In this climate, companies that ignore indirect savings opportunities do so at their peril
In today’s tough economic climate organisations of all sizes, locations and industries are looking at cost-cutting measures to sustain net income. When revenue is hard to come by, alternative strategies are required to improve earnings per share and ultimately market capitalisation. However, many have responded, in part, by short-term tactics such as staff layoffs and product quality reductions that create little in terms of long-term valuable or sustainable advantage.
Organisations must take a broader view of how they manage corporate spend and, in particular, discretionary indirect spend. In other words, those purchases that are a necessary function of keeping your organisation “up and running”, and the service costs of keeping your workforce executing for you. Mature organisations that create efficiencies across their procure-to-pay process cycle are much more able to create a long-term strategy for maintaining shareholder value.
Many are adopting eProcurement solutions to save money by eliminating unnecessary spend on goods and services, driving compliance to strategic agreements and speeding up the process of invoice processing. But it is not just about solving a technical problem. It requires a much bolder approach. Only tackling the technical challenges of automating paper-intensive and manual processes is not sufficient; the idea is to continually evolve these processes to improve performance and ultimately bottom-line results.
So, consider how effective your procure-to-pay processes are.
Ask yourself these questions:
- Do your staff buy items and services in an adhoc fashion that results in premiums being paid?
- Can managers effectively manage their budgets and keep track of purchase commitments?
- How many suppliers do you purchase like-items from at different prices?
- How many individuals need to touch the purchase order before it can be sent?
- Do you know how much it costs to collaborate and transact with suppliers?
- Are Accounts Payable chasing an endless trail of paperwork?
The focus must be to get as much discretional spending as possible under control. But more importantly, to create a new wave of efficiency for your organisation.