In every business, it’s likely you’ll find a vast number of transactions and expenses taking place every day. More importantly, these transactions won’t all be of the same type, and you’re bound to have different spending types you need to manage. Amongst these different expenses, you’ll often find discretionary spend. With a better understanding of this type of spending, you can optimize business cash flow management at your firm.
What Is Business Discretionary Spend?
You’ll likely be wondering what is discretionary spend and how can you manage it more effectively throughout your company? Your business discretionary spend is any form of spending that could be considered more of a luxury or additional expense but not one deemed absolutely necessary. There are many expenses you’ll be making for your business and some of them will be more pivotal to the running and growth of your company than others.
Examples Of Essential Spend Include:
- Business rent – If you have a business location, you need to pay rent in order to keep it.
- Energy bills – This is a necessity for any business, to keep the business location running properly.
- Employee payrolls – Employee payroll is another example of essential spend. Your employees need to be paid for their work, so this is essential.
- Corporate taxes – This is a legal requirement for all businesses, whereby you need to pay the correct businesses taxes.
Examples Of Discretionary Spend Include:
- Marketing campaigns – This can be any form of campaign or strategy to increase brand awareness and draw in customers.
- Corporate events – These are business events which you could either attend or host yourself.
- Travel costs – These are expenses which are made whilst traveling for business.
- Employee benefits – This can be a range of perks offered to employees, such as days out, food, entertainment, etc.
Discretionary spend isn’t completely useless, and it doesn’t mean it won’t bring value to your company in some form, it just means it’s considered less of an absolute necessity than other expenses.
How Can You Manage Your Business’s Discretionary Spend?
Managing your discretionary spend is crucial for your business. This is why you need to implement spend management software tools to gain a more effective and efficient handle on all discretionary spending. Here are some of the ways spend management software can help you manage discretionary spend:
One of the best ways spend management software can help you manage your discretionary spend, is through the range of spend control features it offers. Essentially, these help you get your spending under control. One example is the inclusion of spend limits on all your transactions. These are payment caps that automatically prevent payments which exceed a specified spend amount. You can tailor your spend limits to certain cards which are used for discretionary spend, or even apply the limits to certain types of purchases only. This can help you keep discretionary spend under control, and have a specific way to handle it that suits your company.
Full Visibility On Transactions
Another benefit of using spend management for your discretionary spend is that you gain full visibility on all corporate transactions. With so many payments taking place throughout your business, it can be difficult to track what’s discretionary and what’s necessary. With your software, you’ll have complete, real-time visibility for all your transactions, with extensive data that analyzes what was paid for, how much was spent, etc. This will allow you to easily track every discretionary payment, all from one central platform, to give you a bigger picture view of how well you’re managing it and where to improve.
Customized Payment Workflow
Your spend management software can also enable you to customize payment workflow, so that any discretionary spending goes through you first, and gives you easier management. For example, you can set specific approval requests on discretionary payments, so that they have to be approved by either you or a senior employee, before the transaction is complete. That being said, you can also apply automated approvals where necessary, to help you distinguish between necessary and discretionary payments, so the former can be approved without trouble.
With the right spend management software implemented in your business, you’ll have a much more effective and efficient method of managing your discretionary spend.