S01 E19: A Deep Dive Into The Spend Management Process

Transcript:

Roman Villard
Dan Luthi Ignite Spot, Dan, how are you? Welcome to Flow.

Dan Luthi
Hey, doing really well Roman, how are you?

Roman Villard
Solid solid Good Good to be here, man. You know we connected in St. Louis at Scaling New Heights, and you had a great conversation around spend management. So I thought we would focus our time here today on that and the process and how you’re running spend management on behalf of your clients at your firm. Before before we dive into that would love you to tell us a bit about yourself and Ignite Spot.

Dan Luthi
Perfect and I’d be happy to so it nightspot for me, it’s always easy to start with that. And then because that’s really where I begin, I guess you could say it nightspots been around for 15 years, we started out as an outsourced accounting service organisation. So bookkeeping, accounting and controller services. I joined the organisation 13 years ago as a bookkeeper. And it just worked my way up into being a partner. And so it’s been a great ride over the last several years. And it’s been an awesome experience. And so we really do focus on as much as possible creating the streamline workflows for our clients, as well as creating financial transparency, by utilising not only financial acumen and things of that nature, but also utilising tech tools to help facilitate that for our customers. And so we’re 25 People in our organisation right now, and we’re spread out all over the United States.

Roman Villard
That’s awesome. And do you guys only do outsourced accounting? Or do you do any tax or audit?

Dan Luthi
We used to do tax? We don’t do tax anymore, but just focus strictly on I guess you could say Kaz is the primary focus that we have. And we also do fractional CFO services.

Roman Villard
Okay so you are wholly focused on client advisory or client accounting services. So the workflow process that you bring to these clients is instrumental to, to your growth, their growth to internal efficiency, and even profit margin. So you guys have focused a tonne of time and effort on that.

Dan Luthi
Yeah, it’s been kind of the bread and butter focus that we’ve had for the last I would say probably eight years, is really just trying to create not only operational efficiency for our clients, but our for ourselves. Because it’s a tough market. I mean, clients are always looking at new tools and resources and creating that visualisation of creating that relationship is essential. I feel like in the value add service that we provide from the advisory standpoint.

Roman Villard
Yeah, that’s good. And so let me ask you this, before we dive into spend management, when you think about workflow and process, both internally and client facing, what are the things that come to mind to you in terms of what are the primary benefits of focusing on these workflows in terms of the output that you get?

Dan Luthi
Yeah, definitely, I think one of the biggest pieces that that I think is essential from the process is recognising that what you’ve always done is not always the best solution. It’s convenient, and you know it. But oftentimes, there’s not only a better way, but a more accurate way of doing it. And so that’s one of the focuses that we’ve always had as an organisation, when we dive into a new client that are looking at all of the pieces that were that, that that’s going on in the organisation from the way they create their proposals to the way that they’re managing their expenses and receipts. But I think the biggest part with it is, and just my thoughts to anybody who’s getting started in this or is looking at changing something is, it’s great to have a roadmap. But don’t try to eat the whole elephant all at once. Start with the beginning, start with something that’s that’s smooth for you to interact with, and and then start moving through it. And I think the same thing works with with spend management because people can, I mean, diving into that people can get really excited about the opportunity with it. But it can get overwhelming because there’s a lot that can be done with spend management.

Roman Villard
Yeah. And so you think about workflow and processes as relates to clients, and accuracy being the primary output. Are there other things internally that you guys are setting up workflows and processes for to garner better internal efficiency? Or have your team be able to focus more on advisory type services, things like that?

Dan Luthi
Yeah, definitely, quality control has been one of the biggest areas of focus that we’ve put in from a software platform and an efficiency standpoint. Because historically, and then think this is just general for accounting is its manual, it’s a lot of work to go through. And so we’ve kind of determined what we want to evaluate from that space, which has created a lot better opportunity for us to of course, make sure there’s standardisation. But to make sure the quality is hitting a certain metrics before it gets out to the client. And so I think that’s one of the areas that we’ve improved a lot over the last little bit with, but it’s just created more doors and more opportunities. I think on the other side, we focus really focused quite a bit on actually fine tuning people’s involvement with the client interaction. So we we don’t run a pod system, but we run it based off of a package service offering that you have so you may have up to four people working on your account. We’ve really defined heavily what each person does to make sure there’s not overlap, but also make sure that They feeding the next wave of service a lot easier so that it’s just better communication and better organisation.

Roman Villard
Got it? That’s good. And so in these packages that you have, is spend management a part of every package, or is it kind of tiered out based on what options the client selects?

Dan Luthi
Yeah, definitely. So we start with a basic spend management function for our entry level, drill the clients and if they want something more robust, it gets added as your package theoretically goes up. So really, for us, the the idea around creating organisation around what you’re spending and putting controls in place is at the forefront of our basic package, we really do want to make sure that that’s something people are thinking about, we may not have full budgeting and may not have a true, like, manage workflow by switching them over to a Divi or a ramp or something from that perspective, but, but we really do try to characterise or frame the client correctly from the start on, on really making sure that they’re being efficient with what they’re spending and that they’re aware of what they’re spending and who has access to it.

Roman Villard
Yeah, it’s so smart. Because you think about the clients that you serve, and remind me what industry you focus on. We’re a general practitioner, so it’s anything and everything.

Dan Luthi
So, but primarily smaller businesses, small businesses. Yep, anything from a million to 10 million usually.

Roman Villard
Okay, so a million to 10 million, the focus there 90% of time, I think, is cash and cash management. So when you can bring in spend and spend management from the early days of a client relationship, you’re really setting them off on a good fit on a good path.

Dan Luthi
100% Well, and to the same point, as they’re growing, more people are getting involved. And so if they don’t have good practice, in the beginning, things get out of hand very, very quickly, not only from people spending, but also the owner having to have so much involvement in every aspect of what’s going on in the organisation. So it’s been processes really give them the control of passing down authority to the right people, without having to take pressure on themselves to be able to control every item going out.

Roman Villard
Yeah, and there’s, there’s a lot to it. A lot of pieces to that puzzle, particularly when there’s, you know, 10, 15, 20, 100 employees to manage on a on a spend management plan. And so when you started as a bookkeeper at Ignite Spot, did you guys have a Spend Management offering? Did you run that for clients in the early days?

Dan Luthi
We always had some conversations around it, but it was it was it was very light, it was more of an expense management service. And I know people get a little bit confused between the two expenses much more after the fact and less proactive, whereas spend is we’re thinking about what’s going to happen over the next 3060 90 120 80 days, you know, 120 days. And so we were much more of an expense management focus in the beginning, about, let’s say probably about five years ago, we really started changing it to where it was much more forward, you know, for word processing and forward thinking. And that’s really where we started diving into it, because tools that we were using weren’t making sense and weren’t helping support our clients and putting best controls in place.

Roman Villard
And so five years ago, then what what prompted you all to focus more on that? Was it was it more the tech that was able to facilitate that more? Was it internally, just a need from the client standpoint, what spurred you to jump into that side of things?

Dan Luthi
Yeah, the first piece actually came to us from a client, a client was using a tech tool that was out there. And it was cumbersome for the client to utilise. And but also at the same point in time to they were finding out what was going on in their business much later after the events that they were doing were happening. And so the client was asking, it’s like, how do we get this under control? Like what tools and options do we have that can help us to be able to limit the not necessarily just limit the amount of spend people have, but also make sure that we’re prepared for what people are going to spend at each of these conferences, or each of these controls. And a member of my team was at a was at a conference with me, I think it was honestly the scaling new heights about five years ago. And he ran into Divi, which was the first partner tool that we started working with. And it just made sense to him from that perspective. And so he and I talked and work together. And he really took the lead on building out the structure for our client to really create a more forward thinking system and creating not only a budget, but also creating traction for the people who were below like, knowing how much they could spend ahead of time instead of finding out if they were going to be you know, did not agree birth mentor things of that nature really created just a lot more clarity. And the client was able to save quite a bit of money because of it.

Roman Villard
Yeah, so it started with one client and client. Yep, yeah, that’s cool. And so after scaling new heights and running into Divi and learning about their accounting partnership, did they have an accounting partnership at the time?

Dan Luthi
It was brand new, they were just kind of getting the system going So it wasn’t anything that was major robust, it wasn’t a very comprehensive system. They had a we had a really good rep that was working with us that would give us insights and help support us. And that really made the difference, because it was so new at the time. Yeah.

Roman Villard
Yeah. And so you said you guys had those initial discussions with them. And then your partner started working more on the internal structure to facilitate that more as a product for your clients? Did you collaborate with Divi at that point in time, what the structure should look like? Or how was that initial structure for that service originally conceived?

Dan Luthi
Yeah, they they gave us of course, the framework of the platform, and the platform has evolved a lot since, since kind of our initial integration with them, you know, their, their first phase had the ideas around budgets, but it wasn’t, they didn’t have tiered budgets, they didn’t have any of those kinds of functions with it. And so that’s where we really started, as we started building out this really robust workflow for the client, we really started talking with them about, we would love to see this, we’d love to see, you know, staggered, you know, a staggered budget, that’s going to roll up to a parent group where the managers of that team can see all of it, not just some of it. Also, putting in controls where maybe you control by vendor spend versus, you know, versus just having a general bucket that have it. And that’s available. And so, we’ve definitely provided a lot of feedback over the last five years and have had a really good relationship with our with them, and a great partnership that’s helped us to be able to make sure the products evolved to the way that it is now.

Roman Villard
Man, that’s, that’s so good. I feel like when you’re able to have the type of relationship with a vendor or a software provider that you’re using to serve your clients, the type of relationship where you can provide feedback, and they listen, and they incorporate that into their offering like that is so critical to be able to scale something, because not every system is going to have everything under the sun that you want. But to have that that line of communication open is tremendously important.

Dan Luthi
It’s made a big difference for us not only from the standpoint of, you know, things that we want that we would love to see them create. But also, when they roll something out that wasn’t necessarily in alignment with what we kind of expected. They explained to us why. And I think that’s something that’s been really good from with all the software relationships we’ve had is, we don’t just keep it very simple, we try to have a good understanding of an active relationship on both sides so that when something changes in the platform, we can communicate it to our clients. And they’re aware of what’s going on with that just kind of being blown away by what’s happening. And so, but it also has created great opportunities for new features to come out, which has made a really big difference we’ve had the same discussion with with ramp, we’re relatively new to utilising that but more clients are bringing that to our to us as an organisation. And so we’ve been moving on to that space and doing the same thing with them, which has been really good.

Roman Villard
And so would you recommend for firm runners out there to stick to one platform? I mean, there are a tonne of solutions out there that can manage spinned in a variety of ways. And so would you say hey, it’s better to start off and really lean heavily into one system, or you know, diversify your your software relationships from a spend management perspective.

Dan Luthi
For me, I think it depends on the organisation size, and a lot of cases and who can help you to implement as you work through it. As I mentioned, we’ve been with heavy focused on on Divi, as a partner for the last five years, it was the only solution we recommended for a really long time. It’s still our primary from that perspective, because we didn’t really have a good partnership with them. But clients are coming to us with ramp now. And we have a little bit larger team than we did in the beginning. And so we can have specialists that are good at both systems. As we’ve been able to grow, we haven’t had to cross train everybody on functionality, there is a lot of similarities to how the basic bookkeeping functions work with it. But they are different from implementation. So that’s that’s allowed us as we’ve grown. So I would say if you’re a smaller organisation just getting started, pick one, become familiar with it. I mean, honestly, even if you can adopt it for your own organisation, because it’s going to give you a lot deeper exposure to what it can and can’t do and give you a lot of opportunity to be able to dive into it futher.

Roman Villard
Yeah, that’s a great recommendation of if you’re able to get in the system, utilise it yourself, your ability to then take that and translate it to a quality service to a client is going to be much higher. So when you’re onboarding these systems, when you’re having those initial conversations with Divi, how did you get the team trained up? Were they facilitating team trainings? Was it more on the partners and management team? How did that work?

Dan Luthi
It started out with them training a few core people with our organ within our organisation and so I we did have a really great rep at the time when we first started with them, who just focused on trying to make sure that we could we were having a good experience but also that we could refer a good group of clients to them. So they were very proactive and training and teaching our team on how to use the platform. on how to set up the structures and how to work through it, I think they’re still really good at doing that. And so from that perspective, as our team grows, or we have turnover and things like that we do bring them back in to make sure our team is aware of those pieces so that they can consult correctly and they can get feedback correctly. We try to do that probably at least once a year, have them come in and give us feedback and kind of give us training on new releases and things like that. And it’s made a world of difference from, from our perspective in that space.

Roman Villard
Yeah, I love that. Because every system software out there these days seem to have these vast libraries of how to videos and blogs and resources. But when you’re able to get somebody an account manager and account liaison of some kind, training the team and updating the team on best practices and how to get the most out of the platform, that’s that makes a world of difference.

Dan Luthi
Oh, 100, especially because the platform is changing, right. And that’s one of the biggest pieces. And so when someone’s familiar with something from a training they did two years ago, and now the platform is different. coaching them through why is something that’s really important, opening up for q&a is really big. Not everybody learns from watching videos, right? Like not everybody learns from from reading context, and blog posts, sometimes that firsthand experience and asking questions really creates a more adaptive, but also more consumable relationship. And we’ve seen a lot of success with it, and we follow up with all the extra stuff. But that initial training really does make a difference for for our team being there.

Roman Villard
Yeah, the additional training, and then the ongoing support that that function is a huge, so walk me through when you’re bringing on a new client today. And they say, Hey, I’m gonna check the box, I would really like you to take over my spending management. How do you guide them? How do you get started? What does that process look like?

Dan Luthi
Definitely, this is where it gets crazy, right? This is where a lot of people start to like look at it and say, well, now we’ve got to convince everybody in the organisation that we have to have a structure, we got to convince everybody in the organisation to move all of their spend over. This is where I say let’s let’s take it one step at a time, there is a lot that you can do with it. But let’s begin with reoccurring transactions. Let’s begin with subscription costs, let’s really begin with things where we need the client to understand how the platform works. And so that’s really where we start, we start with an analysis of the client’s financial system, really understanding what their spend is, and what’s coming in and going out. And then we work just set of virtual cards for each of those individual reoccurring transactions. So that the process flow for all of that is just moving more fluid. So if we find and one of the things we find a lot of times in this case, too, is, organisations that are getting a little bit larger start to have multiples of software applications, and so 1015 Different Adobe licences and things like that. So we always give recommendations on consolidations to save money with that process as well, which has been big. But we also gather that content in one single place, so that we can also have, we were actually capturing receipts at the same time. And so we get it centralised off of one specific user, we start the accounts to make sure that that data is being aggregated. And it really helps us to make sure that the flow is going more fluid as well, instead of having people still have to chase and forward and manoeuvre through all that kind of stuff. And so we really, this restriction piece is huge. I think that’s really where we start and where I always recommend that people start with it. And then once we’ve got that under control, and people are starting to get more acclimated to it, we start building out the budgetary structure for the organisation. We don’t dive in building out 58 budgets for every single client from the beginning, we really start very simply with reoccurring transactions and its own budget. And then we have a separate kind of a cadence for that organisation to just get used to using it with the notifications on their phone and everything else like that. And then we dive into it further from there.

Roman Villard
Yeah, that’s good. And so when somebody comes on board, do you have a recommended recommended communication plan for for them? Let’s say they have 20 employees, and most of them have maybe access to one company card and they’ve been doing the same thing for the last six years? Do you have a recommendation community recommended communication plan to them and or to your internal team to advise them as they jump into the relationship?

Dan Luthi
Yeah, definitely. So we start out with having that discussion, of course, with the parents of the, you know, the key stakeholders in the organisation. And then we start with training after that. And so we gather all those employees together, we have some discussion with what’s going to change from what they’re used to doing. Most of them are not reaping benefits from the credit card spends. So for them, it’s it’s just another card. And so showing the value proposition of email notifications showing the value proposition of having a a web portal for uploading that information and also seeing how much they can utilise or what’s available to them, gives them a lot of hope that they’re going to be able to really have more functionality in their own life or regarding expense. So that’s really where we put a lot of our leverage and focus and training in the beginning and then we evolved from there.

Roman Villard
Got it. That’s good. And so with most of your Clients, are you managing this on a daily basis, weekly basis, what a typical cadence look like for spend management through clients?

Dan Luthi
Yeah, so it depends on the client sighs You know, smaller clients, we set up a structure for them or we work with them to set up structure in the beginning and, and we’re reviewing and auditing it on a monthly basis with them because there’s once once you’re set up that a lot of times, you don’t necessarily have to have a daily touch, we really try to make sure that the client is trained and taught if they’re larger on key stakeholders in the organisation having access to certain things so that they can approve changes or that they can reallocate budgets or things from that perspective. And so we come in as more of the adviser and the advocate for the structure of the system, not necessarily the person maintaining every single individual piece because in the end, we don’t want to be the person who’s maintaining every single budgetary change or things like that, we want to help manage it from a global level. And so we may be in touch with them and working with them on a on a week by week basis. But it usually transitions into more of an advisory function where we’re doing it, reviewing it monthly or quarterly, and making tweaks and adjustments to budgets from there.

Roman Villard
Yeah, so the setup is so important. Because once you have everything in that onboarding period set up, then the client stakeholders and those members of the company have confidence that it’s going to be managed well. And so then it really reduces the touchpoints that you have on the back end services perspective, and can also push, maybe the CFO team or the advisory team to spend more time on those higher value services.

Dan Luthi
100%. Yeah, it opens up so much more doors into other spaces. It’s allowed us organizationally to kind of realign our contracts with our clients on on value propositions from each individual piece to historically, our bookkeeping and accounting was some of the largest portions of our contracts, that’s evolving to where that’s about half. And then the rest is advisory focused. because of things like this, which I think has been really great. Like when you can put automations in place where not necessarily automations for everything is being captured quickly. But automation is from the perspective of to the first hand person who’s touching that item is managing the flow all the way till the end. That helps to alleviate a lot of fetching, it helps to alleviate a lot of stress that’s going on globally, because more people are touching the pie around the areas they need to. And so that’s really where it’s allowed us to be able to add different levels of service and really focus on just organisational growth with our clients.

Roman Villard
That’s so good, particularly because you don’t want your clients to look at you and say up, they’re just the great spend management team. You want them to look at you and say, hey, they are fantastic advisors and take care of us from top to bottom when it comes to our accounting function.

Dan Luthi
Yeah, I mean, the last, the last thing you want is your clients just to think you’re a good bookkeeper. I mean, that’s really the biggest piece, I think for us as a whole is, you know, when we have those conversations with people, it’s the, you know, we couldn’t believe our week, we couldn’t live with our organisation without you being a part of it, you’ve helped us so much of growth and understanding and transparency. That’s all very much driven. But from the value add function. It’s not from, Hey, You wrecked my bank really well, or, Hey, you ticked and tied my expenses really well. So it really changes that relationship completely one to one, the focus is around the right areas.

Roman Villard
Love it. Love it. That’s so good. Well, as we wrap here, I know that Ignite Spot and yourself have published a lot of resources as it relates to to spend management. What would your recommendation be for somebody who to for somebody who’s looking to get into this for the first time? Where would you point them?

Dan Luthi
Yeah, definitely, if you’re getting into trouble for the first time, I’ve actually worked with cpa.com to help develop some of their specific resources around spend management, that’s probably the first place that I want you guys to because it’s, it’s the most comprehensive view of what they’ve done. They’ve done a lot of research in specifically with this. So that’s where I would push you direct to to. Also we’re doing a lot of conference, conference sessions with it around it. So if you’re at scaling, new heights, or QuickBooks connect, or even, you know, digital CPA, there’s going to be a lot of sessions that are focused around this going forward. And I think we’re gonna see an evolution of relationships around spend management for our clients.

Roman Villard
Perfect, perfect. And if anybody wants to reach out to you to ask any questions about this, how do they find you?

Dan Luthi
LinkedIn is the best place to find me. I’m just Dan Luthy. I’m always the I’m just the bald guy with a beard, I guess, of all the Dan’s that are at least these that are on LinkedIn. But that’s the best place to reach me. And I’m happy to give anybody feedback on what they should do to get started with it too.

Roman Villard
Perfect. That is awesome. Thanks for going over this overview of spend management and yeah, I appreciate you joining flow today.

Dan Luthi
Appreciate it. Thanks so much, Roman. I appreciate the invite.

Roman Villard
Yeah, absolutely.