Three strategies for effective spend management
Spending money is an inherent part of running a business. Whether it is the expenses or capital related to starting a business, sourcing tools and equipment, hiring the right resources, or investing in research and development, almost every aspect of the business involves expenditure. Procurement teams are responsible for evaluating where the money goes, for whom it is paid to, how cost-effective it is, and determining the impact of the spend (whether it is an optimal arrangement in the short- and the long run).
Chief Procurement Officers (CPOs) around the globe have grappled with trying to find the best possible way to monitor business spending and improve their procurement strategies. High transaction costs, time-consuming and manual-intensive spend management processes, compliance risks, and low visibility into the procurement pipeline are some of the biggest challenges that plague businesses across sectors.
Several spend management solutions and platforms have surfaced in the recent past, promising excellent returns in terms of spend optimisation, risk reduction, and cash flow management. However, not every such software or solution has proved to be successful. One of the key reasons is that CPOs often overlook the bigger picture when seeking such solutions.*
Here’s discussing some strategies that every CPO must embrace to ensure streamlined spend management. The key elements that add up to make the ideal overall spend management strategy are:
- Effective spend planning
- Smart spend analysis
- Strategic sourcing and supplier management
- A strong tail spend management strategy
- Seamless implementation
- Risk management
- Continuous monitoring and auditing
Here are a few critical questions that every CPO must be able to answer and strategise over.
- Crisis planning: Are you prepared for worst-case scenarios?
- Spend analysis: Are you learning from the past and planning for the future?
- Process automation: Does your spend management strategy leverage automation?
In times of crises or unforeseen events, do you have adequate resources and workflows that will support your procurement business process and enable seamless collaboration? What is your risk management plan? What do you do in case of a natural disaster, a pandemic, or periods of market uncertainty?
Embracing digital channels and investing in paperless technologies is the new normal. To eliminate any scope of errors or overpayments, improve spend visibility, and get real-time updates via virtual collaboration, every CPO must ensure that this evolution is necessary. Working towards this will not only reduce the risks during unexpected events but also streamline your purchasing cycles and support cost optimisation.
Spend analytics enable CPOs to dive deeper into their data, filter it, organise it, and visualise it in a digestible format so that they can make informed decisions based on the insights thus derived. It is recommended that you make use of a combination of descriptive, diagnostic, predictive, and prescriptive data analytics to make sense of the unstructured data that lies in disparate systems. Such data analysis can not only help you understand what went wrong and what worked for you in the past but also indicate the ideal course of action based on forecasts and predicted outcomes via artificial intelligence (AI) and machine learning (ML) technologies and algorithms.
Digital process automation is the new buzzword or term in the industry at the moment, and if your procurement teams are still functioning on legacy systems and manual-intensive processes, you will always be behind the eight ball. Investing in digital transformation solutions that leverage technologies like robotic process automation (RPA), natural language processing (NLP), AI, and ML can increase process agility and enable you to achieve the ‘eliminate, reduce, standardise, and automate’ goal.
How can Infosys BPM help?With an enterprise-grade, AI-powered spend intelligence offering called ProcureEdge, Infosys BPM enables CPOs to achieve holistic digital transformation in their procurement and spend management processes. The ProcureEdge is built to help you overcome key business challenges in spend management with AI-enabled data management, spend classification, and opportunity identification.
*For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.