Planning an international spend management initiative
Traditional IT systems have generally been found wanting when it comes to addressing an obvious gap in enterprise cost management: indirect spend management.
That's one of the reasons why so many ERP Procurement modules lie dormant.
But infinitely configurable and best-in-class systems are rapidly giving global enterprises the opportunity to establish common practices and spend visibility with short project lead times and minimal disruption. This gives CFOs a vehicle for turning spend management into instant profit.
Less than 20% of organizations around the globe are exploiting the benefits of spend management, according to investment bank Triple Tree. Given that between them they are spending more than $20 trillion every year on direct and indirect goods and services, that's a staggering degree of inertia.
Any single dollar saved would contribute instantly to the bottom-line, and yet at a turbulent economic time when complete visibility on costs should be a priority, staff continue to follow ad-hoc, 'maverick' purchasing practices around the globe.
CFOs must plug the gap
CFOs multi-national enterprises are effectively presiding over the leakage of their share of more than $500 billion annual profits that are lost through inefficiency and non-adherence to an effective spend management strategy - and missing a major opportunity to consolidate the financial and organizational benefits of a coherent, global spend management framework.
Mandate to cut costs
Urged on by the Board, CFOs are driven by the need to cut costs and drive down administrative overheads, improve financial control and compliance with policies, and increase organization-wide productivity.
It's clear that everyone will benefit. But by contemplating the sheer scale of the challenge, it's equally clear that significant change will be required to see it through:
- Accounts Receivable and Accounts Payable are immersed in manual processing, excessive trouble-shooting and mountains of sticky-notes that represent an underlying lack of control. They should positively support the working capital and cash position.
- Information Systems are largely locked down, fire-fighting existing IT issues. Instead, they should be effectively supporting common enterprise-wide Purchase-to-Pay processes: automating workflow, ranging from data capture to the review, approval, cost allocation, payment authorisation, delivery of goods, and more.
- Procurement teams are struggling to maintain accurate, complete and up-to-date information and is constrained by time-consuming and inconsistent supplier adoption and communication processes. Instead, they should be able to build improved relationships for best value procurement across the organization.
'Maverick' spending is endemic. Methods should be created to reinforce the vision for improved spend management across all quarters of the organization. This might sound like the platitude that a sharp-suited consultant would promote, but true compliance and control can only be achieved if 'maverick' spending is contained.