Tuesday, 30 September 2014

'Yin & Yang' for Truly Effective Spend Control

In our previous article, 'Spend Control for CFOs - Fundamental Objectives for Creating Savings', we discussed two key topics that senior finance professionals should consider when looking at Spend Control and eProcurement.

Following on from that, in this article we address the processes and people involved in implementing Spend Control effectively.

What business processes are involved?
There are two important business processes that must operate together to achieve truly effective Spend Control:
  • Source-to-Contract, and
  • Purchase-to-Pay

Think of these two processes as the ‘yin & yang’ of Spend Control.

The Source-to-Contract process creates savings opportunities by finding good suppliers and establishing advantageous agreements against which the organisation can then buy. Functions within this business process include sourcing, supplier management, contract management and supplier catalogue management. This process is performed by procurement professionals and cross-functional category teams working collaboratively with stakeholders across the organisation to match goods and services sources of supply to the needs of the business.

The Purchase-to-Pay process captures actual savings by leading employees to place purchases for what they need using those advantageous supplier agreements. Purchases are therefore made at lower prices and with suppliers that present less risk. Ideally, employees still have the opportunity to shop for the best fit to their needs, but always with priority given to established suppliers and agreements. Functions within this business process include purchase request, authorisation, invoice processing and payment authorisation.

What people are involved?
Spend Control involves a high percentage of people across your organisation, as well as a number of people outside your organisation. This includes:
  • Procurement professionals and category teams 
  • Accounts Payable (AP) personnel 
  • Every manager that has responsibility for a budget 
  • Every employee that needs to buy goods or contract for services in order to do their jobs 
  • Your suppliers; both large and small

Procurement and AP personnel will use various aspects of the eProcurement system on a daily basis.

Operational managers will use the eProcurement system to view purchase requests against budgets and cost pipelines, and to approve or reject requests.

Employees from across the organisation will interact with the eProcurement system to request or directly buy the things they need to do their jobs. Some will use the system frequently; others only occasionally.

Suppliers will interact directly with your eProcurement system through a web-based supplier portal. As with employees, some will do so frequently, but most will do so only occasionally.

For answers to more questions about deploying new eProcurement systems to work hand-in-hand with your existing financial and operational systems, download our white paper: Spend Control for CFOs.
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