Controlled Burn: 3 Practical Tips for Effective Spend Request Workflows
From the New Series "Driving Smart Growth"
Welcome to the third installment of Driving Smart Growth–insights for finance leaders on making tough decisions in f*cked up markets 😅. If you missed the first post, you can read Post One: How Finance Leaders are Re-evaluating their Financial Models for crazy times and Post Two: Avoiding WTF!? How to Establish Effective BvA Cadences. If you want the full guide, subscribe below.
Establishing Controlled Burn
As focus has shifted from growth at all costs to burn multiples and growth efficiency, the imperative for finance teams changed.
What was an “ask forgiveness” ethos has transformed into a “lead us into efficiency” mandate. Critical to this imperative are agile, lightweight processes to steward efficient spend.
There are three key objectives for effective spend requests:
- Give decision-makers relevant data as soon as possible
- Set clear expectations, via service level agreements (SLAs), on timelines, processes, and frameworks for making spend decisions
- Empower leaders while introducing financial discipline
Basically, you want to add a little friction to the process so your business partners think twice about spending money, but not so much as you turn into the CFO-NO 😂
Here’s where leaders from companies like Vanta, Uber, Appcues and more are finding the sweet spot.
Establish Budget and Operational Cadences
We’ll assume you’ve been an A+ leader and re-evaluated your financial models, built a few scenarios, and established new BvA cadences to get a handle on burn. (If you haven’t, it’s a great idea to start there.)
Next step is to build processes to deal with the stuff that pops up no matter how good your projections, budgeting, and BvA reviews. Things like:
- A candidate is trying to negotiate a higher salary or equity than what was budgeted in that candidate’s band
- A perfect candidate has applied for the role, but that candidate is too senior for what was budgeted
- A marketing initiative is working really well, and the team wants to double down on the initiative (whether it’s a consultant, ad spend, etc)
- Engineering can’t hire for the role they need, so they need to bring on a consultant to help with the task
- A renewal came up and its price was way higher than the original contract. Department leader wants to know if it’s okay to sign
The first step toward more efficient spend begins with culture.
You want to encourage your teams to keep you in the loop when new information arises so that you can update forecasts, as well as reinforce operational cadences and budgets.
This cultural baseline gives you the platform for everything that comes next.
Create a Clear Set of Rules
Setting spend rules isn’t about micromanaging, it’s about creating fiscal discipline so that teams are empowered to move quickly, and know when they need to ask for approvals, and who should be asked.
"Like many companies, we’re keeping a close pulse on headcount right now. It’s super important to get alignment from executives at the beginning of the process. My team and I have regular touchpoints with our Talent and People teams to ensure our hiring maps to the plan.
People teams, finance, and hiring managers need to develop a strong communication cadence so that we are able to get the best candidates while staying on budget,” Christian Fatoohi, Head of Finance at Vanta told us.
We find that top leaders document and communicate the following rules:
- Spend: What are the cost thresholds, categories, contract lengths, or engagement types that require approval (e.g., new hires, specific spend amounts, multi-year contracts, etc).
- Payment: How should specific types of engagements be paid for (e.g., send directly to finance or to Bill.com)
- Approver: Who needs to approve a given spend rule.
- Watcher: Who needs to be CCd on a given request.
In Sudozi, we built an easily configurable rules engine to organize this. Simple rules are clear rules and keep everyone on the same page. You’ll move faster with fewer “WTF is that” moments on all sides.
Implement Simple To Follow Processes
Simple processes create predictable outcomes. With clear rules in place, you can now give your teams a set of simple processes and clear expectations around where to submit spend requests and when to expect responses.
While tools can help, you don’t need tools to do this. Outline and communicate the following to your team:
- When to submit requests (e.g., contract above $10K)
- Where to submit requests
- How long it will take to get a response from each department (critical to avoiding rogue direct requests to the CEO, etc.)
Knowing that no process is perfect.
Even if you’ve communicated what you thought was a clear process, as the leader in finance, you get that slack message at 10pm, with the expectation to reply instantly. That’s okay and expected.
Reinforce your process at the appropriate meetings and communication channels for your company. Especially if you have CEO buy-in, people will eventually get it.
At your next BvA review, review ad hoc requests, status, and how it impacts the updated budget forecast.
Next up in the Driving Smart Growth series, the not-fun topic. Practical tips for reducing headcount and vendors.
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