Finance departments are tightening their control of corporate spending through technologies that give them great insight into what they're getting for their money.

When Al Castino took over as CFO of San Rafael, Calif.-based software vendor Autodesk a couple of years ago, he knew that business as usual wasn't going to make the grade. In August 2002, the company's operating margins had sunk to 3 percent and its stock price stood at less than $12 per share. "We were remarkably unproductive in a lot of areas," he recalls. "We had way too much infrastructure and cost structure." The organization, which had 2004 revenues of $952 million, was "vulnerable to private buyout firms, a hostile takeover and intense criticism from investors," Castino recalls. "We were running the company as if we were a $10 billion firm with no conscience about spending. We had gotten completely off track."

The new CFO quickly reeled in spending. He ransacked initiatives that had led the company astray, consolidated layers of management, crumpled cost structures and shored up the organization's leadership. This comprehensive initiative began to pay dividends almost immediately. Today Autodesk's operating margins are 21 percent, and the company's stock price has zoomed above $65 per share. "Autodesk is stronger, healthier and poised for greater success," Castino says.

Controlling spending is one of the biggest challenges any business faces. As an organization grows, its expenses expand and its cost structures may fall out of alignment. "Most companies do not have a basic understanding of where they are spending money," says Brian Desmond, vice president of supply chain management and strategic resource management for PeopleSoft in Pleasanton, Calif. "You can't improve what isn't measured." The transition from conventional procurement -- in which departments and individuals buy on their own -- to a centralized e-procurement system can improve the organization's management of procurement in a number of ways.

"Spend management is attracting a lot of attention," states Christa Degnan, research director at Aberdeen Group, a Boston-based market research and consulting firm. "Organizations want to know more than just where they are spending money. They're looking to manage buying and spending processes more strategically and oversee suppliers more effectively." As e-business software has become more sophisticated, it has enabled executives to look at spending patterns holistically, which helps them manage their organization far more efficiently.

Procurement executives are essential to the success of a spend-management program, but the CFO and other finance leaders also play a central role -- particularly in developing metrics and benchmarks.

When such a program is successful, its results are worth the effort. Desmond estimates that a $3 billion company which reduces spending by just 1 percent can increase its net income by $18 million and its earnings per share by about 3 cents. "Companies that have executed on spend management as a top corporate initiative have seen dramatic returns," he says.