Spend management sounds like the sort of thing that seems simple but turns out to be deceptively complex.
In truth, it’s surprisingly straightforward. Spend management is merely the practice of managing supplier relationships and company purchasing. It identifies where your company’s money is spent and maximises return on investment. It automates and integrates spend-related activities from source to payment so that purchasing happens as planned and suppliers are paid in compliance with contracts. What effective utilisation of spend management achieves is the transformation of your company’s spending program from individual, piecemeal transactions to a larger, integrated system, increasing organisational value.
The process begins with the conversion of sourcing, contracting, and purchasing processes into a digital format, as well as processes regarding suppliers, invoices, and payments. One simple, intelligent program, integrated with a digital business network, consolidates all of these functions. This therefore makes it possible to gather and analyse all spend data, enabling insight into your company’s spending across the organisation.
There are four main benefits of effective spend management. They are:
- Collaboration (between partners and teams);
- Efficiency (automating manual processes);
- Productivity (freeing time and resources); and
- Value (what is bought, who from, and how much)
Benefits of spend management
Collaboration
Spend management enables companies to collaborate more effectively with suppliers. Managed payments increase free cash flow, working capital, and early payment discounts. Improved collaboration with suppliers means that it is therefore easier to identify any supply shortages early on by keeping abreast of supply and demand mismatches. Supply chain visibility also extends to non-linear and external supply chains, combining reduced inventory levels with increased fill rates. It also allows you to share production forecasts and other information with suppliers. By centralising your spend program, all parties are accessing the same information, in the same format, updated unilaterally in real-time.
Efficiency
Increased automation and multitier visibility reduce supplier risk and potential threats to your company’s operations. By reducing avoidable errors and eliminating cumbersome and unnecessary accounting practices, companies have improved their accounts payable efficiency by as much as 40%. With financial information centralised, companies’ responses to queries also become easier and quicker. Efficiency improvements extend to all sections of the spend program, including accounts payable, administrative support, audits, invoice capture, and purchase order handling. By moving from a decentralised to a centralised approach, companies have seen continued improvements in their overall procurement efficiency from the bottom line to the top level.
Productivity
With the automation of invoice capture, workflow, and approval, companies can eliminate exceptions and ensure compliance with contracts and purchase orders. Automatic limits to all departments and locations ensure budget compliance. Broadly, this means more time and resources available to the most essential parts of your business. The day-to-day operations that were previously done manually are compiled and updated automatically. These include the tracking of budgets, the compilation of spend requests, and the management of available funds. However, companies can still easily update and adjust the budget in reaction to any changes.
Value
Spend management increases the value of your purchase and reduces waste. With a more comprehensive data platform, sourcing is performed from a stronger negotiating position, meaning that your business will receive better pricing from suppliers. The centralised control of company purchasing means employees are guided to buy from preferred suppliers at prices that have already been negotiated favourably. Your suppliers’ performance is continuously reviewed with a 360-degree view of reliable, current data so that your decision to continue using them is as informed as possible. The more efficient use of time due to automation will also increase your time-to-value ratio.
What can spend management do for you?
Continued improvements in these four key areas should be an objective of any business. With proper utilisation of spend management services and software, your company can revitalise those four processes with one dynamic move. Increased efficiency, lower costs, lower waste, lower risk are all easily achievable. With automation freeing up your organisation’s times and resources, you can properly set your company’s minds to innovation and growth. Spend management also creates a more effective division of labour between humans and technology. It allows both to play to their strengths, and creates an organisation ready to meet the challenges of tomorrow.
About B2BE
B2BE delivers electronic supply chain solutions globally, helping organisations to better manage their supply chain processes, providing greater levels of visibility, auditability and control. We’re driven by a passion for what we do, inspired by innovation, and underpinned by a wealth of knowledge. With over 20+ years of experience, the B2BE teams operate worldwide.
For more information, visit www.b2be.com.