5 steps to bring spend under management
Keeping spend under management is an integral part of any efficient organisation. But before you can manage anything, you need to thoroughly understand the terms, processes and expected outcomes relevant to your company. In our last blog post, we talked about defining indirect spend and spend under management (SUM). This article gives you 5 practical steps to get the process going.
Keep in mind, that bringing spend under management is not a one-time deal. You’ll have to regularly re-evaluate your spend to make sure that what is managed, stays managed. This also affects the way people work - that’s why you should firstly focus on getting the upper management on board by explaining the benefits to the company as a whole (cost savings, transparency, etc). Then communicate the benefits to your other stakeholders and procurement team (time savings, efficiency, etc).
READ MORE: Define and conquer your indirect spend
Once you have stakeholder buy-in, follow these steps to bring more spend under management.
1. Make the spend visible
You can’t bring more spend under management if you can’t see it clearly. Spend visibility is the key - how much does your organisation spend, how, and on what categories. Hopefully this is already tracked by your accounting or within your ERP. Make sure your procurement team also has access to this information, if they don’t already. With this data, you can make a spend profile to see how much of the spend is currently being managed within different categories on the itemised level.
Only once your spend is visible, you can analyse it. This is where spend analysis comes in. A good spend analysis tool, one that is integrated with the ERP, can give you a detailed overview of how much spend is not going through the ERP purchase process, by tracking the invoices being sent directly to accounts payable.
2. Put your processes in place
Bringing more spend under management is a management changing exercise. You need to clearly define your goals and then establish a new process to help you meet them. Use the spend data to help you define your goals, then communicate your goals clearly to your stakeholders and explain why these changes are necessary for the organisation as a whole. As mentioned above, these changes will go more smoothly if you have upper management buy-in and the authority to put them in place.
When you are working on developing your purchase processes, take time to research and implement an e-procurement solution (this is addressed more in Step #3.) With your new e-procurement tool and improved processes in place, you can start using the spend analysis tool to follow your progress and see how your new purchase process plays out in real life.
3. Choose the right e-procurement tool
E-procurement is too crucial to be ignored. While managing spend without e-sourcing is possible, it’s impossible to bring more spend under management without implementing an e-sourcing solution. Incorporate an e-procurement tool into your new procurement procedure and make it mandatory. Following your new process should be easier than cutting corners.
ProcurementFlow solution helps you funnel all requisitions to your procurement team and manage them compliantly. You can establish an approval flow and run e-sourcing events. Make sure it’s being used properly and in a way that helps you meet your procurement goals. (P.S. If you’ve already implemented a solution but haven’t yet reached your goals, make sure you consider Step #5.)
4. Turn buyers into superheroes
If you have an e-requisition tool and SRM in place, you should upload all suppliers (direct and indirect) into the system at once. If it’s easy for the requester to find the suppliers they’re used to working with, they’ll be more likely to run their requests through your tool. Start using the new system in full spend scope from the beginning.
Once you have funnelled all requisitions in the system, the procurement team can decide whether it needs an approval, then proceed with making a PO, running an RFx, finding a new supplier, negotiating contract terms, or otherwise managing the spend in a way that adds value for the organisation. Turn your buyers into procurement superheroes by demonstrating efficiency that your stakeholders have never seen before.
In addition to entering suppliers into your e-sourcing solution, it’s also important to make sure that you have adequately onboarded your preferred suppliers. After implementation, notify your suppliers of your change in procedure, offer assistance and respond to any questions or concerns they might have. Remember, sourcing is a two-way street, and if your suppliers don’t understand your new system, they might try to work with buyers outside the prescribed management system.
5. Keep it simple for the requesters
Requesters both in and outside the procurement department are the biggest obstacles to getting more spend under management. It’s not because they enjoy being the maverick; it’s because it might take them more time and energy to run requests and requisitions through an incumbent solution than it does for them to handle requests via email or over the phone.
To avoid this pitfall, think of requesters as your customers - what can you do to provide better customer service and user experience for them? Make requesting as simple as writing an e-mail. Proper e-procurement system like ProcurementFlow captures and funnels all communication to the procurement department. This enables a casual chat between the requester and buyer, while all important information is safely in one place.
Bringing and keeping spend under management requires a thorough mapping of your current needs and setting up procedures that work for your organisation and your people. Put in the work to get a good system running, it’s an investment to keep it working smoothly later on. Implementing the right tools is a big part of the equation.
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