In order to provide complete functionality, this web site needs your explicit consent to store browser cookies. If you don't allow cookies, you may not be able to use certain features of the web site including but not limited to: log in, buy products, see personalised content, switch between site cultures. It is recommended that you allow all cookies.

What's Your Most Wasteful Spend Category? Make Sure It's Not YOU.

19 February 2019

5 minute read

What's Your Most Wasteful Spend Category? Make Sure It's Not YOU.

It’s time for procurement to look in the mirror. When it comes to choosing the right purchase-to-pay (P2P) solution, are you throwing money out the window?

 

It’s easy to recognise “procurement people.” We’re the ones who make the big buying decisions. The ones who impose spend hierarchies and vendor approval rules. We might even have a “no-PO, no-pay” tattoo somewhere on our bodies. But, most importantly, we’re the ones who are really good at identifying waste and saving the company money.

But, could we end up being culprits ourselves? Are WE truly delivering ROI on the business case to automate procurement and finance – or are we falling prey to false promises?

All Eyes on Procurement

Remember that P2P system we bought? It’s time we faced the challenge to prove the ROI of that system, just like we would require the rest of the company to prove the ROI of their spend. Did we really get the best deal? Did we achieve our business case? Are we sure?

When we started on our journey to identify and purchase the perfect P2P, we were painted a magical picture made up of spend under management and a better source-to-contract process. But if we take a look at our numbers now, we’re nowhere close to 100% spend under management we were promised. More like 30%.

As procurement professionals, we need to be asking the hard questions—how do we guarantee we can prove this business case?

Dust off Your Spreadsheet

Okay, team. Remember that business case that we built when getting approval to invest in a P2P system? It had all kinds of detailed calculations in it. We had it in an Excel sheet, with various categories of savings and cost avoidance. Most likely, it was filled with detailed analysis on potentials savings including:  

It’s time for us to break out that old spreadsheet and plug in the actuals. Take a look at what the numbers are saying. Are we getting all the savings we aimed for? How do we know?

What You Can’t See, CAN Hurt You

Sure, the saying goes “what you can’t see, can’t hurt you.” But, when it comes to a P2P system, it’s just the opposite. Simply sweeping our P2P actuals under the rug can cause more harm than good. And we need to own up and see if that’s the case. 

We wanted 100% user adoption
Our goal was to have all procurement processed through the P2P system but maybe our users never got the push they needed to give e-procurement a try. A good e-procurement solution is more than user friendly, it’s intuitive, it’s the easiest way for users to get the stuff they need, and it quietly keeps everyone compliant without it feeling like a “rule enforcing” platform. 

We wanted total supplier on-boarding
If all our suppliers aren’t connected to the P2P system yet, we’re missing out on the supply chain efficiencies from our original business case we thought we’d achieve. We must remind ourselves that we bought this system to connect all our suppliers, mid-size, small, technically savvy, and those who are practically paper-only.

We wanted complete spend visibility
All invoices need to be running through the system for complete spend visibility Non-PO invoices included, both indirect and direct, no exceptions. We chose this P2P system because of its ability to process all invoice types and if we’re not using it in that way, we won’t see ROI like we had planned. However, with all invoices being processed through the P2P solution, we’ll gain detailed visibility of spend and can better track and quantify poor spend habits and identify maverick spend quicker.

Time for the Tough Questions

We’ve got to ask ourselves the hard-hitting questions:

  • Do we have 100% of our spend running through the system like we planned? Not just the indirect easy stuff, but all of it—direct, indirect, PO-based, non-PO, all of it. Does everyone use the system all the time?

  • Do we really process all our invoices through the system?

  • Are all our sourcing savings just there on paper in the form of lower pricing in the contract, or is our company actually buying from those contracts 100% of the time?

  • Did we reduce the AP headcount as planned? Did we really get all that touchless invoice processing? Did we get rid of all that paper like we planned?

If most (or any, for that matter) of these questions were answered with a “No,” it’s time to take a step back and reevaluate where we went astray in our plans and what we can do to get back on track. If we don’t, we’ll continue to face roadblocks and setbacks and may never realise the true ROI we had originally planned for.

  • If we don’t have all our spend running through your P2P solution, we can’t catch cost saving incentives like early payment discounts and we miss out on collecting all that precious data we can do so much with.

  • Without on-contract spend, we might as well just throw cash out the window and forget about the potential of additional savings and simple compliance management.

  • If we’re still manually processing all or some of our invoices, we’re stuck in a bad loop of continuous careless errors, longer processing times, and stacks upon stacks of paper.

Yeah, we’ve got the P2P system, but we’re not seeing the ROI – and it’s time we called ourselves out on it.

Find the Bright Side

But there is a bright side to all these realisations. The fact that we’re honestly answering these questions is a first step in the right direction. And there’s hope yet.If we’ve revisited our Excel sheet and still feel like we’ve made the right decision in your P2P solution decision, then we are already one step ahead and it’s all just a matter of reminding ourselves why we purchased the solution to begin with.

If not, the beauty of software-as-a-service (SaaS) is we aren't a prisoner to the software provider like in the old days of customised on premises software. So, we can get it right next time. Next time we’ll ignore the hype of all that smooth marketing, the charisma of the slick sales guy, and instead we’ll get into the nuts and bolts of the system to make sure we’ll actually achieve our business case.  

Ready to Use Your P2P the Right Way?

Need a little extra motivation to get your team back on track with your P2P solution? See how the Carlsberg went from processing 48% of their invoices electronically to 96% (with goals to reach 100%) and how this gave them valuable visibility into their spend. And read more about how a digital system can transform your business. As always, reach out if you have any questions.