

Useful controls can include one-time virtual cards, category restrictions, and approval requirements before card use. Review your card controls as your company grows. A limit that worked for a small team may need to change as budgets, responsibilities, and approval needs become more complex.

The best practices for managing employee spending are often simple. Be sure to:

• Make the rules easy to find.
• Make approval paths clear.
• Give managers enough visibility into their team’s spending, so they can properly own their budgets and make trade-offs in real time — not weeks later when finance is closing the books.

If employees have to ask what’s allowed every time they book travel, buy software, or take a client to lunch, your system isn’t working. And if you’re seeing the same issues repeatedly, this may point to a deeper problem. For instance, the policy could be unclear, the approval process might be too slow, or the budget owner might not have enough context. Take note of any problem areas in your spend management system and make updates accordingly.

Having remote and distributed teams can introduce a different kind of spend complexity. Employees may be making purchases from different locations and time zones. Without clear systems in place, remote spend can be tricky to manage.

Best practices for spend management in remote teams include:

• Implement digital approval workflows.
• Provide virtual cards for online purchases.
• Set up standardized reimbursement processes.
• Monitor card activity in real time (instead of waiting till the end of the month).
• Create documentation rules that don’t depend on in-person handoffs.

Whether booking a coworking space or buying a travel upgrade, remote employees should know whether a purchase will require approval and what documentation finance will need later.

Overspending on subscriptions and tool sprawl can be easy to miss. Seats get added, usage changes, and renewal dates can come and go before anyone has reviewed whether the software is still needed or worth the cost.

Best practices for managing SaaS spend center  on ownership, usage, and renewal. Finance teams should track key details for every subscription, such as the renewal date, any contract terms, the business purpose, and any duplicate tools. Every subscription should have an owner who is responsible for confirming whether the tool is still needed before the renewal date. For larger contracts, your finance team may want to start renewal reviews 60 to 90 days in advance, especially if there are negotiation windows or cancellation deadlines.

Make spend management a regular operating habit. CFOs should establish a reporting rhythm that gives leadership a clear view of budget versus actuals, department-level spend, reimbursement trends, and variances.

Monthly reviews are often enough for most categories, though high-growth or cash-sensitive companies may need a tighter cadence to talk through timely topics. Be sure to assess trends (such as: why is sales travel increasing month over month?) and problem areas (such as: is a department over budget because the forecast is outdated or because controls are weak?).

Clear reporting helps CFOs shift the discussion from what happened in the past to what the company should do next.

Are you building a business case for better spend controls? Read our article on the ROI of spend management to help determine where savings may come from and how to measure the impact over time.

Spend management is easier when the finance team can turn good habits into a repeatable system. Use this checklist to identify where your company's spend is happening, tighten the rules around it, and keep the process aligned as business grows:

• Audit spending. Audit current spend across corporate cards, reimbursements, bill payments, vendor payments, and SaaS subscriptions.
• Update spending policies. Let employees know what’s allowed, when approval is needed, and what documentation is required.
• Automate workflows. Processes like approval routing, receipt capture, categorization, reimbursement review, bill payments, and accounting syncs could all be good candidates for automation
• Assign owners. Make it clear who’s in charge of every budget, vendor, software subscription, and recurring expense.
• Monitor SaaS subscriptions. Keep track of seat usage and vendor ROI before contracts renew. Look out for duplicate tools and other unnecessary purchases.
• Review card controls. Set up card controls by employee, team, vendor, category, and budget.
• Refine your approach. Regularly assess limits, approvals, reporting, and ownership.

To build a spend management system that supports your startup, make spend visible, give every major category an owner, and keep optimizing your system as the company grows.

As your business grows, your spend management methods need to evolve, too, since relying on a hodgepodge spreadsheets and after-the-fact approvals probably won’t cut it anymore. Your finance teams will need a system that gives employees clear guidance on how to spend while keeping visibility, controls, and documentation in one place.

Learn more about how Mercury can help your team build a more controlled, transparent, and scalable approach to company spend, so finance can spend less time chasing details and more time helping your business grow.