A little over a decade ago, cloud accounting sparked a seismic shift away from paperwork-heavy manual processes towards more efficient digital automation. Today, integrations reach all the way from the current account to project management tools, flowing valuable information into cloud accounting platforms to simplify financial management.

It’s a win-win situation for businesses and their accountants, reducing manual work and delivering actionable insights in the moment. Administrators and advisers expect to be able to track and act on finances in real-time. So, it’s strange that spending and expense management has largely been kept in the dark ages.

The banking bottleneck

Though most banks have bank feeds into cloud accounting software (like Xero), many of the payments made by businesses don’t end up in the accounts for weeks, or even months. That’s because a large proportion of a business’ spending – by frequency, if not by volume – is not directly paid out of the business current account.

Current accounts are perfectly sufficient for fixed costs like rent and utility bills. But travel and entertainment expenses (T&E), and other incidental costs are paid for using petty cash, employee reimbursements and cash advances. Software subscriptions, online ads and other forms of variable spending are often paid for on company credit cards.

Though neo banks like Monzo and Starling are working towards more capable business accounts, many companies still prefer to bank with age-old institutions, for good reason. Security and stability are crucial when handling money, and neo banks have so far focused on micro-entities, struggling to earn the perceived credibility needed to usurp incumbents.

But the way traditional banks manage variable spending hasn’t changed for decades, meaning both businesses and their accountants are stuck with painful processes – right in the middle of bookkeeping workflows. At their best, these processes feel like compromises. At their worst, they suck time and money out of the business.

The black hole of the status quo

Here’s how most small businesses address the challenge of managing spending and expenses.

• Low-level staff spend on personal cards, waiting for weeks (sometimes months) before reporting the costs they’ve incurred on the business’ behalf.
• Management uses a mix of personal cards (with the same issues) and company credit cards, with statements taking weeks to arrive.
• Departments lean on finance teams to pay for expenses, introducing unnecessary and time-consuming administrative hurdles.
• Petty cash and advances only add to the confusion. And accountants have the unenviable task of bringing it all together in a system of record. Cue chaos.

The truth is, the status quo has always been a nightmare that businesses (and employees) have accepted for lack of an alternative. And it’s resulted in symptoms that we’ve mistakenly considered an inescapable part of business.

Poor visibility

Reimbursement and petty cash processes hide costs from view. Waiting for statements and reporting can mean companies lose 60+ days before identifying costs. And that’s a big deal. For small businesses, expenses are the second biggest outlay after salaries, so being in the dark about these costs has huge implications for decision making.

Limited control

In this fragmented system, it’s virtually impossible to assert any kind of control outside of an expense policy. The true limit is whatever the employee is willing to spend on their own debit and credit cards, or the upper limit of a company credit card. As a result, fraudulent expense claims cost British businesses £1.9 bn (yes, billion) per year.

A time warp

Expense management is a chore, taking businesses hours to report, and accountants hours to record. Shoeboxes full of receipts, manual statement uploads, nagging emails, tedious reconciliations… expense management is a broken, inefficient process that increases the likelihood of inaccuracies.

Über-expensive: Why real-time visibility matters

This year, a ride-sharing start-up found that an employee initiative had resulted in £165,000 being spent on balloons. Yes, it’s an overblown (sorry) issue, clearly impacted by scale. But that kind of flyaway (last one) spending can also affect small businesses. Without seeing all spending as it happens, businesses pour profits down the drain.

Introducing Soldo – The missing link

For visibility and control over spending, businesses need to connect everything between payment and reconciliation. It needs to happen in real-time, capturing business-wide spending at the moment of purchase. And it needs to integrate seamlessly with the business’ existing bank account and their accounting software.

Soldo does this by putting smart prepaid company cards in the hands of employees and departments. It means that all spending can be controlled proactively using built-in budgets and rules, but it also means spending can be seen in a centralised system, instantly.

That smarter spending holds the key for simpler expenses. The Soldo mobile app prompts cardholders to take a photograph of the receipt the moment the payment is made. Adding receipts, tags and notes is as simple as a couple of clicks, right at the point of purchase. And a Xero direct bank feed and expense integration put the icing on the cake.

Why the bank feed matters

For many accountants and business owners, the most logical place to see spending is alongside other financial information. The power of a platform like Xero is that – when plugged into the right products – it can serve as a single source of truth.

Soldo allows you to connect a direct bank feed to Xero that updates regularly, so accountants and business owners alike can get an up-to-date view of spending. When paired with its class-leading expense integration, Soldo automatically delivers everything an accountant needs to reconcile an expense in Xero.

Transactions flow in on the left-hand side of Xero’s bank reconciliation; expense data – including tracking codes, VAT rates, notes, billable expenses and more – is sent to the right. It’s a major time-saver that substantially reduces the risk of data input inaccuracies.

Practices like Farnell Clarke love the efficiency this brings to compliance tasks. Will Farnell, Founder of the practice, says they’re now providing bookkeeping services to their clients with an average of four minutes’ work per day. Extraordinary. But that live data truly comes into its own for the delivery of next-gen advisory services.

Implement or implode

Contrary to the dying cries of the traditionalists, implementing automation tools like Soldo and Xero has empowered accountants, rather than replacing them. Smart accountants, leading progressive practices, have turned the tide – transforming the efficiency of compliance services and moving towards more profitable advisory roles.

But, until now, there have always been caveats surrounding the delivery and profitability of advisory services.

Truly accurate advice depends on live accounting data, with 30-day old advice offering an instantly dated perspective rather than fresh insights. But one piece of the puzzle has always been missing: it’s been virtually impossible to gain real-time visibility over T&E and variable spending. The processes just didn’t exist.

Real-time spend and expense management changes everything. Your advice takes into account a complete view of the business, gained directly from Xero. And your clients get the most accurate view of their business as it stands, here and now. Why does that matter? Here’s what Will Farnell had to say:

“With the right relationship and live data our clients come to us first with every business question. We might not currently be able to deliver the answer every time, but with live accounting, good planning and great client relationships, this can happen. And live data, which is as real-time as possible, is how it works.” - Will Farnell, Founder of Farnell Clarke

It’s clear, with a complete set of live accounting data, accountants can deliver the most valuable services with greater accuracy and relevance. Relationships with clients thrive, meaning your clients stick with you, and the range of tasks they entrust to you grows.

When it’s right it just fits

For more than a decade, forward-thinking accountants have been recognising and deploying technology that digitises and streamlines their processes. Bit by bit, the vision of a smarter, more profitable practice has been created.

Today, for the first time, accountants can get a complete view of the entire business in one place – their online accounting platform. But the surprising thing about real-time spend and expense data is that it just makes sense. It fits into your and your clients’ existing workflows, as if it was always meant to be that way.

We know the power of spend management, and soon your clients will too. Which is why it’s important to stay on the pulse of such an exciting and powerful tool. The easiest way to do that is to become a member of the Soldo Partner Programme. We give partners free access to Soldo for their own practice, so you can experience the benefits for yourself.