With the Covid-19 pandemic having had a major impact on the global economy over the last few months, many CFOs are now challenging their procurement function with the difficult task of reducing costs and consolidating spend. As part of these efforts, organizations are turning to spend analysis.
In fact, according to The Deloitte Global Chief Procurement Officer Survey 2019, consolidating spend has ranked as the most important business strategy for organizations since last year. Knowing your contractual obligations as well as having visibility into your agreements with suppliers and customers can enable you to better deliver for your customers while being responsible for your own business results.
Contract mismanagement can result in an estimated yearly 9.2% drag on revenue and savings, as manual a contract management process adds unnecessary risk to your business operations and you don’t quite gather all the important data points within those contracts. It is important that a thorough analysis is conducted as to where exactly money is being spent. A detailed spend analysis report will answer questions such as;
Once you know exactly where your money is going, you will be in a much better position to make decisions about how and where it should be spent and identify opportunities for reducing costs. However, a problem that often arises out of spend analysis initiatives is a poor quality and lack of recorded data. This is where technology has an important role to play.
Wondering how you can improve your contract management and make savings for your organisation?
According to the Deloitte report, spend analysis is one of the main areas of procurement where technology is having a major impact. By choosing a contract management solution that includes spend analysis as well as the likes of contracts management functionality that helps manage contract and pre-approved spend and demand approval workflows so you have control and visibility over your procurement along with all relevant spend data available in one place, ready to be analysed; can place your organisation one step ahead to make informed decisions.
Once you have a solution in place, capable of providing the information required, there are some important steps to take to conduct an effective spend analysis initiative.
The larger your budgets, the more departments that you will have; With multiple departments means many separate, accounting systems, and internal processes. It is vital that all data from these different areas is combined into one central database for effective spend analysis to take place.
However, even after combining all spend data into one database, sourced data from multiple different areas means that formats, currencies, and languages will differ. Work with your internal departments and suppliers to standardise the format of your data for easy input and reporting.
With several different departments in your organization comes a number of different suppliers. For accurate spend analysis, all suppliers should be tagged, from here, individuals can be viewed to compare the likes of prices and turnaround times to then be further assessed and the best suppliers then can be tagged as ‘preferred’.
With individual suppliers grouped and categorised when preferred, the same should be done with expenses for the purpose of spend analysis. By breaking your expenses down into the likes of office supplies, marketing, travel, and legal spend, you will have a much better idea of where your money is going and be able to make informed decisions over spend.
Once you are following such steps within your spend analysis initiatives, you will begin to experience the many benefits.
For those in charge of managing budgets, it is priority to understand how much is being spent and where it is being spent. Through spend analysis, organizations gain a greater understanding of the costs of materials and services, expensive suppliers and those suppliers meeting/not meeting expectations and can adjust their procurement processes as necessary. Maverick spending is also eliminated through the implementation of a more controlled, centralized procurement process.
To both maximize profits and reduce costs, spend analysis reports can enables businesses to gain insights into both their spending patterns and supplier profiles. Additionally, organisations will realize unexpected savings by switching to preferred suppliers, negotiating volume discounts and reducing waste from overbuying.
Regular monitoring of your suppliers and your dealings with suppliers will help improve your risk management. Through spend analysis you can monitor your dependency on certain suppliers through the level of dealings with them, while also keeping track of their annual revenue and credit score. If your dependency outweighs the strength of the supplier, you may need to adjust your procurement strategy.
Your organization may be required by industry or government law to comply with certain procedures and audits. With all relevant data, from supplier information to purchasing history, stored and readily available in your centralized database, you will ensure that your employees’ adhere to company policies and any audits will be relatively straightforward.
With cost reduction such a big priority for CFOs at the moment, organizations need to gain a greater understanding into where and how their money is being spent, before making any drastic changes. Technology has a major role to play, and through the implementation of a contract management solution that includes spend analysis, organizations can begin to assess their spend activity in real-time and start making important changes to their procurement process. Taking this step will allow you to start reduce costs, manage risk, evaluate vendor performance and ensure compliance.
We’ve developed Accord Contracts Management to enable you to think strategically not operationally. Our Contract Lifecycle Management Solution can help you gain a complete insight into your contracts and allow you to maximize revenue, control cost, manage risk and make savings not only in money but productivity time too.
With unlimited contracts and unlimited users, Accord makes managing contracts easy; helps you to be compliant and helps you control spending…
Robert Beel, Procurement Manager at Osborne Clarke
“The Accord Contract Management System has certainly made a difference in the short time we have been using it. The forward-look report provides an instant view on our contracts, helping us plan ahead, while navigating budgets and spending. We would not hesitate to recommend Target’s very smart contracts management solution.”
Accord is an advanced contract information management and reporting tool with a supplier intelligence function that tells you as much as you need to know about your suppliers, contracts and what needs doing next; holding your key clauses, including review dates, end dates, and terminations dates in one central secure location.
If you would like to learn more about how to can gain control and visibility over your organizational spend, take a look at our contract management solution or Request a Demo of Accord via email@example.com and a member of our Sales team will be in contact with you.
Learn more from our team and how innovative contracts management can empower your business.