History of Spend Management
- 14 Apr 2022
- Spend Management
Many career-minded people discovered the benefits of being in finance, accounts payable, and procurement since spend management moved from the back office to the executive suite. In addition, as a result of automation, the AP team and procurement are now part of critical decision-making processes based on relevant data.
While automation has transformed how the world approaches financial processes, spend management has been around since the beginning of trade. As a result, the history of spend management has evolved over the centuries, making it crucial for financial professionals to understand and adapt to the changes.
The most recent evolution of spend management includes its integration with technology, such as cloud automation to support remote work. Exploring the history of spend management helps financial professionals become even more progressive in the future.
The Early Days of Spend Management
The earliest days of spend management began when humanity discovered fire forms when lightning strikes, creating a valuable “business” opportunity. Consider how spend management evolved through the 20th Century:
- Bronze Age (3,000 - 1,300 B.C.) - Builders required constant supplies to build the pyramids during the pyramid period. Scribes reported the amount of goods needed and traveled to neighboring cities to exchange goods and services. Also, long-distance trade began but was limited to luxury items such as spices, precious metals, and textiles.
- Iron and Middle Ages (200 B.C. - 1,500 A.D.) - This was when trade distances increased thanks to ships, and the currency was introduced for more manageable payments. At this time, it was commonplace to record tallies to represent transactions and remember debts.
- 19th and Early 20th Century - As the world moved forward, so did finance by establishing large production factories using steam and coal with the Industrial Revolution. Supplier networks were usually families, creating limits. New machinery, mass production, and increased wages brought more workers to the city. Finally, purchasing becomes its own department as selecting and tracking materials becomes crucial.
The Next Phase in Procurement
Now that purchasing has rightfully become a department, the next phase in finance, AP, and procurement begins. During The Age of Bureaucracy in the 1950s and 60s, Great Depression and WW II showed the prices, quality of materials, and how suppliers performed affected transactions rather than the availability of materials. With that in mind, every transaction required legal and administrative work. In addition, suppliers expanded their reach, making transactions more complex.
During the 1970s and 80s, war-related oil embargoes impacted purchasing processes, proving the importance of spend management. In addition, technology shortened product life cycles, making it crucial to review all details quickly and efficiently. Also, supply chain management became a top priority to cut costs and improve communications.
As spend management moved into the 1990s and new millennium, the World Wide Web accelerated the globalization of supply chains. Instantly the world recognized the impact of technology on financial processes. AP became intertwined with procurement and disbursement processes to streamline operations. Technologies evolved, including:
- Computerized databases for information management
- Long-term contracts with suppliers to cut costs and fulfill requirements in a competitive marketplace
- Skeptics of information management and technology evolution continue to use paper processes in AP and procurement, causing payment delays and inevitable human errors.
- Medius was formed with a focus on AP and ERP integration, helping global professionals move into the future of financial processes.
Spend Management in the 21st Century
The world instantly realized technology’s evolution in the 21st Century, as everyone from school children to grandparents accessed instant information online. As a result, today, the means of global communication are nearly instant, which moves production forward faster than ever before.
The introduction of Big Data and AI makes it possible to deliver customized solutions to clients. As a result, spend management is critical to control costs and remain competitive in a global marketplace. However, partial automation means relying on tedious, time-consuming manual processes from yesterday.
Cloud automation became necessary to avoid business interruptions due to natural disasters and pandemics. Companies that failed to implement cloud automation scrambled to support remote workers and were left behind. In addition, cloud automation improves spend management by putting relevant data at the fingertips of procurement, AP, and the C-suite to make budget-influencing decisions in real-time.
In addition, automating payments locally and globally creates a single channel to automate all your payments to suppliers. As a result, companies quickly get past typical pain points such as bank fees, foreign exchange fees, and other cumbersome processes.
What Is the Future of Spend Management?
Agile spend management is crucial today and in the future to control third-party costs. To achieve this goal, the finance department and C-suite must learn how to use automation and workflows in a streamlined way.
Cloud automation supports timely insights and practices through transparent spending and removing bottlenecks. As a result, organizations can eliminate fraud and improve operations to take advantage of benefits such as discounts for early payments. With that in mind, automation also improves supplier relationships while boosting productivity and profitability.
Effective spend management relies on research based on real-time data rather than speculation or estimation. With remote access to the latest financial information, the team makes essential decisions when they matter most to avoid business interruptions, even during a crisis.
The history of spend management reveals the importance of choosing the right suppliers and keeping track of all transactions. As production and technology evolved, so did the procurement and accounts payable departments. Today spend management depends on cloud automation to make real-time choices today to remain competitive in the future.
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