Global events such as the coronavirus outbreak, Brexit and 2020 elections have many people and businesses on edge, concerned about how these current events will impact their financial stability, and that of their supply chains. In fact, according to a study by the Conference Board, economic slowdown, trade uncertainty and a global recession are top concerns for CEOs in 2020. Where does spending come in?
In the wake of this uncertainty, business leaders will be forced to take a hard look at their spending to see where they can spend cash more efficiently and consciously – or risk leaving much-needed cash on the table. There are powerful insights and patterns hidden in business spend – everything from over-spending and regulatory risk, to supply chain stability and employee safety.
Where to Look
The story of how businesses spend money is literally all around them – in the data they manage every day, across the entire business. Today though, businesses are inundated with so much spend data that managing it in a way that it provides real value can be challenging. Every department is spending business cash – whether it’s HR on recruitment and talent development, marketing teams on promotional items, product teams on R&D, and of course, the cost of the direct materials for production. Connecting the dots isn’t always easy. A recent study conducted by IDC and SAP Ariba and SAP Fieldglass found that 62% of procurement executives say the siloed nature of spend is one of their top digital transformation challenges. To overcome this challenge, finance and procurement professionals need to invest in technologies and strategies that enable them to approach spend more intelligently, creating a unified view of where and what they are spending. In doing so, they’ll be able to identify patterns and areas of overspending, duplicate spending, fraud and even risk.
Take Swisscomm AG, for example. Before implementing an intelligent spend management strategy, the leading telecom provider in Switzerland lacked visibility into the spend for its external workers and suppliers. The company was managing 16,000 external workers and receiving 23,000 emails and 2,000 phone calls from suppliers each year. Given this volume and complexity, Swisscomm needed a way to automate spend management, and to enable a unified, holistic view of all its workforce and supplier spend. Once they deployed an intelligent spend management suite, the company was able to transform procurement into a proactive function, and gained transparency into its total spend data. This has not only resulted in increased visibility into workforce and supplier spend, but the company has also identified opportunities to capture discounts and savings through the procurement process. This type of savings is invaluable at a time when the next global recession is on your doorstep.
What to Look For
Identifying ways to save money is critical for any business – whether it’s during times of economic uncertainty or when business is booming. But saving money isn’t the only way businesses can benefit from taking a closer look at their spending behaviors. For example, with new regulations such as GDPR and CCPA, remaining compliant is top of mind for every CEO. And, with the coronavirus outbreak instilling fear in global markets, supply chain disruptions may be inevitable for many businesses. The point here, is that spend management touches every part of a business, and therefore, every part of a business can benefit from approaching spend more efficiently. Risks may vary from sustainability issues that negatively impact the environment, human rights violations, natural disasters, financial volatility and more. By analyzing supplier and spend data, along with current events, industry patterns and more, businesses can quickly and easily determine where there could be risks within their business.
How to React
Just like any story, the best spend management stories are those in which we learn something new, and hopefully even improve because of it. Identifying risks and patterns is invaluable, but only if the business has the ability, the will and the know-how to make a change. This is where intelligent spend management comes full circle – it’s not just about knowing that risks and opportunities exist, it’s knowing how to correct or capitalize on them. With supplier risks, this means having the ability to quickly shift to a new supplier before your supply chain operations are disrupted. For cost cutting, it means identifying and executing quickly on savings opportunities. For example, by analyzing spend patterns, you might be able to see that one particular supplier always requests to receive early payment. That’s interesting to know, but the real value comes when the spend management platform takes it a step further. It can proactively alert you to this pattern, along with the recommendation to adjust the contract and payment terms, knowing the supplier might be open to offering a significant discount if you agree to pay them earlier. That’s cost-cutting that anyone within a business can get behind.
In the recent IDC study, 90 percent of respondents said there is room for improvement to control spend. With so much economic uncertainty already in 2020, the time to invest in better spend management practices is now. Businesses can’t risk leaving money on the table – or worse, missing a pattern or risk that could cause irreputable business damage. Committing to more intelligent spend will not only help cuts costs and recession-proof organizations, it can lead to more strategic, informed decision making that will have lasting, profitable impacts across the business.