C-suite leaders need accurate and timely information to make the best decisions for their company. Gaining visibility into how the company spends its money supports these efforts, helping companies identify overspending patterns in procurement before they impact the bottom line.
Procurement visibility is critical for several reasons; most importantly, it reduces costs, helps companies spend smarter, and improves decision-making. In this blog post, we will discuss why procurement visibility is so vital and how c-suite leaders can leverage the practice to build value and create new efficiencies that support business growth.
What Is Spend Visibility and Why It Is Important
Accurate spend visibility allows c-suite leaders and other stakeholders to see how much their company is spending, where it is being spent, and with which suppliers. This information helps organizations make more informed decisions about their procurement processes and strategies.
There are several benefits of accurate spend visibility:
Reduced Costs
By understanding where your company is spending its money, you can identify areas where costs can be reduced. For example, suppose you see that your company is spending a large amount of money on office supplies from a particular supplier. In that case, you may be able to negotiate a better price with that supplier or find another supplier that can provide the same products or services at a lower cost.
Smarter Spending
In addition to reducing costs, gaining visibility into company spending can also help you make smarter decisions about where to allocate your resources. For example, if you see that a significant portion of your budget is being spent on travel expenses, you may decide to invest in video conferencing technology to reduce those costs in the future.
Improved Decision-Making
With accurate spend visibility, c-suite leaders can avoid making costly mistakes when it comes to procurement. For example, if you are considering signing a contract with a new supplier, looking at how much your company has spent with that supplier in the past can give you a better idea of whether or not they are a good fit for your needs.
High vs. Low Spend Visibility
Not all companies have the same level of spend visibility.
Those with high visibility clearly understand how and where their money is being spent, whereas companies with low visibility do not.
Several factors can impact a company’s level of spend visibility:
Data Quality
The quality of the data used to generate reports on company spending can impact report accuracy. If the data is outdated, skewed, or inaccurate, it can lead to decision-makers making incorrect assumptions about spending and how funds should be allocated.
Organizational Structure
The way an organization is structured directly impacts spend visibility. For example, a company with a centralized procurement process will have a better understanding of its spending than a company with a decentralized procurement process.
Technology
The technology that a company uses to track and manage its spending can also impact procurement visibility. For example, companies that use manual processes or spreadsheets to track spending may have significantly less visibility than companies using automated software solutions.
Strategy Through Spend Visibility
There are several ways that c-suite executives can leverage spend visibility to improve their company’s procurement strategy.
Analyze Spending Patterns
Understanding how your company spends money enables you to identify patterns and trends. Let’s say you notice that your company tends to spend more during certain times of the year or that a particular supplier consistently provides high-quality products or services at a reasonable price. This information can help you make better decisions about where to allocate resources in the future.
Develop Procurement Policies
With accurate spend visibility, c-suite leaders can develop policies and procedures to help their company save money. By consolidating procurement activities, companies can optimize resources, reduce time spent on procurement, and channel money saved back into business-building activities.
How Companies Get It Wrong
Many companies struggle with overspending because they do not have the right tools in place. Software, in itself, is often a contributor to overspending. For example, most businesses today use dozens of third-party SaaS to optimize and automate processes. However, about one-third of that spend is wasted because the software is either unnecessary, underutilized, or employees are not trained adequately enough to reap the benefits.
The attitude is, “we need this because our competitors have it,” and the purchase is made without fully understanding what’s required to make the most of it. If a company spends $15,000 per year on SaaS, that’s $5,000 that could be put to better use.
Software is just one example, of course. But without spending analysis tools and a centralized process, it’s impossible to track inter-departmental spending. Lack of transparency almost always leads to unnecessary purchases, duplicate purchases, and overspending.
How You Can Get It Right
When it comes to overspending, prevention is the best medicine. Successful mitigation of waste in the procurement process starts at the highest levels and requires strategy and leadership to succeed.
The first step is to choose a software solution. There are many spend analysis solutions on the market, so selecting one that meets your company’s specific needs is essential. Sourcing Insights is a 360˚ solution that enables a centralized procurement workflow, automates repetitive tasks, and delivers real-time data to help you identify spending patterns.
There is little room for error in today’s volatile and fast-paced business landscape. Maximizing margins and ensuring your employees’ time is spent wisely are essential tasks. By centralizing your procurement process, you address both issues while producing the data you need to help you make better business decisions and drive value back to the bottom line.
Final Thoughts
Gaining visibility into your company’s spending is essential to developing an effective procurement strategy. C-suite leaders are responsible for providing thought leadership in this area and ensuring that their company has the right tools and processes in place. By taking these steps, you’ll be better able to control spending, reduce costs, and improve efficiencies throughout the organization.
To learn more about Sourcing Insights and how we can help you gain spend visibility, request a demo today.
