Five Simple Ways to Reduce Spend Volume

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Cloud-based buying networks help procurement people gain better control over their organizations' spend habit. At least, that's one of the implications of Jason Busch of Spend Matters' prediction that 2011 will see more cooperation between business buying and financial operations due, in part, to cloud. In March wiredFINANCE also addressed cloud-based procurement networks.

For example, when procuring print services via the cloud, buyers can collaborate with vendors to keep presses running by scheduling print jobs during slow periods. In that situation, a printer would be more inclined toward reduced pricing.

Although the economy is beginning to recover, spend reduction always remains in fashion and more saving can usually be achieved. If nothing else spend reductions free up cash to pursue business growth opportunities. Coupa, a cloud-based (SaaS) spend and procurement management company, is so sure it can reduce a company's spend it guarantees that you will cut spending in six months by at least 1% in OPEX or you don't pay.

But even without the Coupa technology, Rob Bernshteyn, Coupa CEO, suggests five ways you can cut spend volume.

1. Insist that people look for the least costly way of doing something and reject spend requests when there are less costly approaches available. That may be a simple as scheduling offsite meetings at less expensive locations.

2. Pay less for what you do purchase by negotiating contracts in advance and enforcing policies requiring workers to use the negotiated deals. This will cut down on the more convenient but more costly runs to Staples for things on which you have negotiated a lower price.

3. Speed your purchase process to reduce the cycle time it takes to get the goods and services your people need to do their work. If they can get what they need quickly and easily, they won't be running off to Staples.

4. Improve spend predictability. This requires you track spending and apply predictive analysis to forecast future spending. Be prepared to revise your forecasts as situations change.

5. Reduce the time spent on procurement and the cost of procurement through the use of automated information technology. Technology can take people, paper, and fax out of the procurement process, which alone will reduce costs. Information technology also will capture the information necessary for spend forecasting and to enforce spend policies.

Following these practices, including the use of its technology, Coupa customers report spend reductions of 0.83% to 4.3%. Looking at industry segments, Coupa calculates that the retail industry overall, which had profits of $54.6 billion in 2010 overspent on procurement by $3.73 billion. The financial services industry, with $170 billion in profits, overspent by $3.48 billion. The point: there are significant savings to be gained by tightening up your spending practices.

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