CPOs: Get this One Thing to Reduce Wasteful Spending with Procure to Pay
Friday, 1 Sep 2017
VP of Purchase to Pay
Welcome to #BasBites – your source for bite-size procurement info for your busy life. This blog focuses on the one thing CPOs need to be effective using a procure-to-pay solution: 100% spend visibility.
The most important thing to understand about automating procurement and finance functions is that any improvements leadership wants to make are contingent on collecting data in your procure-to-pay solution and leveraging advanced analytics against the data to transform that information into action.
If you’re a CPO who wants to reduce wasteful spending, you must get 100% spend visibility – you have to see the entire picture.
You do that in 2 ways:
- Manage as many spend categories as possible through your e-procurement solution. Take an iterative approach to getting more spend under control. Once you feel comfortable with the large, primary categories like IT, office supplies, Maintenance, Repair & Operating (MRO) spending, go broad – look at spending on things like assets and travel & expense; start funneling contingent services through your e-procurement solution; optimize your inventory carrying costs. Don't stop short with your scope – your goal should be to manage as much as possible using that phased approach.
- Automate the processing of ALL of your invoices – meaning that all invoice types (paper, electronic, EDI/XML, PDF, etc. covering direct, indirect, PO, Non-PO spending) are being processed through the AP Automation arm of your procure-to-pay solution. Make sure your AP department becomes a true transaction hub for all invoices – regardless of the level of sophistication of the suppliers sending the invoices.
Once you've accomplished these tasks, you will be able to achieve 100% spend visibility in your procure-to-pay platform, enabling powerful analysis. This data will show you the areas where you have wasteful spending happening and you can activate your procurement team to:
Negotiate better contracts
Stop duplicate orders
Seize opportunities for volume discounting
Run strategic sourcing events
Prevent overstocking inventory and use perishable items before they expire
The key to being effective is reliable data and for CPOs that means 100% spend visibility. Read more about what to look for in procure to pay in The Forrester Wave™: eProcurement, Q2 2017, where they note Basware “has the broadest functionality to manage different spend categories” to help you achieve that 100% spend visibility.