We all need to pay for things in order to do our job. It’s part of our daily professional life, yet not much has changed in the past decades when it comes to spending on behalf of the company.As employees, freelancers, managers or we buy all kinds of stuff. I’m obviously thinking about travel expenses, but products and services required to do your job correctly also lead to many one-off or recurring purchases: office equipment, organising events, software licences, marketing campaigns, champagne magnums to celebrate your fundraising…
For a CFO, any professional expenditure has to meet three specific requirements:
- Supervision requirements — Any purchase must be authorised in advance.
- Regulatory requirements — Each payment must be justified with an invoice, so that it can be accounted for as an expense and to allow VAT to be recovered.
- Monitoring requirements — Cost items must be identified and monitored to control business expenses and ensure the financial situation is sustainable.
Private life vs. professional life: our buying behaviours are increasingly disparate
Our personal buying habits have changed considerably in recent years with the development of e-commerce and its plethora of instantly available products and services. We’ve become accustomed to get what we need immediately, and payment methods have evolved to make purchasing quick and easy. The very act of purchasing tends to disappear: with Amazon’s 1-click buy you don’t even need to enter your credit card number anymore.
The credit card is today’s standard means of payment. Secure and instantaneous, it is integrated with our mobile devices and has evolved to reduce stress: contactless payment, mobile payment, integrated payment in WeChat in China… Payment is evolving to become instantaneous, invisible. Today’s perfect payment requires no action on behalf of the buyer.
Instantaneous purchasing is inconsistent with the requirements companies have to adhere to. They're used to paying when they receive invoices, by bank transfer or cheque, after having confirmed that each payment meets their operational requirements, and they're not equipped to adapt to our changing purchase behaviour.
Whereas in private life, you can complete an order with a few clicks, in the professional world you still have to follow outdated procedures.
Except for start-ups?
The companies whose purchasing behaviour is closest to the one we use in our private lives are start-ups. Having worked in both small structures and more traditional businesses, I can see to what extent purchasing fluidity improves operational efficiency.
In start-ups, purchasing procedures are extremely simple. Most payments are made synchronously: do you need to pay for something? No problem, just use the company credit card that is available to everyone or ask the boss who is sitting next to you.
However, this model has its limits. Once the teams become bigger it doesn’t work anymore. More and more payments are made with the company credit card that quickly reaches its payment limit, payments are no longer justified and accountants waste a lot of time hunting down invoices.
It also raises obvious security issues: we no longer know who has, or doesn’t have, access to the corporate credit card number. There are unpleasant surprises at the end of the month, like unanticipated major expenses, risks of fraud…
What about SMBs?
When a company begins to be more structured and hires a financial team, one of its first actions is to remove access to all company credit cards and centralise payments to regain control over expenses. These procedures systematically create operational friction. Whereas before the staff were autonomous and responsible for their purchases, they must now go and ask others to purchase for them or pay from their own pocket to be reimbursed via expense reports.
Operational teams lose agility and speed of execution. Financial teams are always being asked to do low added value tasks.
I actually lived through this scenario when my start-up, Wozaik, was acquired by the Solocal group (PagesJaunes). Whereas before with just a few clicks I could rent a server to test a new idea, I then had to go through a buying process that took several days. The simple purchase of a SaaS software that could potentially double the efficiency of the team took even longer.
Treat the cause and not the symptoms
These procedures have been improved and digitized in an attempt to streamline interaction and communication between operational staff and finance teams with software for digitized procurement procedures, expense management software, etc. But these things are treating the symptoms and not the cause.
The cause, in my opinion, comes from centralising the means of payment. In order to conform to its requirements companies delay what should be instantaneous, they transform what is synchronous into asynchronous.
Expense reports are a perfect example of converting a need for an immediate purchase — which is difficult to control, like paying for a taxi — into an asynchronous procedure: the reimbursement is deferred until a proof of payment has been presented.
But the cost of this “transformation” is not trivial: inefficiency, loss of agility, time wasted on low-value tasks, paying a higher price for the same goods because companies shop in a more restricted, less competitive marketplace.
With that in mind, I created Spendesk. We started by providing an effective way of decentralising the corporate credit card and are successfully solving this problem for hundreds of companies. Our ambition is to totally reinvent the way businesses pay.