In order to be a successful business, you have to be in control of your company’s spend. No matter how much money you are making, if your spending habits are unchecked, you will lose money. A procurement software can help ensure the money you are making stays in your pocket through spend management.
According to Gartner.com, “Spend management is about maximizing value from company spend while decreasing costs, mitigating financial risk and improving supplier relationships.” Procurement software is key to helping realize maximum value through spend management.
Below we will look at how procurement software can drive your spend management to the next level through:
- Cost reduction
- Risk mitigation
- Supplier accountability
Procurement software can really help drive your cost down by tracking key data points. By collecting and analyzing data on your spend, you can action items that need your attention and move the needle.
Procurement software gives you the ability to pull custom reports. Some important data points that can be looked at are purchasing frequency, bucketed spend, and item costing across different suppliers.
By leveraging the data on your purchase frequency, a procurement software allows you to realize economies of scale. Ordering in the right quantities at the right time can decrease the cost per item, lower transportation costs, lower warehouse handling cost and increase overall efficiencies through the organization.
Through procurement software, the ability to categorize your spend into buckets puts a magnifying glass on any leaks in your spending. The ability to see spend at the category, departmental, project or individual user levels allows for transparency to see exactly where your money is going.
Visibility into Item level costing within a procurement software, pinpoints costing over time or by different vendors which can lead to important conversations about sourcing. This can also spot errors in pricing that otherwise may not have been caught if not for the tracking of the data.
Through collecting and analyzing your spend, you can make a difference in your business’s profitability. Using data driven analysis can make a huge impact on your companies spend. Using procurement software, you can quickly pivot and formulate a winning strategy for your spend management.
Budgeting and minimizing maverick spending is very important to spend management. By implementing and structuring approval processes and forecasting, procurement software can help minimize risks associated with spend.
According to WLF Accounting and Advisory, “Budgeting is the basis for all business success. It helps with both planning and control of the finances of the business. If there is no control over spending, planning is futile and if there is no planning there are no business objectives to achieve.” Procurement software can help create, forecast and manage your spend as it relates to your budget.
Tracking your spend versus your actual forecast is important. Procurement software can look at your historical forecasts, establish trends and help ensure your spend is on track versus your budget.
In order to help stick to your budget, procurement software can establish approval workflows to ensure everyone is playing by the rules. Approval settings and workflows can be established at departmental, category, project or individual user levels.
In order to control spend you need to have the ability to be in charge of where your money is going. With the approval workflow, a procurement software allows:
- Departments or users to be required to request approval for spend which can be tracked and monitored over time
- Spend to be pre-approved based on budgetary needs as to not waste time in the approval process
- Alerts to be sent out when spend is getting close to budget to be proactive about keeping spend in line
Approval workflows also help reduce unwanted expenses. The best part is if you choose a web based software, you do not have to be physically in the office to control expense spend.
The web based software has the capability to expense items on their credit cards and phones and it will be recorded to the software. At this point, you can set up instant alerts to let you know an expense has been made. In an instant you can approve or reject expenses as soon as they are made.
Procurement software adds an additional layer of expense management by allowing for receipts and other documents to be uploaded virtually into the software. This reduces spend by ensuring expenses are accurately expensed in a timely fashion. The convenience to upload items directly from your phone via screenshots or photos and upload directly into the software encourages the team to follow the right procedures for documenting expense spend.
Forecasting and planning your spend is important when creating and following through on financial plans. By knowing what you are expected to spend and budgeting accordingly through procurement software, a business can plan on meeting their objectives.
Being in complete control of how your money is spent is key to spend management. Through approval workflows and processes, procurement software can minimize the risk of over spending.
A major factor in spend control is who your partners are. Being able to hold your partners accountable to your expectations goes a long way in spend management. Procurement software can be your best friend in ensuring partners are living up to your standards.
See how Fetchr, a logistics service company, was able to save a cost spending of 15% by using procurement software as a supplier management system by clicking here.
Procurement software can create and store documentation. These documents are the cornerstone to a supplier's relationship and directly impact spend. Some key documents for spend the software can create and manage are:
- Request for quotes on items
- Contract guidelines that lay out payment terms and chargebacks
- Supplier score cards that track partners performance
With the procurement software, you can create and request quotes from multiple vendors for the same items. The ability to take the quotes, document them and compare them side by side across different partners within the software, enables a level of transparency to ensure your spend is not misplaced.
This level of detail from the procurement software ensures you are always getting the best pricing and most bang for your buck. In addition, the ability to keep a record of this process enables you to revisit potential partners should the need arise.
Procurement softwares contract management features enables you to create and store contracts within the software. This is important as you will always have one central place to reference when it comes to the most critical document in your relationship with your partner.
The ability to lay out payment terms and manage them in the procurement software affects cash flow. By allowing the software to track these pertinent pieces of information, your finance team will be able to be notified of when bills are due. This ensures you are not paying for any late fees while also maintaining a good relationship with your partner to enable them to continue to ship in good faith.
Within the procurement software, you have the ability to adjust language within the contract to ensure against negative business outcomes. By putting chargebacks in place, things that cost you money due to a supplier's error can be recouped. This serves as a deterrent as well as reduces the financial impact of a partner's mistake.
In the procurement software, you can also keep score cards to track your suppliers performance over time. This can be used to demonstrate to a partner their performance versus agreed about terms. By having this information at your fingertips, you can negotiate better terms, pricing, delivery times as well as many other factors that contribute to your spend.
Having good partners leads to good outcomes. With procurement software, you can really drive spend by ensuring you are holding your supplier accountable for their performance versus expectation. By having a good supplier management system, you can keep your spend on track by maintaining good partnerships.
Procurement software can really help you keep an eye on your spending. Keeping track of your spend is the first step in the ability to control it. By tracking key data points, you can see potential areas of cost reduction.
Risk mitigation through procurement software gives you the piece of mind that spend is always being tracked and accounted for. By following your budget closely and reducing maverick spending through approval workflows, you can sleep safe at night knowing your spend is being managed closely.
Being able to manage who you spend your money with is equally as valuable as the aforementioned ways to control spending. Through procurement software, you will be able to keep your suppliers on the up and up and ensure you are always in the optimal partnerships.
With procurement software, spend management becomes intuitive. It creates an environment for cost reduction, risk mitigation and supplier accountability to maximize a business's buying power. Through the everyday workflows within the software you are able to analyze and manage spend to come up with key action items to drive your business forward.
See what else a web based procurement system can do for your team by clicking here.