6 Ways Spend Management Improves Success

Bogdan Büchner

Spend management has become a successful best practice as it helps to control and optimize the way money is managed across an organization. It provides a wide array of benefits to organizations that purchase. It encompasses all aspects of a purchasing lifecycle, from obtaining goods to selecting suppliers to setting up contracts and even paying the various suppliers. Buyers procure through a holistic approach, becoming more competitive in the process.

A study from Deloitte shows that spend management is more than sourcing and procurement. It requires the alignment of business units, finance, and others to focus on key spend categories. A comprehensive view is needed to address the many processes across external spend categories and continuously improves processes. This will, in turn, provide a higher level of control over risks and spending.

Here are six tips to help you with your purchasing department’s ability to leverage spend management to your benefit.

Bring Expenses Together

It’s imperative that you gain company-wide efficiency. In order for this to happen, you have to bring the various expenses, and entities, together. If you have acquisitions, expansions, or even widely dispersed locations, get them onto the same page. There’s no need to use location-specific contracts as this can be more expensive. It’s best to leverage the power of the organization as a whole for janitorial supplies, office supplies, managed IT, and much more.

Aggregate Knowledge

Talk to everyone within your company and aggregate knowledge on buying and spending habits. When you do this, you can improve negotiating power with the different suppliers that you work with. You want to do more than make better purchasing decisions.

You should make more educated buys on all levels throughout the organization. You want to tap into the knowledge that your people have regarding specific categories and commodities. When you know more about the ins and outs and they are shared with everyone, it leads to the purchasing department being more knowledgeable.

Bring Leadership on Board

All of the leaders and managers within your organization need to be on board with the concept of spend management and understand its benefits. The drive to improve spending has to come from more than one or two agents. When everyone is on board, it changes the culture and helps to improve the success for the entire organization. You should be sure to identify and assign responsibilities to some of the different department heads so that they are in charge of various components. It will get people more involved and ensure that you receive the buy-in.

Perform Supplier Audits

Audits should be performed regularly to ensure you know where you stand with supplier relationships as well as long-term contracts. Top expense categories need to be reviewed regularly. You should also compare current market pricing to what your organization is paying.

Look at Indirect Spending in Spend Management

Indirect spend management should be a focus, not just the direct spending. Look at areas such as maintenance, repair, and operations supplies as well as various services that don’t necessarily go towards a specific product in your organization.

Centralize Purchasing

Centralize purchasing whenever possible with spend management. Coordinate purchases across multiple departments to be able to have more buying power and therefore more room for negotiating on costs. It will help to improve communications across your organization and give you a better position with vendors, too.

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