PROACTIS Blog

Talking Point – Establish a Systematic Approach to Governing Costs

Charlotte Sutton
Charlotte Sutton,
PROACTIS

Spend Control in the Charities & Not-for-Profit (NfP) Sector

In an age of austerity, attracting more money and new donors is costly and difficult. Government funds and grants are limited and the ability to attract a regular flow of donations from a diverse set of funding sources (individuals, foundations, corporations, service fees etc.) is challenging. At the same time, demand for services has continued to rise.

Revenue growth and its consistency is a top priority to ensure the organisation can hire and retain staff, sustain facilities, create programmes, or even maintain tax-exempt status in order to ultimately deliver services that impact the maximum number of intended beneficiaries.

That being said, opportunities exist to reduce the bottom line without aggressively growing the top line.

Organisations spend nearly half of every pound earned on external goods and services with each pound in operational savings having multiple times more impact on the bottom line than a pound increase in funding.

The main point being that Spend Control initiatives afford more control and accountability over operating profit by increasing the efficiency gained from each pound of revenue and gaining valuable insight into each pound of spending. So while focusing on the top line, establish a systematic approach to governing costs as a way to ensure long-term value creation.

The challenge associated with this in many NfP organisations is due in part to the lack of capabilities, domain expertise and business process knowledge, and technology automation for truly enabling Spend Control principles at all levels of the organisation and across all spend categories.

Spend Control requires creating value from sourcing events, contract management, preferred suppliers with active supplier development programmes and spend visibility. It also requires capturing value through purchasing controls and compliance, and ensuring efficiency with which things are paid for.

Technology is the only tool that can connect everyone to getting spend under management - procurement professionals, finance managers, operational department managers, category experts, employees throughout the organisation and all of the organisation's suppliers.

Good eProcurement systems create a communications network among all participants combined with an underlying foundation of information about suppliers, items, policies, activities, transactions, organisational structure and more.

Like any important initiative, Spend Control and eProcurement requires management focus and commitment, a process to drive change, and continuous tracking of results that come out of that effort to ensure success.