Looking to improve your spend management in procurement, start here!
How confident are you when it comes to spend management in procurement? Do you know how to properly utilise your business spending when it comes to sourcing and procurement? Or are you still finding it difficult to navigate?
Well, that’s where our procurement specialists can help. In this blog, we talk you through all you need to know when it comes to spend management in procurement.
What Is Spend Management?
Firstly, you need to understand what spend management is when it comes to procurement. If you’re the one that manages your business’s procurement strategies, then you’re probably already aware of it what is. For those who don’t, spend management focuses on maximising your value for money, reducing costs, and improving supplier relationships.
When it comes to spend management in procurement, you need to look at everything that encompasses your spending. This includes your spending analysis, strategic sourcing and the relationships you have with suppliers. This will allow you to gain better control over your expenditure.
But Why Is Spend Management in Procurement So Important?
When it comes to your business, you can’t afford to waste money, especially with the economy constantly changing. You need to take control and know exactly where your money is going. Not having an efficient plan in place can be detrimental. You could find that you’re overpaying for services/products, leading to a low return on investment.
Just some of the main reasons why spend management in procurement is important:
- You can align your spending with your business objective
- Can indicate where you can spend money more/less
- Gives you control of your expenditure to maximise your ROI
- Allows you to forecast future unknown costs
- Can increase profitability and cash flow
- Mitigates fraud and spending errors
- Optimise your relationships with suppliers
- Increase operational efficiency.
What To Include in Your Spend Management Analysis
- Identify Your Expenditure
To allow you fully understand your spending, you need to know exactly where your money is being spent. Therefore, you need to record every bit of expenditure that your business is currently making. This will include purchase orders, invoices, receipts, and payment information. You also, need to collect your supplier information. This will include, invoices, statements of work, contracts, and expense policies.
- Organise your Data
Once you identified and collected all the necessary expenditure information, you need to collate this into a singular database. Having all your data in one place allows you to comprehensively assess your spending. You can ensure there are no duplicate records, and can categorise your business spending, (i.e., petty cash payments, supplier payments).
- Time to Analyse
To improve your spend management in procurement, you now need to analyse the data you have collected. This needs to be a thorough review of everything. From this, you can begin to understand your spending better. You will be able to identify spending patterns, recurring payments, and find any payment errors that could lead to fraud. By doing these checks, you can start to map out areas where you could save money. This could be reducing certain costs, cutting out unnecessary costs, and getting better value for money.
During this stage, you need to make a note of your supplier information. Such as contract end dates, payment renewals, and supplier performance. By having this information on hand, you can create a plan for pricing negotiations in the future and reduce costs.
Time to build your Spend Management Strategy
So now that you’ve thoroughly analysed your spend management, it’s time to build a strategy to improve your procurement processes. Here are the steps you should include in your strategy.
- Perform an internal audit
Payment errors or irregularities could lead to unsolicited fraud. Therefore, you need to ensure that this is not the case by conducting an internal audit. To do this, you need to address individual payments, confirming that every payment is legal and that there are no discrepancies.
- Unify your expense policies
Having too many, expense policies (or not having one at all) can lead to high costs and make you spend unnecessarily. Create a unified expense policy that ensures is followed by all employees within the business. This will allow you to have full control over employee expenses, and overtime you will see that this brings costs down.
- Create a forecast plan
Analysing your spend management in procurement now means you can forecast future outcomes. Meaning you can anticipate future costs and mitigate spending where needed to accommodate. Making you prepared for unforeseen circumstances. It can also help when it comes to your suppliers. If your suppliers decide to change their prices, having a forecast plan in place will help. It will allow you to predict the impact of this, and whether you need to switch suppliers.
Here at Hudson Procure, our specialists can work with you in creating a spend management strategy. They can work with you in analysing your spending and suggest areas of improvement. To find out more, contact our procurement team today.
Let’s Recap
So, by now you should have a better understanding of spend management and building your strategy. Let’s recap Just some of the main reasons why spend management in procurement is important:
- You can align your spending with your business objective
- Can indicate where you can spend money more/less
- Gives you control of your expenditure to maximise your ROI
- Allows you to forecast for future unknown costs
- Can increase profitability and cash flow
- Mitigates fraud and spending errors
- Optimise your relationships with suppliers
- Increase operational efficiency.
Knowing where your money is going can help a great deal, as you can see. But to be able to understand how to navigate your spending, you need to:
- Identify Your Expenditure – collect all spending data, from invoices to supplier contracts.
- Organise your Data – collate the data into one central system for easy navigation
- Analyse – thoroughly review your spending, and look for patterns and discrepancies.
Once you have all your spending data on hand, you can then begin to build a strategy. Your spend management strategy should be made up of the following:
- An internal audit
- Unifying your expense policies
- A forecast plan
Need help with your organisations spend management strategy?
Whether you already have an established spend management strategy, or you’re starting from scratch, we can help. Even the most thorough strategies can benefit from an impartial review. Our consultants are here to help, no matter your sector, industry, or the size of your organisation.
Our services
Procure Consult
With Procure Consult, we offer support with tender management and ad-hoc procurement consultancy. Our expert team will manage the end-to-end procurement process or offer assistance with any stage, as and when required.
Procure Health Check
With Procure Health Check, we’ll conduct a full review of the strategic and operational procurement processes within your organisation. We’ll identify the areas that need improvement and help you drive greater value from the procurement process.
Procure Analyse
The purpose of Procure Analyse is to conduct a high-level analysis of your spending activity. We’ll help you understand your current purchasing behaviour and highlight areas that can deliver greater value. Procure Analyse is also offered as part of Procure Health Check or as a standalone service.
Procure Outsourcing
With Procure Outsourcing, we deliver a range of procurement solutions on an outsourced basis, completely bespoke to you. This can range from delivering multiple tender projects as a package to delivering the full procurement function of your organisation.
Procure Post
Are you trying to find a supplier for your project? Post your tendering opportunity onto any of our 11 sector-specific portals for FREE with Procure Post!
Housed by our sister company, Hudson Discover, our portals host thousands of tendering opportunities for organisations of all sizes. For an additional cost, we’ll even help you identify your requirements and find the most suitable suppliers for your business.
Get in touch for a consultation and find out how we can help your business drive better value from procurement.
