Enforce Compliance to Contracts & Organisational/ Legislative Rules
In this next article in the ‘What is your Strategy to Improve Profitability?’ series, we look at another Spend Control area – enforcing compliance to contracts and organisational/legislative rules – that provides opportunities for P&L cost savings
Compliance management is the process of ensuring all organisation-wide purchases are in line with corporate policies, established budgets and negotiated supplier agreements in order to avoid costly and uncontrolled off-contract purchases.
It is a critical process for savings opportunities and risk reduction.
- Maverick spend reduction: In many cases, when negotiated agreements are in place, organisations find that staff are not buying from approved suppliers which increases cost and risk
- Price rationalisation: Inconsistencies can arise in the price that organisations pay for a particular item. It is necessary to ensure everyone is paying the lowest available price
- Budget compliance: Once savings are identified, budgets need to be adjusted to preserve the cost reductions. Organisations must ensure compliance with revised budgets as early as possible in the process
- Order processing costs: Manual processing of orders account for a large amount of cost and can leave the company exposed to unexpected liability
- Contract reviews and renewals: Not recognising when to renew or renegotiate existing contracts results in missed price reductions and additional costs with extending existing agreements
- Substitute goods and services: Cost is incurred when organisations do not have visibility of available substitute goods and services. Opportunities may exist to consolidate supply
- Specific expenditure: Categories of goods and services may require a different level of attention and handling to ensure optimum specification, pricing, terms and conditions