There is a longstanding myth in the business world that there are two types of leaders at the helm of an organization. Either a creative visionary who is driven by innovation, or a level-headed, fiscally responsible penny-pincher who has their eye firmly on the bottom line.
One side of the fence is about driving growth at all costs, and the other is about harnessing spend and prioritizing margins over revenue.
It is highly possible for a business to knock down those preconceptions and embrace both ethos simultaneously. It is possible to be innovative and run a tight financial ship, and the key to achieving that holy grail is gaining spend visibility.
Your organizational spend is more than just tracking corporate spending. It is about constantly and consistently collecting and analysing spend data in a purposeful and conscious manner. Accountability for your organizational spend should lie everywhere, and through consistent monitoring of all direct and indirect spend and a transparent spend management system, you will have a full view of how money moves through your organization.
Spending mistakes, accidental budget overspends, lack of working capital, increased maverick spend, increased inventory management and purchase order costs and more are the potential consequences of impaired spend visibility. And all of those issues impact on your ability to be agile and respond to opportunities for innovation and growth.
Our guide to the 7 things you can do to achieve true spend visibility is as follows:
1. Make it easy to track spend
Give your organization the tools it needs to easily and efficiently record the data required to gain an overview of spend. If the process is laborious, or isn’t clearly defined, people simply won’t adopt it.
2. Conduct a full spend analysis
You cannot get away with not tackling a spend analysis. If you do not make the effort to collect and categorize your spend data you are in the dark when it comes to your spend management. You can check out our full guide on to how to conduct a spend analysis here. Which segues nicely into our next point:
3. Invest in spend analytics software
Spend visibility simply cannot be fully achieved without automation. We live in an increasingly digital age, and nothing can compare to the functionality of spend analysis software.
4. Introduce a ‘buying lisence’
It is a constant struggle for procurement professionals who are mandated with controlling organizational spend that they are constantly fighting against spend which happens under the radar. Encourage a corporate policy of extremely limited spending authority, clearly define roles and processes and ensure buy-in from all stakeholders.
5. Speculate to accumulate, both in terms of time and money
Investing in P2P software, documenting processes and putting the effort in at the front end of the procurement process will save time and resources throughout all stages in the long run.
6. Use a purchase order system
It seems obvious, but so many organizations fail to follow a robust purchase order system. Purchase order software that is integrated into your other accounting and procurement systems can help you keep track of all purchases, ensuring accountability from all departments as well as enabling easier supplier and order management to ensure orders are being fulfilled correctly.
7. Analyze intent and driving factors behind maverick spend
The Chartered Institute of Purchasing and Supply (CIPS) in the UK estimate that 80% of organizational spend can be generated from uncontrolled buying. Not all maverick spend can be a flagrant disregard for protecting the company bank balance, so evaluate the reasons behind this maverick spend. Buying behaviours and attitudes often need to change more than processes, and both will need to change at the same time to ensure adoption of processes.
For more insights into procurement best-practise and how you can leverage technology and data to drive efficiency and innovation in your procurement department, contact our team of solutions specialists, or check out our blog archives.