It doesn’t particularly matter what industry or type of work done, there’s something disrupting it. Whether it be inflationary pressures, shifting credit markets, labor shortages, social and political instability, natural disasters, wars, the pandemic, or supply constraints, there are very few businesses unaffected. Business spend management solutions are more critical than ever.
Procurement leaders are continuously focused on getting more transparency regarding sourcing requirements, market conditions, supplier performance, spend, and the risks inherent to running any company. They’re often the type of leaders that thrive on the fluid conditions of each day – including the current uncertain economic state that’s taking its toll on businesses.
Though there are plenty of problems to go around, businesses also have more viable solutions than they expect – and not all roads lead to slashing headcount. While laying off or furloughing employees can quickly reduce costs, it can have a negative impact on businesses over the long run, reducing capacity, stunting innovation, potentially damaging reputation or credibility, and increasing the difficulty and cost of hiring new talent down the line – a task that seems to be permanently set to “hard mode” lately. Mass layoffs are a short-term solution that can be difficult to recover from, the current state of Peloton being a good example.
One of the greatest and most underrated long-term responses to the potential (and increasingly more likely) recession is to manage business spend aggressively, understand it holistically, and leverage business spend management software not only to reap benefits now, but also to maintain and increase ROI in the long-term.
1. Audit Business Costs Top to Bottom
If spend has been a relatively unmonitored activity up until this point, departments vie for a budget, get it, and do what they will, it’s past time to review the money being spent. No expense is too big or too small to scrutinize, and CFOs need to cast a net across accounting, finance, and procurement, as well as work closely with the CIO (or tech leader) and CPO (or procurement leader). This is the longest and most involved part of wrangling business spend management, but the solutions derived during this process will be invaluable. In addition, the work you do here can allow you to create a business continuity and resiliency plan.
Take note to consider the total impact of cost-cutting decisions. Eliminating free coffee from the office breakroom can be construed by employees as a company that must be in dire straits. Modifying the vacuuming service from your janitorial provider from daily to every other day may go unnoticed but result in the same financial impact.
Getting transparency into working capital, cash, and spend management can make your business more agile and resilient. Transparency allows you to establish policies, negotiate agreements and implement business practices that allow you to increase or decrease spend to support ebbs and flows in your business. Across your organization, for every purchase, ask these questions:
- What are our required expenditures?
- What are we currently paying for that we can either reduce or eliminate?
- Where can we consolidate?
- Central supply closet instead of departmental. Regional, national global providers to leverage spend? Reduced office space through flexible workspace?
- Who is approving what spend?
- Do we need to revisit our spend policy?
- Can we relocate to a smaller office with so many working from home?
When it comes to reducing spending on suppliers, whether it’s goods or services, your procurement leaders will be invaluable. Leverage their extensive exposure and knowledge of the business and procurement habits. Asking questions like those above, they can assess the value of each vendor, why they’re necessary, and eliminate extra costs through:
- Consolidating suppliers where feasible
- Negotiating pricing terms
- Right-size software licenses to eliminate “shelfware”
- Developing alternative suppliers to minimize risk
- Negotiating and leveraging payment terms, like early payment discounts
- Leverage card spend to maximize cash rebates
It’s also worth looking at spending on employee and client experience. While it might not be popular to eliminate free lunch in the office, white glove outings for prospects, traveling to meet clients, and other workplace perks, there are few that would take those perks over having job security and stability.
Every single charge to company cards should be pre-approved as providing a return that’s worth the expense. While this can seem tedious, it will ultimately prevent spending that doesn’t provide value to the company.
2. Leverage Business Spend Management Software
Tracking every dollar that every employee is spending and why can seem like a monumental task, and with a last-generation procurement system it is. Fortunately, newer, cloud-native, integrable business spend management tools can provide the power and the flexibility you need to control your expenses.
Specifically Cloud. Specifically integration capable.
Those two key qualities offer several bonuses. Cloud-based technology is quicker to deploy, leading to faster return on investment. After all, the faster your company gets into the habit of managing spend, the faster you’ll see results.
On top of that, a quicker implementation means more time you can devote to effective change management that ensures engagement and usage. Cloud deployments can begin with the minimum viable product, introducing teams to new processes and technology which can then be adjusted to meet the needs of your teams. The biggest hurdle when implementing new processes and technology is the people, so planning for a quality, well-documented, and empowering changeover is crucial for success.
Choosing a best-in-class, user friendly technology ensures transparency and fosters company-wide collaboration and understanding. Selecting technologies that can integrate with current or future technology with ease, whether through API, direct-connect, or middleware, develops better data practices and allows teams to work with real-time, trusted data.
Coupa in particular is a business spend management tool that’s hit the Gartner Magic Quadrant a few times for good reason:
- It aggregates data from spend in one place for easier analysis
- It features automated contract workflows and seamless approval processes
- Pre-approved expenses allow easier purchase of items or services you really need
- You can integrate it with your ERP, contracting, and accounting tools to reduce human error when jumping between programs and see a consolidated view of your spend
- Compliance can be configured and managed in the system
- Payments and discounts can be streamlined
- It allows you to provide smarter supply chain discounts using early payment discounts and vCards
Opting for integrable, cloud-based business spend management software sets you up to optimize, standardize, automate, scale and build in the flexibility required to give you a significant advantage when wrangling business spend.
3. Use Automation to Reach Operational Efficiency
Automating tedious tasks is freeing. Teams can avoid lengthy manual work, reduce human error, and get to a single, trusted repository of data that can be leveraged whenever it’s needed. When implementing solid spend management solutions, having trusted data is crucial. This all leads to better operational efficiency, as well, allowing your people to focus on things that truly matter for your company.
While mapping out processes, the goal is to automate, eliminate, and simplify as much as possible. Repetitive activities need to be handled without human interaction, workflows should be built into the backend along with approvals, and reporting should be produced routinely for review. If the task you’re looking at doesn’t involve actual thought or decision making, nine times out of ten it can be automated.
Spaulding Ridge Can Help You Offset Inflation with Expert Spend Management Solutions
Planning for growth is exhilarating but planning for negative circumstances is just as important for a responsible company. In uncertain times, aggressively controlling spend means collaborating with engineering, operations, inventory planning, finance, operations, accounting, and suppliers to identify and execute ways to reduce expenditures while keeping the things that drive profits running smoothly.
Spaulding Ridge helps companies bring their disparate teams together around thorny issues like spend management, looking at both the technologies and the human side of the solutions.
I have spent 20+ years in procurement leadership roles, spanning economic ups and downs, and tough times are a true test of procurement leaders, pushing us to provide value. Let’s view our current uncertainties not as impending doom but as a glorious challenge, the kind that will go down in the annals of history for your business. I’m not saying it’s easy, but it may help mentally ease the heavy burden on our shoulders.
Have questions? Reach out to Wade Lyons today.