Spend Control Insights

Purchase-to-Pay (Part 4): Are You Getting the Best Value For What You’re Spending?

2012-02-21T08:00:00.000Z

No matter what your annual expenditure level, you want to get as much for your organisation’s money as possible. You want the lowest prices and best overall value for everything you buy.

That’s why your procurement people research suppliers and negotiate contracts. Studies have shown that 10 – 15 % savings are easily possible when purchases are made through pre-established suppliers. It’s simple: once good suppliers are identified and contracts set, you want as much of your spend to go through those suppliers as possible.

An important way for you to get a handle on how effectively your organisation is using its money is to ask:

How much of our spend is with preferred suppliers and contracts; how much is not?
What information do we have when we negotiate supplier contracts? Do we capture detailed information about our spending over time (e.g. on what, with whom, and at what prices).

Why it’s Important

You don’t want to pay more than necessary: Every time someone buys something from a supplier other than one with whom you have a favourable contract, the price savings you worked hard to negotiate are lost.
You want the best overall value: Price alone is not always the only criteria for selecting the best supplier. When an employee buys something from an unauthorised source, they may not understand how to evaluate other important dimensions such as quality, delivery or payment terms. What may look like a “good price” might actually cost more.
You want to avoid undue risk: Another factor in selecting a supplier is the potential risk they might entail in terms of their ability to ultimately deliver the product or service they sell. If your performance to your customers relies on their performance to you, you want to be sure you know the supplier well before selecting them. In some cases – especially with outside service providers – there could even be liability transferred to your organisation if they don’t meet certain regulatory requirements.
You want to fully leverage your spend: If employees around your organisation are buying essentially the same product or service from many different suppliers (e.g. stationery), you are losing a lot of buying power. By consolidating those purchases with fewer suppliers, your volume with them goes up; making it much more likely that they will agree to discounts based on the higher level of business you provide them.
You want to continuously improve: If you don’t have any good way of knowing what is being spent by category, supplier, etc; your procurement people do not have the basic information they need for activities like contract negotiation and supplier consolidation that can lead to further savings over time.

What to Look For – Key Indicators

Percentage of spend under management: This is the measure of how many purchases are with what you consider your preferred suppliers – typically ones with whom you have a contract specifying negotiated prices or discounts. A high percentage is, of course, what you’re after. If it’s low; discuss why that is.
The number of active suppliers in your vendor master file: If you have many suppliers in the same category with whom you’ve paid invoices over the past year, that may indicate lost opportunities for volume discounts. If the number is expanding over time, the lost opportunities may be growing.
Reporting ability: Ask your purchasing or IT manager to produce a report that summarises the money you’ve spent per supplier for key product or service categories. Talk with your purchasing manager about whether or not (s)he feels well-equipped with the right data when (s)he goes to negotiate a new supplier contract.

How to Improve

Identify and focus on preferred suppliers: Clearly identify the one or few suppliers you want to use per category. Your procurement professionals may already be well down the road on this. If not, start with those suppliers with whom you have formal agreements.
Make them known to employees: Again, you may already have this process in place, but if not, provide a reasonable way for people to look up the supplier they should use for a given purchase.
Develop an understanding of the importance of using preferred suppliers: Be sure everyone who initiates purchases understands the importance to your organisation that they first consider a preferred supplier and only look elsewhere if absolutely necessary.
Capture all purchase history: If you are not already doing so, initiate a process by which you capture enough detail about all purchases for later analysis. You probably already have total spend per supplier, but you will want to categorise that at a lower level of detail (category, commodity, etc) in order to make the information as useful as possible.

The Value of an Effective Purchase-to-Pay System

Make it easy to buy from preferred suppliers: A good Purchase-to-Pay (P2P) system will make it much easier for employees to buy from a preferred supplier. Online catalogues can lead them directly to the right supplier(s) for commonly purchased items. Some systems will allow users to “punch-out” to a preferred supplier’s website, use their shopping cart to select items, and bring those items back into the P2P system for the normal authorisation process. With a P2P system, it can be much easier to buy from the right supplier than the wrong one.
Make it easy to capture history for spend analysis: A P2P system captures all the details of a purchase in electronic form, ensuring all pertinent coding in terms of purchase category, supplier, contract, etc. Much of this information is automatically applied from the catalogue and other sources within the system without requiring user input. This history is then available for reporting and analysis – an invaluable tool for contract negotiations and other strategic procurement activities.

Video Case Study: Oldcastle Materials discusses best value sourcing and purchasing compliance across 1,400 locations

2012-02-14T08:00:00.002Z

Oldcastle Materials, Inc. is the leading vertically integrated supplier of aggregates, asphalt, ready mixed concrete, and paving services in the United States. Headquartered in Atlanta, Georgia, Oldcastle has over 1,400 locations in more than 40 states.

Like all successful companies, Oldcastle recognises that keeping costs down is key to long-term competitiveness. And key to keeping costs down are best-value sourcing of goods and services, and effective control of the purchasing process. Toward that end, they established a formal program for procurement transformation.

Jake Schmoyer, Director of Procurement talks about how they have improved adherence to their sourcing deals and achieved financial compliance with PROACTIS Purchase-to-Pay.

Goals supported by PROACTIS:

Provide a consistent Procure-to-Pay framework with flexibility to support diverse needs of regional companies
Support effective deployment of company-wide strategic procurement initiatives:

Ensure compliance to preferred suppliers
Capture enhanced spend data for analysis
Improve supplier performance
Streamline Accounts Payable process
Support SOX control measures

Results to Date:

First four companies live in ten months with varying levels of procurement experience
Mobile capability (e.g. BlackBerry) deployed for field authorisation
Accounts Payable process transitioned to electronic registration and troubleshooting
Now accumulating valuable spend detail to support sourcing

Purchase-to-Pay (Part 3): Do Managers have Sufficient Visibility of Purchase Commitments to Manage their Budgets?

2012-02-06T08:00:00.007Z

Click here for Part 2 of the series

Managers need more visibility than just last month’s financial statements if they are to effectively control their budgets and be fully accountable for their function.

In today’s fast-paced world, they also need clear, up-to-date visibility of outstanding commitments in order to see the full financial picture within their scope of responsibility. In addition to paid invoices (what they see on last month’s financial statements), the full picture includes open purchase orders (POs), approved but not yet placed POs, and outstanding purchase requests.

Managers who don’t know the full cost pipeline simply don’t have the information they need to make good financial and operational decisions. That puts them and your entire organisation at a competitive disadvantage to those who do.

Why it’s Important

Budget control: Since purchase commitments are made well in advance of when they are paid, trying to manage a budget with just last month’s financial statement is like trying to drive down the expressway with one eye closed – accidents are bound to happen.
Cash flow management: At times, department managers are asked to help manage cash flow in addition to their budgets – that’s a lot easier when they can see the commitments that are already made when deciding if they can approve another request.
Operational productivity: A department manager’s primary responsibility is to perform an operational function such as order fulfilment, maintenance, or customer service. If, in the effort to manage the budget, a manager needs to spend an inordinate amount to time “asking around” about open commitments, or trying to re-do his/her plan because (s)he’s suddenly over budget, productivity and operational results are going to suffer.

What to Look For – Key Indicators

Manager behaviour: Are some managers often surprised to find that they are over budget, or likely to go over budget? Conversely, are some managers overly cautious about doing necessary things because they’re concerned they could go over budget due to expenditures they’re not aware of?
Frequent EOY budget crises: Situations where important activities cannot be covered in the budget because less important things were already purchased (i.e. times when things are not getting done due to budget constraints).
Ask managers… How do you decide if you can approve a request or not? What do you look at to know where you really stand with your budget? Do you often just guess about open commitments?
Ask yourself… How do you know what your organisation’s overall cost pipeline is? Do you have visibility beyond last month’s financial statements? Do you have the visibility you really need to know where the organisation stands with respect to budget and upcoming cash requirements?

How to Improve

Institute good authorisation procedures: As already discussed this is critical to having any chance of knowing about purchase commitments before the invoice arrives.
Capture purchase activity early: Put in place a way of capturing purchase requests and commitments as early as possible. Try to capture enough detail to enable managers to really know what the request or commitment is, who originated it, what it’s for, and why it’s needed. Be sure proper account coding is done up front.
Make the information accessible: Make it easy for managers to see summaries and details of open commitments in addition to their financial statements. Enable this at multiple levels of organisational roll-up.

The Value of an Effective Purchase-to-Pay System

Make capturing the information practical: Capturing purchase commitments and requests may not even be practical without a Purchase-to-Pay (P2P) system – the effort to do this on its own may not be justified. But since a P2P system captures and holds purchase activity from the time of request through PO, invoice and payment authorisation, it provides this information as a natural by-product of streamlining the buying process.
Easy access: A good P2P system will provide a summary and drill-down capability for all outstanding commitments within a given manager’s span of responsibility. Combined with General Ledger (GL) account balances, this provides a complete picture of expenses.
Better decisions: With the ability to easily view to-date and future expenditures right at the time of authorising new requests, managers can more quickly make the right decision to approve, deny or delay. With the ability to analyse the full cost pipeline at any time, managers are better able to make the right decision when asked to do things like contain costs, help with cash flow, and reduce budgets.

Purchase-to-Pay (Part 2): Do the Right People Really Have Control of What You Buy?

2012-01-30T11:46:00.005Z

Click here for Part 1 of the series

Financial controls are essential for any organisation and pre-purchase authorisation is key to effective purchase-to-pay management.

As people throughout your various departments and functions spend money on behalf of your organisation, you want to know that those expenditures are being reviewed and authorised by the right people before they are committed.

While you don’t want to burden employees with excessive controls for low-value goods like office supplies, you do want to know that multiple levels of management have seen and authorised major expenditures.

Most purchases lie somewhere in between the extremes and should have some level of authorisation. Certainly, you want managers to have the opportunity to approve any significant purchase within their department in order to effectively manage their budgets.

Budget control: Without proper authorisation controls, employees may buy things that are not budgeted, not a current priority, or not appropriate for their function.
Quality and risk control: For some types of purchases, such as capital equipment, computer hardware and specialised outside services, the involvement of an expert that understands technical, legal or other category-specific issues beyond the requesting employee, may be needed to ensure the right purchase is made.
Fraud prevention: Though the vast majority of purchases are well-intentioned, there is always the risk of fraudulent buying – something you certainly want to prevent.

What to Look For - Key Indicators

Invoices with no PO#: A high percentage of invoices arriving in Accounts Payable (AP) without an approved purchase order (PO) on file probably indicates insufficient authorisation controls.
Excessive AP workflow: A high percentage of invoices being coded in AP and sent to an appropriate department for approval, effectively getting approval on what has already been spent (i.e. “spent control” vs. “spend control”).
Frequently surprised managers: When managers are surprised that purchases have been made within their department, there is clearly a problem with the authorisation process.

How to Improve

Clearly define authorisation rules: Develop clearly defined rules for approval requirements based on monetary value, item category, department, and other criteria.
Make everyone aware: Make everyone in the company aware of these policies and the importance of adhering to them.
Track unauthorised purchases: Ask your AP Manager to track invoices with no PO to identify frequent offenders.

The Value of an Effective System

Make it easy to define your policies: Because it provides a pre-designed framework, a good purchase-to-pay (P2P) system will make it easy to define your authorisation policies and procedures without the need for extensive paper documentation.
Ensure compliance: A good P2P system will check all purchase requests against the established rules and route them to the appropriate person(s) for authorisation as needed. Routine purchases can be automatically approved when appropriate.
Make it easy for employees to do the right thing: A good P2P system eliminates the need for employees to be fully aware of approval requirements. They need only submit their request and the system will automatically apply the correct authorisation process.
Make authorisation easy for managers and buyers: Using workflow technology, a good P2P system will conveniently organise requisitions and purchase requests for those who do the authorising. In many cases, requests can be authorised with a few clicks and from PDA devices.
Make it visible: Since everything is captured electronically, everything in the P2P system is visible to the people who need to know. Employees can always see the status of their request, managers can always see what they've approved, denied or questioned, and executives can see a complete history of all activity.

Purchase-to-Pay (Part 1): Are You Truly as Efficient as You Can Be?

2012-01-23T11:29:00.000Z

Your organisation may have good purchase authorisation and payment controls in place today, but at what cost?

How much time and effort does the current process take?
How much manpower is really involved in a typical purchase transaction?
How much time does it take an employee to buy something in order to do their job?
How much time do managers spend reviewing and authorising requests while trying to make sure they stay on budget?
How much time do professional buyers spend on purchases that don’t really need their expertise?
How much time do Accounts Payable (AP) clerks spend every day tracking down information to verify the accuracy of invoices?

The purchase-to-pay cycle is the ultimate case of a business process with a delicate balance between the need for controls and the time required to follow them. When the effort to comply becomes too great, it is amazing how inventive people can become in finding ways to work around the process. Once that starts happening, an organisation has the worst of all worlds.

Why it’s Important

Organisation-wide productivity: No matter what business you’re in, high productivity throughout your organisation is key to success. If employees take a lot of time to get the goods and services they need to do their jobs – e.g. find the right source, create a request, chase their manager for approval, respond to Accounts Payable to authorise invoice payment – that takes time away from their real job. If line employees spend even a small percentage of their time in such non-value-adding activities, that can be a lot of lost productivity. No organisation can afford that.
Cost of compliance: Another way to look at the same issue is the cost of each purchase transaction. The more time it takes away from employees and managers, the higher the transaction cost that is really being added to the direct cost of each purchase.
Cost of Accounts Payable: Payment controls are essential, but the cost of the Accounts Payable function deducts directly from your organisation’s bottom line. A people-intensive, paper-intensive Accounts Payable process is almost certainly costing your organisation more than it needs to.
Cost of inconsistent compliance: If the “proper” buying process is cumbersome and time-consuming, some employees will skip it entirely and go around the controls you’ve worked so hard to put in place. That, of course, leads to all the problems discussed in the previous questions.

What to Look For – Key Indicators

Paper: Is there a lot of paper (or even a lot of standalone electronic forms that don’t populate a database) involved in your current procedure? Are forms often being lost, causing people to spend a lot of time chasing them or re-creating them?
People: Are there people in your organisation for whom a noticeable portion of their time is spent “buying things for people”? (i.e. administrative assistants or buyers placing orders for things that are really not that specialised).
Frustration: Do employees express frustration with how hard it is to get what they need to do their jobs? Or how long it takes? Do managers express frustration with the effort required to keep up with purchase approvals, or do they really know what it is they are being asked to approve, or to figure out where they really stand with their budgets? Are a lot of purchases still taking place outside the proper process even though it’s well defined? Does that indicate the process may be onerous and the frustration with it has just become too great?
Lead time for invoice posting: What is the average elapsed time between when an invoice is received and when it is authorised for payment? For many invoices, more than a couple days probably indicates inefficiencies. You also may want to track the percentage posted in “x” days of receipt.
Invoices processed per AP employee: On average how many invoices are processed per month per Account Payable FTE (Full Time Equivalent)? Less than 50 probably indicates an opportunity for improvement, though this can vary by organisation. You can also do a quick calculation of average AP cost per invoice this way.
Number of supplier enquiries per month: A high number of supplier calls probably indicates a high number of late or incorrect payments. This, too, is adding to the actual cost per invoice, and therefore per purchase.

How to Improve

Obviously, the only way to improve is to streamline the process without giving up the necessary controls. That leads us to the value of a good purchase-to-pay (P2P) system…

The Value of an Effective Purchase-to-Pay System

Lower cost per transaction: A good P2P system reduces the time spent by employees, managers and Accounts Payable personnel on just about every purchase. That reduces both the productivity loss and direct cost of each transaction. It provides an easy, intuitive way for employees to request or buy the things they need to do their jobs. The system guides them through the process without the need to spend time looking up the policies, forms, etc. It enables more direct ordering by employees, reducing the overhead of administrative help for many types of items.
Accelerated buying process: With a good P2P system, everything happens more quickly because it uses electronic records and communications instead of paper. There is no time required for physical movement of paper. Managers have immediate access to all the information they need about budgets and commitments in order to make an authorisation decision. AP has PO information at hand as soon as invoices arrive. The speed and visibility of the entire process eliminates frustration and makes it easy for everyone to comply with the organisation’s policies and procedures.
Dramatically streamlined AP: With a good purchase-to-pay (P2P) system, much of the invoice review process is automated. Many invoices flow through to posting “untouched by human hands” while their correctness is thoroughly verified using automated matching. Far fewer invoices arrive without purchase order (PO) numbers since most purchases are the result of a PO produced by the system. When discrepancies are identified, it provides email-based workflow so the originator can resolve issues quickly. The invoice registration process can be dramatically accelerated with tools such as OCR (Optical Character Recognition) and electronic invoices. A P2P system can even provide a supplier portal for self-service supplier status enquiries, and more. The cost savings opportunity is clear.

PROACTIS Ranked in Top 50 Digital & Technology Company Sector

2012-01-20T10:08:00.000Z

PROACTIS ranked in Insider Research top 50 digital and technology companies sector: In a unique piece of research, Insider Research ranked the top 50 digital businesses in the region and found they make a huge contribution to the regional economy and employ thousands of local workers. PROACTIS joins the ranks of digital businesses, that despite a difficult climate for funding, are demonstrating that a pioneering spirit and an ethos of innovation can help to push the region forward and are helping to carve out a reputation for the region as a global digital centre of excellence.

Cloud Credentials on Display at the 8th Cloud Circle Forum

2012-01-16T10:51:00.000Z

The recent 8^th Cloud Circle Forum held by InTechnology, PROACTIS’ Cloud Computing partner, was one of the best yet…. with great feedback following the presentation on Business-Focused Cloud Strategy. The presentation went down extremely well with the audience thanks to the collaboration between InTechnology’s Divisional Director, Data & Cloud Services Stefan Hasse and PROACTIS COO Sean McDonough – following each snippet of supplier theory from Stefan, Sean was able to add a customer context to proceedings and validate InTechnology’s Cloud Credentials. As a result, there has been a big demand for the slides from the day.

The biggest Cloud concern amongst IT departments and companies in general is security. However, this is perhaps due to the fact that few people equate Cloud Computing with a physical operation – they assume that something they can’t see cannot be safe or reliable. At this event, many customers we invited to take a look at the InTechnology data centres and support centre didn’t appreciate there was something they could visit! You may also be unaware that you can ‘touch the Cloud’ because many providers keep their facilities to themselves. But PROACTIS’ Cloud Computing partner, InTechnology, has nothing to hide and everything to be proud of, and welcomes you to come and see their facilities, put them to the test and see how their end-to-end services work up close.

Find out more about Cloud Computing in this white paper: Unlock the Cloud for Spend Control and eProcurement Innovation.

Pulling Back the Covers: Spend Review & Financial Controls for Charities/Not-for-Profit

2011-12-21T10:46:00.000Z

Charities face multiple pressures – raising funds in a competitive marketplace, operating at low margins and delivering against the varied obligations of the beneficiaries and donors, while demonstrating good value for money. How do they address these challenges?

Charities that are financially efficient spend less money to raise more. As a result, many organisations in this sector are recognising the need to assess the suitability of their current approach to Spend Control. This as an opportunity to examine objectives and revisit core activities and projects.

PROACTIS helps Charities to target areas of cost reduction (cash and efficiency savings), process improvements and risk mitigation through a project comprising of analysis of spend data and a review of the Spend Control process. Then providing a spend control framework to achieve rapid ROI and incremental benefit.

In this blog article we will share with you a recent Spend Review project for a charity.

PROACTIS Spend Review Project

PROACTIS was commissioned by a high-profile charity to undertake a Spend Analysis project. A number of recommendations were made, along with a sense of magnitude and materiality where appropriate, calculated through the application of industry standard metrics.

The headlines from the exercise were as follows:

There is broad scope for savings through the use of invoice automation techniques:

Targeting only 20 suppliers with automated invoicing methods could have generated a £3 million reduction in processing costs.
Targeting the next tier of suppliers subsequently over time will continue to deliver gains moving forwards.

Purchase Cards will also remove cost and provide greater visibility:

Extending the use of purchase cards will also remove large volumes of transaction cost and generate better management information (MI).
They will also cater for those situations where there are critical, short notice and/or emergency requirements.

‘Best practice’ processes are not in place. Specifically the following are missing:

Effective Spend Control policy, with only belated approvals upon receipt of invoices.
Document controls, meaning limited visibility and audit trail.
Budget checking.
Automated accounting.
Transparency of the spend pipeline, limiting scope for better procurement decisions.
Supplier management and vetting controls.
Controls on who can commit organisation funds.
Controls on the terms and conditions under which purchases are made.
Visibility on contract compliance.

Also, the use of imprest accounts and staff expenses currently masks the true level of expenditure with individual suppliers. This reduces buying power and also introduces risk.

A prioritised list of sub-projects were identified for the Charity and it was noted that an eProcurement project focused on purchase-to-pay (P2P) and a few key suppliers will not introduce risk or endanger business continuity, but will provide:

A payback within 1 fiscal period.
An efficient, largely automated Accounts Payable function, with exception handling workflows to involve other staff within the organisation.
Control and clarity of the spend pipeline, resulting in less spend overall and better information to use in procurement decisions moving forwards.
Electronic trading.
A single browser-based user interface for all process aspects and users, including:

All Procurement, Purchasing and Accounts Payable processes
A single point of integration and control with:

the finance system
all suppliers, for any marketplaces or other online buying resources that might be used in the future

Full electronic document exchange

Prioritised Activities

The data analysis highlighted a number of significant sub-projects which will make a massive impact on the Charity’s Spend Control process by generating opportunities for cost reduction, risk management and price improvements:

Full Electronic Document Exchange

A small number of very significant suppliers have been identified and should be pursued as a priority to assess their ability and willingness to engage in the submission of electronic invoices.

With the processing of electronic invoicing as a priority, a second project should be considered to automate the output of electronic orders from the Charity. This will rely on all expenditure being managed by purchase order and not by local funds, staff expenses or any other means.

PunchOut plus Document Exchange

Where suppliers have the capacity to manage electronic document exchange, and also have large amounts of catalogue content, they may have the ability to extend the solution to include PunchOut. Buyers can easily PunchOut to suppliers’ websites to see the most recent prices, options, and item selections. At the same time, by eliminating manual catalogue maintenance activities, PunchOut can save the Charity considerable time and effort.

PO Flip

Having identified a small list of suppliers who can make a massive impact on the overall expenditure by the use of electronic data exchange, the next tier of suppliers can be accommodated with slightly different technology.

PO Flip offers the ability for many suppliers to be approached and given the opportunity to view the purchase orders they have placed with a buying organisation, by linking to a portal. Once viewed the supplier may choose to flip the PO and create a purchase invoice automatically.

Any supplier with a PC and internet access could be in a position to use this type of functionality.

Purchase Cards

There are undeniable limitations with the management of expenditure by local funds and/or staff expenses, not least the ease of visibility of the original provider. An easier and more visible approach, which allows a higher degree of automation, will be to extend the use of Purchase Cards. Some are currently in use and more should be considered once a sound means of managing and reconciling the statements is in place.

Purchase Cards would cater for the short notice requirement that is a genuine part of the Charity’s procurement. If goods and services are needed at off-peak times or at very short notice, these can be managed with Purchase Cards.

The area that must be addressed is the policy that clearly states the circumstances in which card use is acceptable i.e. the card must not be used to avoid a more robust Spend Control policy.

Spend Control Policy

The issues noted within the category analysis, with significant levels of expenditure being managed by local funds and/or expenses, highlights the need for a formal and rigorously applied Spend Control policy.

Currently it will be extremely difficult to assess the overall expenditure in a given area, to identify potential contracting opportunities.

The policy needs to be absolutely clear on the circumstances where:

Corporate contracts are used/not used.
Where local funding is acceptable.
Where reimbursement via staff expenses is acceptable etc.

Only when such a policy is in place will the Procurement team have sufficient detail to identify and pursue further corporate contracts.

Contracting and Compliance

Progress on any or all of the sub-projects will significantly increase the buying power that the Charity has. What will be essential is for corporate contracts to be readily available, and with a mandate for use.

Once in regular use it is essential for the contract reference to be stored with the transaction so that an accurate picture of contract compliance can be gained. Where there is non-compliance this can be reviewed and appropriate action taken.

Self-Billing

For the longer-term or partnership-type agreements a further option may be to introduce Self-Billing, whereby the Charity would raise their own purchase invoices on behalf of a supplier on the basis of a contractual agreement.

Whilst there may be few supplier relationships that lend themselves to this approach, a small number may impact greatly on the overall invoice processing, particularly if the generated invoice is electronic and can be registered automatically.

Expenses Review

A review, particularly around the massive expenditure on mileage, is needed to assess whether it is all absolutely necessary and if technology solutions such as conference calls and video conferencing will provide a better option and, in doing so, reduce the amount of dead employee time taken up by travelling.

The recording and claiming of mileage should be assessed to ensure that a degree of rigour is required by the user. System-managed expenses would allow the mandatory entry of ‘To’ and ‘From’ destinations, along with legitimate reasons and any organisational validation e.g. any journey over ‘n’ miles should be made by train.

An automated solution for expenses is well worth considering as this would allow:

Validation of expenses as entered e.g. maximum costs for overnight stay, assessing the correct mileage rate.
Authorisation via workflow.
Full audit trail.

Target Suppliers and Potential Benefits

A small number of very significant suppliers were identified and these should be the initial targets in the pursuit of automated methods for invoicing.

Using industry analyst statistics the adoption of electronic methods would elevate the Charity from their current status to best-in-class when dealing with these suppliers. Using the analyst metrics, the cost of processing an invoice would reduce from £16.37 to £3.07.

In itself, and with none of the other Spend Control projects being undertaken, this would result in a process cost saving over of almost £3 million.

With other initiatives in place, such as PO Flip, Self-Billing and improved contracting and compliance, the available benefits will increase greatly.

PROACTIS’ experience of working with charities and not-for-profit organisations to improve source-to-contract and purchase-to-pay initiatives with cutting edge technology makes us extremely well placed to help executives to address the challenges of controlling costs and optimising efficiencies.

PROACTIS clients include: NSPCC, RSPCA, Royal British Legion, Peabody Trust, RNID, Age UK

To learn more about how to achieve greater financial visibility, compliance and control, visit www.proactis.com.

Law Firms Tackle Spend Control in the Face of Unprecedented Challenges

2011-12-19T12:09:00.004Z

The challenges of a faltering economy and difficult business environment are giving rise to fundamental changes in the legal profession.

In recent years, growth in the sector has slowed due to a decline in Mergers & Acquisitions and a reduction in existing and potential clients. This has resulted in increased competition and has forced law firms to identify new ways to find profitability.

For some, the response is to focus on the cost of external counsel and to restructure hourly rates. Many more firms are unbundling their services so that repetitive, low-value work can be done through the use of technology or outsourcing services.

Others are embracing change in the nature of work e.g. tackling emerging markets such as India and China that are bringing IP considerations.

Meanwhile, the function of in-house lawyers has been transformed, and they are centre stage of the business; which was not the case a few years ago.

However, there is another option for law firms with a genuine commitment to trying to do things differently: take a closer inspection of the systems, processes, and controls for the company’s spending.

At first sight this may not seem "high profile" enough to get management attention. Yet, research suggests that organisations need to reduce just one dollar of non-payroll costs to have the same impact on profitability as generating five dollars’ of new business revenue.

Spend Control is proven to be one of the easiest and fastest ways to reduce excess costs. It provides more control and accountability over operating profitability by increasing the efficiency gained from each dollar of revenue and controlling each revenue of spending.

Spend Control initiatives deliver three types of cashable savings:

Secured savings – where favourable terms of purchase are acquired through changes in pricing, mix, demand or quality and increased contract compliance.
Mitigated savings – delivered by an ongoing program of cost and risk avoidance
Cash-releasing efficiencies – direct financial savings where money is chosen to be released from efficiency gains.

Spend Control also generates non-cash releasing efficiency gains by improving the performance of available resources – adopting best practice, improving business process, etc.

Some of the opportunities for law firms include:

Maverick spend: Many firms do not insist on an authorisation signature or approval process before goods or services are purchased. Consequently, invoices turn up unannounced – after the firm has been fully committed and the money is spent. AP then has to chase down the originator, determine if it is an internal charge or disbursement, and code it accordingly. This is extremely inefficient.
Unnecessary write-offs: Nothing is more frustrating than writing off legitimate client expenses, yet many firms find themselves in this position. One cause can be the log jam of "mystery" invoices handled by AP at the end of the month. Lost, miscoded, or delayed disbursement invoices can miss the billing cycle, and therefore, the billing window.
Manage disbursements: Law firms have significant costs tied up in disbursements; monies which they have to pay to third parties to help prepare for client cases e.g. court fees, stamp duty, fees for medical or other expert reports. Often when a cheque payment or ACH is raised on behalf of the client, it is inappropriately managed and ultimately suffers from not being recovered.
IT expenditure: IT is often the single largest spend area in law firms and requires close scrutiny. Too often IT expenses are buried in employee expense reports, hardware and software is purchased when similar items already exist elsewhere in the organisation, and there is limited visibility of potential assets. In addition service and maintenance agreements are poorly managed.
Aggregated spend: In most law firms, purchasing is dispersed across the organisation and fragmented across numerous suppliers. This means law firms are not leveraging quantity discounts and preferred contracts – a major source of instant savings.
Outsourcing agreements: In spite of the trend towards outsourcing and subcontractors, few law firms have formalised procurement processes when selecting services and even less run a similar process when renewing existing agreements.
Contract compliance: Contract and supplier relationship management are key Spend Control areas to tackle for law firms. Nothing is worse than one of their many high value contracts auto-renewing without the chance of review, renegotiation or cancellation; nor when supplier qualification is too subjective thereby providing limited visibility of exposure to risk.

To learn more, download "How Law Firms Can Improve Profitability"

PROACTIS' experience of working within the legal sector to improve Spend Control initiatives with cutting edge technology makes us extremely well placed to help leaders and managers address the challenges of controlling costs and optimising efficiencies.

PROACTIS is experienced in helping law firms to address these Spend Control and eProcurement issues, and more. PROACTIS clients include:

DLA Piper
Clifford Chance
Herbert Smith
Hill Dickinson
Barlow Robbins
The Law Society

Video Case Study: Fortune 500 firm, CBRE, discusses benefits of PROACTIS eProcurement & eInvoicing

2011-12-09T13:25:00.002Z

CB Richard Ellis, a Fortune 500 & S&P 500 company headquartered in Los Angeles is the world's largest commercial real estate services firm. The company has over 30,000 employees and serves real estate owners, investors and occupiers through more than 300 offices worldwide.

Matthew Burnham, COO, CBRE Property & Asset Management, talks about implementing PROACTIS eProcurement and how it has benefited their business.

CBRE Property & Asset Management operates out of 12 UK offices with approximately 460 employees, the team manages 1,300 properties and delivers service to 12,000 tennants. They demand and collect rent and service charges of more than £1.3 billion each year. In terms of procurement, they have an annual spend approaching £200 million, with over 2,000 suppliers and over 10,000 invoices per year.

CBRE faced a number of challenges which lead to its selection of PROACTIS eProcurement; the need to operate their investments to maximise long-term value and reduce exposure to risk and financial shortfalls. PROACTIS has proven to be the solution of choice for CBRE because it offers visibility of exactly what they're doing with their suppliers - what they're buying, how much they're spending, delivery performance etc. That's enabling CBRE to proactively identify and resolve issues, and to work towards obtaining even better value with their contracts.

In addition, CBRE is now able to receive a high percentage of invoices electronically. That plus the use of purchase order matching and workflow to verify service delivery by the originator, has greatly reduced paper-based processing and enabled the AP department to significantly increase control of the payment process.

CBRE's goals supported by PROACTIS include:

Provide client property owners with best value for procurement of goods services, utilities and other expenditures for managed facilities
Operate over 850 managed properties as separate entities in terms of operational and financial control
Ensure control over expenditure against budget at the point of order not invoice
Maintain consistent control and visibility of all purchase activity across all on-site and central office functions
Streamline invoice processing and payment authorisation within the AP function
Support the Year End process by creating a list of accruals for unbilled committed expenditure

Is your Supply Chain Secure – or is it Merely an Illusion?

2011-11-18T08:32:00.000Z

Many organisations are becoming increasingly concerned about the viability of their critical suppliers. More complicated supply chains and the global downturn has increased the probability that suppliers will encounter financial and operational duress.

Furthermore, recent natural disasters in Japan, New Zealand and the US have raised serious questions about the security of supply and the implication for the wider business.

Organisations must establish a robust supplier risk management framework that can respond to the increased volatility and pressures in the current climate.

In the past, the signs that a supplier is encountering financial difficulty might offer advance warnings (e.g. requesting improvement in payment terms, increasing payment discounts, changes in ownership etc.) during 6-, 9- or 12-month intervals.

Today, financial duress can build up rapidly and overwhelm suppliers in a matter of weeks or even days. A supplier who was financially strong when you first qualified them may now be on the brink of bankruptcy.

The only way to minimise supplier risk is to maintain a high level of the information that acts as key indicators of each supplier’s ability to perform. Information such as:

Demonstrated qualifications and capabilities
Quality and safety assurance processes
Certifications and regulatory compliances
Insurance and disaster recovery plans
Key executives and changes to the management team
Mergers, acquisitions, and other important organisational changes
Actual performance history and internal satisfaction levels
The list goes on…

The truth is maintaining an up-to-date view of the operational and financial position of critical suppliers by proactively identifying risks and threats is proving difficult for most organisations.

For many organisations, the challenge to maintaining the necessary level of visibility comes from the way in which supplier information is collected, stored, and managed:

A reliance on paper information and documents that cannot be easily analysed
Multiple, dispersed systems containing different types of supplier information; sometimes conflicting where they overlap
Manual and disconnected processes that don’t use or contribute to a single view of suppliers
Information that may have been accurate at one time, but is now out of date

In response, some organisations pay attention to only the top 10-20% of their suppliers, focus only on initial supplier qualification, or depend on once-a-year risk assessments that don’t do the job, take too much time, and cost too much.

True visibility of supplier risk can only be maintained through consistent, consolidated, and ongoing management of supplier information throughout the supplier relationship lifecycle:

General supplier qualification
Supplier selection for a specific purchase, project, or contract
Monitoring of ongoing supplier performance
Access to alternative suppliers if/when a replacement is needed etc.

The situation surrounding and within a given supplier is constantly changing in both expected and unexpected ways.

The fact is it requires a variety of integrated tools and processes in order to maintain the necessary level of supplier visibility needed to effectively identify and manage risk. The only practical way is to employ the aid of information technology – it’s just not possible in most organisations to do a proper job of supplier risk management manually.

Risk never sleeps. Ask yourself:

Who in your organisation is responsible for assessing and monitoring supplier risk?
Is supplier risk management a natural part of your ongoing engagement with suppliers?
What would be the impact on your business if a critical supplier failed?
How confident are you that your critical suppliers aren’t in financial or operational difficulty?
What actions would you need to take if a supplier were to face difficulties?

To gain perspective on supplier risk management, download the PROACTIS paper titled: “Supplier Risk Management: Do you Really Have the Right Level of Visibility to Minimise Risk?”

Why “Best-in-Class” eProcurement is “First Class”

2011-11-14T10:00:00.000Z

PROBLEM

Organisations of all types and sizes are under constant pressure to do more with less. In most organisations, the key processes have been streamlined and improved over the past few years. But a wide range of problems are endemic to those who ignore the procurement process for indirect expenditure.

Maverick Buying

Spending over budget
Incorrect cost allocation
Unauthorised transactions
No corporate compliance
No legal compliance
Inconsistent process

No Visibility

No spend analysis
Transaction flow invisible
Cost pipeline invisible
Budgets/commitment access
Contracts inaccessible
Manual catalogue sources
Unexpected transactions

No Savings

No economies of scale
Negotiated contracts ignored
Costly process
Too many staff
Audit fees too high
Productivity gains missed
Inefficient paper trail
Process bottlenecks
Documents get lost
Duplicated transactions
Annual account coding
Paper intensive process
Delays

PROBLEMS WITH PAPER-BASED SYSTEMS

Even where the procurement process is defined, it remains a manual system in many organisations. It often involves the physical movement of paper documents, demands regular subjective intervention, and provides little visibility of either the transaction or its process until long after such information is useful.

It is a costly and inefficient process, prone to error or duplication which delivers little control or visibility.

PROBLEMS WITH SIMPLE "REQUISITION" SYSTEMS

Even electronic "requisition" systems in use today in many organisations offer little in terms of process automation around critical steps such as item sourcing and selection, budget checking, truly usable approval routing, invoice matching, etc.

And such systems provide no help with strategic sourcing or capital goods/project sourcing, contract management, supplier communication, etc.

PROBLEMS WITH EARLY E-PROCUREMENT SYSTEMS

Early solutions intended to provide more procurement process support have been expensive and difficult to implement. Most have been suitable only for the very largest organisations. And in many cases, these systems have been far less than successful because they are cumbersome for employees and department managers to adopt or use, causing users to buy things outside the official process. This “maverick” buying greatly reduces the number of purchases using the proper process and sources, and therefore greatly dilutes the benefits. Mid-size and smaller organisations in particular have had little access to practical procurement support systems that could truly help them improve their purchasing.

PROBLEMS WITH ERP PURCHASING MODULES

ERP systems cover a broad function scope and offer a degree of integration across their different applications. However, such breadth often leads to a lack of focus on Spend Control issues such as bringing maverick spend under control, giving visibility of the cost pipeline and delivering economies of scale.

Since most ERP systems are primarily designed to support purchasing of direct material for manufacturing or sales, they are typically cumbersome at best when it comes to the purchasing process for the many indirect goods and services needed by the rest of the organisation. They rarely provide the ability to access supplier websites or marketplaces, and they provide little, if any, support for procurement processes such as sourcing or contract management.

SOLUTION

What is needed is...

A comprehensive solution that streamlines the entire procurement process in order to:

Obtain “best value” for purchased goods and services
Reduce the cost of the procurement process
Improve financial control
Ensure compliance with organisational policies
Improve organisation-wide productivity

An intuitive, easy-to-use solution that will be readily adopted in order to:

Minimise end user training requirements
Eliminate errors, delays and frustration
Most importantly... realise the full potential of Spend Control and eProcurement

A modular solution offering deployment flexibility so organisations can:

Resolve immediate Spend Control problems first
Invest in just the solutions they need
Extended the scope of their Spend Control support over time
Protect investments in existing systems

A practical solution that is easy to implement and manage in order to:

Effectively tailor it to the unique needs of the organisation
Speed deployment and deliver results quickly
Minimise internal resource requirements and total cost of ownership

POSITION

PROACTIS is a new generation solution that finally enables organisations to realise the full potential of Spend Control and eProcurement.

PROACTIS is appropriate for commercial companies as well as public sector and not-for-profit organisations, delivering specific functionality to address the unique needs of each.

PROACTIS is both comprehensive and robust, with the capabilities to support the needs of employees, managers, purchasing professionals, and financial executives in any organisation. Just as importantly, its flexible, modern design makes it easy to implement and manage. And most importantly, its straightforward concepts and intuitive user interface make it easy to use, fostering ready adoption throughout the organisation.

KEY DRIVERS FOR PROACTIS BY SECTOR

Public Sector

Best value procurement
Sustainable purchasing
Sourcing transparency
Supplier risk management

Private Sector

Spend control
Cost pipeline visibility
Streamlined purchasing
Broadest available catalogue

Not-for-Profit

Visibility and accountability
Tax exempt purchasing
Funded buying
Ethical vendors

Built from extensive real world experience using today’s most advanced and reliable software technologies, PROACTIS delivers:

A comprehensive suite of applications to support all key procurement processes
Fully electronic processes to eliminate paper-based inefficiencies
Built-in controls to ensure corporate compliance
Intuitive design to drive broad adoption

Plus:

Easy access to information for better management decision-making
Seamless integration with existing systems for streamlined business processes
Fully internationalised to support global business

And:

Deployment options to fit any organisation and business model
Rapid implementation to speed results
Easy system administration to reduce total cost of ownership
Microsoft technology for a reliable, scalable industry-standard platform
Flexible licensing to deliver affordable world-class solutions for any need and any size organisation.

eProcurement Demystified – Top Questions

2011-10-19T11:31:00.000+01:00

What is eProcurement?

eProcurement means many things to many people. But let’s first ignore the ‘e’ as it is a bit of a distraction.

The goal of Procurement is to give employees a better shopping experience to do their job: That is to identify and request the right goods and services they need, at the best possible price, in the right quality and quantity, and at the right time; and also ensure its always approved and against budget.

The ‘e’ makes that process a whole lot quicker, slicker and auditable.

But you also need to think about the things behind the scenes that make purchasing not just effortless but more controlled and effective e.g.:

What is bought, by whom, from where?
Are purchases being made on-contract or off-contract?
Are there any opportunities for consolidation?
Can you challenge existing contracts?
How can you measure supplier performance?

The “shopping experience” is only really as good as the underlying processes that support it.

eProcurement is a range of technologies to support just that; offering decision support and streamlined transaction processing.

What are the ROI drivers?

There are guaranteed savings to be made. This includes reducing costs and eliminating waste and error in making purchases that are necessary to keep an organisation “up and running” i.e. non-payroll spend.

We often see customers achieve ROI in less than 6 months and achieve savings of up to 75%.

In absence of a system you will typically find a range of issues in an organisation:

In purchasing:

Employees struggle to make the purchases they need.
Often they are from non-preferred sources. No authorisation. No visibility of purchase commitments.
Costs are attributed to the wrong accounts or departments.
No one really knows what’s being bought over time.

Then you have the buyers:

They don’t know how many suppliers they have, who they are, or what categories.
The finance system is littered with single suppliers made up on the spot. This leaves the company exposed to colossal risk.
Also the value of contracts aren’t being realised. Review dates are being missed.
...That alone can justify a system.

The first time the company knows about a purchase being made is when the invoice arrives.
In Accounts Payable, they spend 60% of their time processing inbound invoices, with a long paper trail, delays, inefficiency and cost.

So, the drivers are easy to identify.

Is it a good idea to get as much spending as possible into the solution?

Absolutely. Executives today are increasingly challenged to do more with less. This requires greater control over spending.

In our experience, If you analyse how much spend is under control by procurement. It is likely to be 20-40% of total expenditure. Often most procurement departments are focused in spend categories over a certain threshold e.g. £50k... why? Because they only have finite resources in the department.

So, how do you move that figure to 80-90%? You will need to do a few things.

You will want to:

Ensure everyone is spending through the same gate without abuse; to maximise the opportunity of bringing spend under control.
Allow shopping choices and probably distribute the work of sourcing throughout the workforce.
Reduce your supply bases to a few strategic ones for specific categories so that you can reduce pricing.
Streamline Accounts Payable processes by documenting spend on purchase orders and ensuring coding and approvals are made upfront.

All of this must be made easier than what you are replacing. It has to be simple, easy to understand and employees must want to use the system.

Is it good to deploy a single instance of an eProcurement solution across a global organisation?

If you are asking is it technically possible to deploy a single instance, absolutely! We have customers that have done just this. Is it desirable? Probably not in all cases.

Why? Because the argument suffers from the same hang-ups that ERP vendors are accused of – you do not want to impose a single system and process across country territories and language boundaries.

Global businesses want to act global but think local and technology should not be a barrier to conducting sound business.

In the past 5-10 years, many companies have grown through merger and acquisition (M&A). With each M&A comes a finance system that deviates from the corporate standard. Unifying disparate divisions and ERPs is costly and time extensive.

What is required is a Spend Control “umbrella” that can sit on top and integrate with anything. That means supporting multiple instances of finance systems, chart of accounts and local workflow requirements etc.

What you are probably looking for is a configurable and modular design for maximum flexibility that can be deployed in a phased step-by-step approach.

Do you need a purchasing application and an eProcurement application?

Almost certainly, and the scale of the opportunity is enormous. According to analysts, up to one-third of large enterprises have yet to buy any kind of eProcurement system and a quarter of them are not using any kind of eProcurement tools.

It really doesn’t matter what your drivers are – whether its goods for resale, or you what to bring the cost of your indirect goods and services under control – you will want to be the fittest on the planet.

Your COO might tell you that there are eProcurement capabilities available in your existing infrastructure, but being a slave to a mandate for a single global IT provider probably won’t cut it.

The alternative is to turn to specialists, like PROACTIS, who eat, sleep and breathe Spend Control and eProcurement and offer systems that leverage the value of your existing ERP investment.

Let’s face it. Do you really want to compromise when it comes to your cost containment agenda?

How hard is it to integrate best-in-class with ERP?

As a best-of-breed supplier of eProcurement, we have integrated to all flavours of systems. Typically it takes under five days to implement. In fact, with the well-known ERPs it can take just three days.

So our competence is also integration specialists. This means proven integration to Finance and ERP systems, plus a whole lot more: document management, business intelligence, stock systems etc.

We would argue that a best-in-class system is better integrated than the eProcurement module that comes native with the ERP package. That is no surprise when often the ERP plain old procurement systems are written 20 years after the target platform.

What you also need to consider is the total cost of ownership (TCO). This means ensuring that the integration is version independent so as you upgrade to the latest ERP version, and procurement version, it doesn’t keep your IT department awake at night.

Should organisations mandate eProcurement to drive compliance?

Yes. Corporate governance is a given these days. What is required is a tool that can monitor and audit compliance. You also need built-in controls throughout the procure-to-pay process:

Financial controls such as account coding, commitment checking, purchase authorisation and audit trails.
Buying controls such as catalogue access, sourcing rules and transaction templates etc.

The system must be practical for everyone to understand, so that complying with policies and procedures becomes second nature.

Catalogue content – can organisations rely on punch-out?

Punch-out is one of the many great tools to interact with suppliers and manage content.

However, managing supplier content should be like playing golf. You need different clubs to do different jobs. That means looking at a strategy to balance supplier type, capability and category type.

Sure, the Holy Grail is to ensure you do not suffer cost for maintaining catalogues and punch-out fulfils that objective.

Through punch-out, users have access to the supplier’s product catalogue and once items are selected, they are then routed through the established requisition, approval and order processes.

In fact you can go one step further with punch-through by loading catalogues on your own buying portal. Or even combine punch-out and punch-through with purchase order flip, enabling you to reduce supplier costs and therefore open up the opportunity to renegotiate prices.

To successfully manage supplier content, a mix of techniques is required: punch-out, punch-through, internal catalogues, contract based, quick quotes etc. and all of this has to be easily accessible to the end user.

Should eProcurement be rolled out to end users?

Yes. Otherwise you are layering in inefficiencies. The procurement process must be effortless for the entire organisation.

For employees that means inductive buying. Having visibility of requests. Also ensuring a sense of ownership.
For department managers, they want easy budget checking, one-click approvals and full visibility of costs.
For Purchasing, there needs to be sourcing controls, centralised supplier and contract data and self-service buying for employees and self-service capabilities for suppliers.

eProcurement is about supporting people’s day jobs and delivering contribution to the bottom line.

Boardroom Chatter: Cost Reduction – Accounts Payable

2011-10-13T12:54:00.000+01:00

Over lunch, the CEO, CFO & CPO of a large corporation were chewing the fat. Topic: Cost reduction.

Turning their attention to Accounts Payable (AP), the CEO asks the CFO what the current state-of-play is? On the back of a napkin the CFO works out:

70,000 invoices processed per year
15 FTE in AP
220 working days
= 21 invoices processed per FTE, per day

“That doesn’t sound good” said the CEO. The CFO is tasked to undertake an audit and report back.

A week later: the report lands on the CEO’s desk with a thud. The highlights:

On average, it costs $35 to process a single invoice and takes well-over 30 days (whereas for top performers it costs $3.47 and takes 2.9 days, according to analysts).

The interesting (but scary!) stuff:

AP is currently receiving invoices in the most inefficient manner: regular mail and paper.
AP clerks have to physically match invoices with physical POs (if there are any), goods receipt notes and other documents that cause delays.
There are a high number of errors and discrepancies to deal with.
"Problem" invoices are sent out of Finance by interoffice mail to managers (the expensive people) for issue resolution.
Duplicate and rogue invoices are being paid as there is “just pay them” attitide.
For approvals, AP clerks send paper invoices out for a physical signature or worse still hold paper invoices back in finance and ask approvers to come and sign them.
On complex invoice categories, AP creates extra work for Procurement by insisting on “after-the-fact” POs so they can still do a three-way match – this keeps the ERP system happy but delays processing without noticeable improvement in control.
There are a high percentage of calls coming into AP from vendors enquiring about invoice status. AP waste time speaking with vendors AR departments because payment isn’t on time.

The board members get together to brain-storm ideas on how to make changes. On a whiteboard they draw up a ‘wish list’:

Most or all invoices are electronic
Invoice data is intelligently captured and extracted
High percentage of purchase orders with automated handling
Minimal-to-no staff handling vendor payment inquiries
Totally paperless processes with no storage issues
Global access to all documents and data
No issue with overpayments or late-payments
Cash-flow benefits from early-pay discounts and vendor negotiations
Hands-free exception-handling; high degree of automation

This situation is not uncommon. Do you recognize the same challenges within your organization?

PROACTIS, a leading supplier of spend control & eProcurement solutions, provides the capabilities to address these issues. To learn more click here.

Alternatively, download this guide that looks at how to formulate and execute a strategy to automate invoice processing: AP: How to Cut Costs and Improve Invoice Processing Efficiency.

You “Suddenly” Realise You’ve Become a Global Company – What’s Needed to Support a Multi-National Approach to Spend Control?

2011-10-07T13:38:00.000+01:00

Even with the economic turmoil of the past few years – or maybe in part because of it – many companies that essentially operated in a single country a few years ago now find themselves with sales, support, manufacturing, R&D, and other operations spread across various parts of the globe.

In some cases, this expansion has been achieved through organic growth, in others, it’s been through acquisitions. Either way, many such companies’ Spend Control frameworks have not kept up with the expansion, leaving significant levels of purchasing activity happening outside the corporate framework of controls and visibility.

There are any number of reasons why a company’s Spend Control processes have not kept up with their operational expansion, but one reason for a lot of companies is that their existing eProcurement systems are simply not designed to support multi-national deployment. Some of the challenges for financial and procurement executives who recognise the need to regain organisation-wide control of spend are:

Varying languages used by employees across different countries and regions
Varying currencies for POs and payments
Varying tax methods and regulatory requirements that must be adhered to at the local level
Varying financial and business systems
Varying scale of operations in different countries
Varying levels of procurement maturity

In order to standardise purchase-to-pay processes on a global basis, a company’s eProcurement system must be designed to address all of these issues. An eProcurement system not designed from the ground up to operate in a multi-national, multi-organisational environment simply cannot become an enterprise-wide Spend Control platform for a company with global operations. Capabilities to address the issues above cannot be bolted onto a system developed with just one country or one region of the world in mind.

Without a consistent enterprise-wide Spend Control umbrella, companies are missing out on opportunities to improve competitive, operational and financial performance by:

Eliminating unnecessary purchases
Ensuring purchases are made from the right suppliers (local or global)
Leveraging the company’s full buying power
Sharing spend category expertise across the company
Providing enterprise-wide visibility of spend to enable analysis and further savings

To gain perspective on this and other issues related to gaining effective Spend Control in a global company, download the PROACTIS paper titled: “Spend Control for the Multi-Location, Multi-Business Unit Organisation”.

Plugging the Gap - Procurement for Infor FMS SunSystems

2011-09-29T08:45:00.000+01:00

Infor’s acquisition pace in the past decade has been relentless. They have snapped-up a wide range of enterprise software to carve a sizeable slice of the ERP market.

Yet, despite the acquisition/organic growth there still remains a ‘void’ in the Infor solution portfolio: Spend Control & eProcurement.

Infor has continued to place Spend Control and eProcurement on the back burner in favor of core financials and supply chain and related areas.

This is surprising, given the enthusiasm for the space and the double-digit CAGR in most key areas including P2P, sourcing and supply management.

As a result, Infor FMS SunSystems users should not ignore the Spend Control “void”.

Demand for Spend Control & eProcurement

Current economic conditions are driving a marked increase in demand for Spend Control and eProcurement solutions because it provides an effective mechanism to minimize the cost of purchasing and deliver measurable ‘bottom line’ savings to the organization.

For example, “greater supply base consolidation will yield a greater ROI for procurement”:

According to the Hackett Group, there is a direct correlation between a decrease in the number of suppliers/billion of spending and decreased total procurement cost as a percentage of spending. Each reduction of 2,000 suppliers per billion of spending generates savings of more than 5 percent of overall procurement costs.

Spend Control and eProcurement software helps procurement operations to automate manual-intensive processes to “achieve more for less” and bring more “spend under management” e.g.:

perform more competitive bidding events
free up time to undertake category management
engage more effectively with the organization to understand demand requirements
conduct a larger number of supplier performance reviews per FTE etc.

This is just one area for opportunity when it comes to spend control.

Given the strategic importance of Procurement – especially when it comes to areas like sourcing, supplier development/ collaboration, compliance and working capital management etc. – ROI potential for an effective Spend Control solution is high.

PROACTIS & Infor FMS SunSystems

PROACTIS, a “best-in-class” provider of Spend Control & eProcurement solutions, has been “plugging the gap” for Infor FMS SunSystems users for over ten years and helps clients to leverage the value of their existing IT investments.

PROACTIS for Infor FMS SunSystems offers:

Purchase-to-Pay:

PROACTIS is designed to manage all spend, across all suppliers.

The software streamlines purchasing and invoice handling, imposing vital controls over spending, delivering instant cost-base visibility and automating typically inefficient paper intensive processes to bring savings from efficiencies and economies of scale.

Strategic Sourcing:

PROACTIS is an environment presenting a suite of hosted applications that can be used as the core of an organization’s buy-side eCommerce strategy, or as simple enhancements to any (i.e. not just PROACTIS Purchase-to-Pay!) purchase-to-pay application.

The suite include solutions for sourcing, contract management, catalogue & content management, electronic invoicing, and vendor recruitment, adoption and appraisal etc. When delivered alongside PROACTIS Purchase-to-Pay, the combination represents the most comprehensive eProcurement solution today.

Integration with Infor FMS SunSystems

PROACTIS integrates with all versions of Infor FMS SunSystems. The “wizard-based” integration tools make it easy to link PROACTIS and other business systems.

This offers exceptional business benefit and much lower cost of ownership for Infor FMS SunSystems users.

PROACTIS & Infor FMS SunSystems: The Benefits

PROACTIS addresses a number of challenges faced by Infor FMS SunSystems users today e.g.:

Maverick Spend

Regardless of corporate procurement guidelines & processes, whenever staff need to procure goods they will seek out the easiest route to satisfaction. Without an effective spend management solution the easiest route is often outside corporate control.

PROACTIS addresses the issue of maverick spend by offering:

Controlled catalogues and suppliers
Up-front coding, budget and commitment checking
Authorization workflow etc.

Lack of Cost Pipeline Visibility

In a recent survey for one of our clients prior to implementing PROACTIS we found that more than 60% of inbound invoices were “invisible” to them prior to receipt by Accounts Payable. There was no electronic record of any liability and management had no collective view of corporate exposure.

PROACTIS addresses the issue of cost pipeline visibility by offering:

Transaction visibility throughout workflow
Executive dashboards of “vital signs”
Commitment reporting etc.

Process Inefficiencies and Inconsistencies

Manual processes are time consuming, prone to error and open to fraud. Often they lack the transparency and auditability required by world-class organizations.

PROACTIS addresses the issue of process inefficiencies and inconsistencies by offering:

Electronic workflow
Email and task integration
Invoicing & mis-match troubleshooting etc.

User Adoption

There is no doubt that if a procurement solution is not adopted by everyday users it will fail to control spending for the organisation. If users can find an easier way to satisfy their business need than be employing the system they should, they will. Most user interfaces are focused on the transaction, not the user. Most workflows demand too much thought to be classified as automatic.

PROACTIS addresses the issue of user adoption by offering:

Highly intuitive interface
Transaction ownership and full visibility
Intuitive buying process etc.

Corporate Governance & Compliance

Understanding your corporate responsibility and providing the controls you need to comply with the requirements of the Sarbanes-Oxley Act and other similar guidelines is an important part of the role of a CPO. How closely can you control the habits of your staff? How easy is it to manage maverick spend?

Balancing ease of shopping with the rules that you need to impose is a tightrope that must be walked in order to allow people to do their job within corporate constraints.

PROACTIS addresses the issue of corporate governance & compliance by offering:

Full accountability & visibility of transactions
Electronic corporate guidelines
Compliance engine etc.

Managing Vendor Relationships

How important is the relationship you have with your vendors? What would happen if the relationship faltered? How often do you refresh the relationship or appraise the vendor’s performance? How do you measure that? What is the risk to you if the vendor “disappears” overnight?

PROACTIS addresses the issue of managing vendor relationships by offering:

Electronic vendor grading
Supplier performance measurement
Vendor visibility etc.

To learn more about PROACTIS for Infor FMS SunSystems click here.

PROACTIS as an Agent of Change

2011-09-23T08:54:00.000+01:00

Some of the 350+ organizations using PROACTIS today came to us looking for specific software or cloud-based Software-as-a-Service (SaaS) solutions with specific functional requirements in hand. But more often, they initially came to us looking for “tools that would help them institute change.”

When we meet financial and procurement executives at industry conference and events, they usually say things like “I know we’re buying things we don’t need and spending more than necessary on what we do buy, but I just don’t have a practical framework to change that behaviour.” Or “Our management recognizes individual problems like an expensive AP operation, too little visibility of purchase commitments, too many different suppliers for the same products, and things like that, but I’m having a hard time getting them to see the big picture of how all these problems relate to each other.”

Some of those people we never see again after a friendly chat over a cup of coffee in a hotel lobby. But many of those conversations evolve step by step into a discussion about what we do and how we might be able to help them help their organization make meaningful improvements that really improve financial and competitive performance. The people with whom we have those kinds of conversations often become customers. Not just because we have the best spend control and e-procurement solutions around (which we do of course!), but because of that plus the fact that those people are people who have a real drive to improve things for their companies. Successful spend control initiatives are almost always achieved when a person with a vision finds the toolset that enables them to spread that vision through their organization, and that provides a flexible, but also concrete, framework to support that vision.

The PROACTIS solution suite is much more than just software. PROACTIS is a tool finance and procurement executives can use to dramatically improve the way their entire organization operates by instituting proven best practices, streamlining business processes, and improving operational controls.
For instance:

It enables a cultural change that allows employees across the organization to buy the goods and services they need on a routine basis, but always within proper organizational policies and procedures.
It provides functional managers at all levels of the organization with the ability to make better decisions because they have immediate access to information related to purchase requests, budgets, commitments, and the entire ‘cost pipeline’.
It dramatically streamlines the Accounts Payable function while providing better control of payments.
It enables the Procurement function to structure and streamline many of its daily activities, freeing more time to focus on finding premier suppliers, negotiating best value agreements, and maintaining good long-term supplier relationships.
It enables strategic changes like geographically dispersed spend category teams and ‘centers of excellence’
It provides more information for spend analysis, enabling important initiatives such as supplier consolidation and national or global contracts.
And it can do much, much more...

Once the managers and executives we first meet understand the breadth of the PROACTIS suite, many of them ask us to come into their organizations for the simple purpose of showing other managers what a complete spend control solution looks like, what it entails, and how it all fits together. Few try to tackle everything at once, but gaining a common understanding of the full picture makes it a lot easier to address the most critical needs in a step-by-step manner.

Many start with the basic purchase-to-pay process; others with strategic procurement; others with supplier management – or what we more broadly call supplier engagement. But in nearly every case, someone in the organization is using PROACTIS an agent of change. They recognize that, used to its fullest advantage, PROACTIS can help their organization go beyond just automating the way things are done today to establish new, better processes that significantly improve organizational performance and bottom line results.

If you are looking for a way to lead your organization toward a more effective approach to spend control, start by downloading our PROACTIS Solution Overview. Use it along with our many white papers, our “15 minute health check” series, and our diverse case studies to stimulate discussion within your organization. We would be happy to help as we have with many organizations much like yours.

Have You Really Gotten the Cost of Accounts Payable as Low as Possible?

2011-09-19T11:32:00.000+01:00

Financial executives in most larger organizations have been conscious for some time now that they have an area right within their own span of responsibility that represents an opportunity to help improve their company’s overall bottom line – Accounts Payable. In many organizations, invoice processing is the single most paper-intensive, “high touch” manual activity remaining today. Even organizations that have largely automated their front office, operational and supply chain functions often still process invoices in a very manual manner.

In their E-Payables Benchmark 2009 study, Aberdeen Group found that the industry average cost to process an invoice was $11.19.

“Laggard” companies (bottom 30%) had an average cost of $35.56
“Best-in-Class” companies (top 20%) had an average cost of just $3.53

The difference between Laggard and Best-in-Class companies is over $32.00 per invoice! Multiply that by thousands of invoices, add the cost of missed opportunities for early payment discounts, and add the cost of AP FTEs required to answer supplier payment inquiries, and it’s easy to see that the direct cost of inefficient invoice processing is substantial.

If you have responsibility for the Accounts Payable (AP) function, you have no doubt already taken steps to streamline the process – possibly by implementing document scanning technology or by working with certain suppliers to institute electronic invoicing. There is no question that paper invoice handling is the enemy of efficiency in the AP department. Scanning invoices into a document management system can help, but by no means solves the entire problem. Receiving invoices electronically helps more, but only if the rest of the process is set up to really use the information in an automated fashion.

Have you really taken a holistic view of AP and developed a serious strategy to reduce cost – and to do so while actually improving the value AP delivers to the rest of the company? Have you clearly identified the other problems caused by the “mail latency”, “desk float” and “information chase” associated with manual invoice processing, like:

Management does not have visibility of outstanding liabilities
Invoices are beyond the discount period before they even enter the AP system
The potential for paying duplicate invoices increases as suppliers send second copies
The inclination to “just pay it” becomes greater when the validation process is too cumbersome
AP personnel end up spending a high percentage of their time answering inquiries from suppliers about payment status
Audits become long, costly and problematic

A well-thought-out approach to invoice processing automation can address all of those issues as well as reduce the cost of AP operations.

There are a couple of PROACTIS resources that can help you formulate a practical and effective strategy for improving your AP operations:

Accounts Payable: How to Cut Costs and Improve Invoice Processing Efficiency
15Minute Health Check: Accounts Payable

Consider downloading them today…

Why PROACTIS is Your Ticket to Effective Purchasing

2011-09-16T16:38:00.000+01:00

PROACTIS specialises in just one thing – helping organisations improve their operational and financial performance by improving the way they buy all types of goods and services: we call this “best-in-class” Spend Control and eProcurement.

Specifically, PROACTIS provides software solutions and services that help commercial, public and not-for-profit organisations to:

Reduce the overall cost of purchases goods and services
Improve financial control
Mitigate risk

Only PROACTIS offers the capabilities to streamline the entire procurement process, with the organisation-wide controls you need to ensure policy compliance, and an intuitive easy-to-use design that is required for organisation-wide adoption.

Purchasing Challenges

Organisations are under pressure to do more with less. In most organisations, the key processes have been streamlined and improved over the last few years, but a wide range of problems are endemic to those who ignore the purchasing process for indirect expenditure:

Employees often make purchases without appropriate authorisation
Many purchases are made from non-preferred sources
There is no visibility of purchase commitments until invoices arrive
Costs are attributed to the wrong accounts or departments
No one really knows what’s being bought over time – little information is available to support procurement improvements

Furthermore, your ERP systems will most likely not provide the answer. ERP systems cover a broad function scope and offer a degree of integration across different applications. However, such breadth leads to a lack of focus on Spend Control issues such as bringing maverick spend under control, giving visibility of the cost pipeline and delivering economies of scale.

Purchasing Requirements

What is needed is a solution that supports the day-to-day purchasing process in a way that ensures compliance with organisational sourcing and authorisation rules while at the same time making it as easy as possible for employees to buy goods and services.

PROACTIS manages the complete buying cycle, from expression of need to approval of payment, in a consistent and fully transparent process. Capabilities include:

Multi-source requisition – PROACTIS enables a seamless search across the multiple sources available for that user to compare and choose items to request
Corporate compliance – PROACTIS provides a set of tools to capture authorisation rules, business processes, and purchasing and accounting rules that may be applied to any new purchasing request
Planned procurement – Users define a project against which to purchase, or a plan for procurement and submit it for approval
Invoice matching and troubleshooting – Automatic receipting ensures streamlining and control plus 3-way matching and workflow to support all types of goods and services
Automated payment release – Auto-generation of payment release streamlines supplier payments
Items and catalogues – PROACTIS provides a range of tools to maintain catalogues of generic and supplier-specific items. This includes in-house catalogues, supplier catalogue import, or punch-out to supplier websites
Spend visibility – Visibility of spend from transaction through to summary analysis makes PROACTIS an invaluable management tool to support executive and departmental decision-making.

And much more…

PROACTIS applications are all designed to be agnostic to surrounding Financial and ERP systems, whether they are in-house developed or packaged applications.

PROACTIS also provides an integration framework to streamline and automate inter-system transactions and to leverage the value of your existing IT investments.

To learn more about PROACTIS purchase-to-pay solutions (plus our integrated suite of procurement solutions which help to automate upstream sourcing, supplier enablement and integration, contract management, and SRM processes) download the PROACTIS solutions overview brochure or visit proactis.com.

Millions of people in hundreds of organisations around the world use PROACTIS Spend Control and eProcurement solutions every day. Organisations range from Fortune100 companies, central government agencies, and national associations; to mid-sized companies in just about every industry, a variety of local governments and authorities; and charities focused on many different causes.

Are Supplier Networks the “Silver Bullet”?

2011-09-12T17:00:00.000+01:00

Clearly, the idea of connecting buyers and sellers with each other “in the cloud” where they can easily collaborate, share information and exchange transactions is an approach that can positively impact a company’s Spend Control efforts.

Today’s Internet-based technologies have made that process far simpler than it was even five years ago. Basic capabilities such as web portals, email, and XML enable organisations to communicate and collaborate with suppliers in ways that would have previously required specialised technology and a large IT effort.

One approach to enabling buyer-supplier connectivity in the cloud that has garnered attention lately is that of supplier networks and eMarketplaces - a concept that initially rose and fell in the “dot-com” era, and has recently been given new life by a number of solution providers.

The Reality of Supplier Networks and eMarketplaces

On the surface, the concept seems great for buyers – a large number of suppliers already set up and accessible through a single “hub”. And in some cases, there are in fact advantages to this approach to dealing with suppliers.

But supplier networks and eMarketplaces are not the “silver bullet” their operators position them as being. While access to certain specialised supplier networks and eMarketplaces can be a useful as part of an organisation’s overall strategy for supplier connectivity and enablement, the extent of that usefulness is often overstated by the operators of some such services.

The Fundamental Goals of Supplier Connectivity and Enablement

Looking beyond the noise, what are buying organisations really trying to achieve with supplier networks and eMarketplaces? The organisations we work with are pretty clear – they tell us that their fundamental goals are:

Reduce costs by introducing standard purchase-to-pay (P2P) processes
Reduce the cost of transaction processing
Reduce the cost of supplier enablement

Common Myths

You may perceive that the “biggest and broadest” public supplier network will enable you to achieve those objectives, but keep in mind that:

They don’t really come without a cost
They don’t cover every spend category
They don’t provide suitable capabilities for all types and sizes of suppliers
They don’t really relieve you of all supplier enablement tasks
Most importantly… they don’t automatically put more spend under management or transform your procurement process

In a recent PROACTIS white paper, we identified and addressed nine common myths about supplier networks and eMarketplaces. Download the paper: Supplier Enablement: Myths and Realities about Supplier Networks and eMarketplaces to learn more about the realities related to each of these myths as well as an overview of how PROACTIS provides the capabilities for practical real-world solutions to supplier connectivity and enablement.

Built-in Controls & Monitoring Compliance is Essential to Gain Value from eProcurement, According to PROACTIS

2011-08-19T11:33:00.000+01:00

Speaking with government agencies in Canberra, Australia, Paul Waylett, CEO PROACTIS Asia Pacific, said: “It is vital organisations adopt electronic controls to improve spend visibility and ensure user compliance”.

This statement follows the Australian government’s spending watchdog being criticised for not following its own purchasing compliance rules over a nine month period. The internal audit reported the government’s Department of Finance and Deregulation “failed to meet its own compliance rules in 19 procurements out of a sample of 27 that occurred between 1 July 2009 and 31 March 2010”, as reported in SupplyManagement.com.

The audit revealed “procurement processes did not encourage competition in accordance with Commonwealth Procurement Guidelines” and highlighted issues including “poor value for money”, “poor risk assessments” and “discrimination based on location”.

In his briefings, Paul describes the essential controls that make it practical to ensure organisation-wide compliance with all sourcing, budgetary, and approval policies. “Many government executives and departments are held back by manual process and the limitations of existing Finance and ERP systems that do not provide necessary controls” continued Paul.

PROACTIS - Built-in controls to ensure compliance:

Finance controls

Automated finance coding and validation ensure proper expense allocation while saving users time
Interactive encumbrance/commitment checks ensure budgetary compliance
Authorisation engine ensures that the right people approve each request based on organisational hierarchies as well as type, size, and nature of request
Invoice matching with automated exception reporting and troubleshooting ensures only valid invoices are paid
Audit trails provide transparency, accountability and fraud prevention

Buying controls

Catalogue access controls ensure buying from approved suppliers and established contracts
Transaction templates ensure correct buying from supplier, location, item, value, account code, etc. for specific individuals or departments

Sourcing process controls

Sourcing projects automatically direct procurement of items not under catalogue or contract through proper procedure using a fully transparent process
Organisation-specific rules guide users through the proper sourcing process for each commodity or service without the need to understand or remember corporate standards
Authorisation engine ensures proper authorisations throughout each type of sourcing project to ensure due process and visibility

Interested in purchasing compliance and want to learn more about the essential controls? Contact us.

Supplier Engagement: "Why it Consumes Time, Effort & Cost" (More than What Most Finance & Procurement Execs Realise)

2011-08-18T18:01:00.000+01:00

Supplier Engagement is a hot topic. Organisations are on the hunt for techniques and technologies that will help them to reduce the cost, inefficiency and risk in trading with suppliers. But why?

Let’s take a typical case study - what we routinely see:

The situation

The organisation tends to equate ‘suppliers’ to ‘creditors’, meaning they register and maintain details in the corporate ledger to pay invoices. This is what we call “spent” control not “spend control”.

Each year the supply base changes by up to 50% with as little as 10% of the new suppliers being actively used in subsequent years
Less than 10% of current suppliers will account for 80% of their total spend
Around 20% of their current suppliers will account for 80% of the invoices processed
A moderate percentage of suppliers will trade with more than one service area or department within the organisation
A high percentage of subjective general ledger codes will account for spend
Little effort is made to categorise suppliers (e.g. high risk, routine, sundry etc.), manage performance and co-ordinate information across departments .

The challenges

This presents a number of challenges for Procurement AND Finance. Without a clear and formalised strategy for identifying and engaging with suppliers, it is difficult to:

Share information to improve planning and collaboration
Engage appropriately with the right suppliers that can deliver value
Understand the optimum trading mechanism with suppliers
Adopt the right risk reduction strategies
Manage the performance of suppliers to achieve business objectives

This is even more problematic when you consider the types and range of suppliers across all your purchase categories:

Suppliers of direct and indirect goods
Suppliers of ongoing, periodic, and one-time services
High volume/low value and low volume/high value suppliers
Huge global corporations and small companies
Companies with sophisticated IT capabilities and companies with little
Local, regional and global suppliers

Plus, you may engage with some suppliers as a single or sole source and others you will have a strategic relationship with. Clearly, a “one-size-fits all” approach will not work effectively across your supply base.

What is required?

Effective supplier engagement should address a broad range of activities that takes place every day with suppliers. Your Procurement and Accounts Payable departments interact continually to:

Recruit and qualify potential new suppliers
Solicit bids and proposals, accept responses, and collaborate on solutions
Maintain important supplier information
Update supplier catalogues
Perform supplier reviews
Send purchase orders
Receive and process invoice transactions
Respond to supplier enquiries about invoice and payment status

That’s a lot of activity performed by a lot of different people. And in most organistaions, much of that activity is still done in an unstructured manner using paper, fax, email. That means a lot of inefficiency, many opportunities for human error, and very little process standardisation or control.

Effective Supplier Engagement should incorporate a comprehensive, phased approach to managing, communicating with, and trading with your suppliers.

Phase 1.
Gain a clear picture of what your buying, and from whom. Undertake a rapid and high level procurement review to identify areas that can deliver immediate cost savings and efficiencies.

Once the base information is gathered, you can categorise suppliers, outline the various communication and eCommerce methods you will need for different types of suppliers, and highlight candidates and methods for invoice volume reduction. Ultimately, you will be able to identify the opportunities that will make the greatest impact, fastest.

Phase 2.
Once you understand your environment, develop your strategy, and collect essential information. Adopt eProcurement technology and implement a framework to streamline and automate key aspects of Supplier Engagement in the sequence that provides the most value to you. This framework should include the tools you need to:

Maintain accurate, up-to-date supplier information (supplier directory, recruitment, qualification and adoption, eCatalogue management)
Effectively communicate and collaborate with different types of suppliers (self-service profile and catalogue management, RFx and quotation posting and response and account enquiry)
Streamline commerce transactions (orders and invoices)

Phase 3.
Once you have the Supplier Engagement framework in place and address initial “quick win” opportunities, you will be ready to work your larger strategy with incremental expansion and refinement.

Why bother? The benefits of Supplier Enagement

For the CEO:

Improved profitability through reduced costs
Improved competitive position through a stronger supply chain
Reduced risk

For Finance:

Reduced capital employed in the business
Reduced operational cost in AP, Procurement, and across the enterprise
Reduced cost of purchased goods and services
Improved cash management

For Procurement:

Stronger supplier relationships
Better value; lower risk
More time for strategic sourcing and supplier development activities

Download the white paper: "Supplier Engagement: A Practical and Smart Approach to Reducing Cost Inefficiency and Risk"

Local Government eProcurement – The Issues that Matter

2011-08-15T14:49:00.000+01:00

Local Authorities are under pressure to improve efficiency by embracing new technologies. eProcurement is recognised as one of the key pillars of a successful eGovernment strategy, seen by most an as effective way to reduce purchase costs, drive new efficiencies and promote collaboration across local government.

But with conflicting hype from different eProcurement vendors, and little clarity about where to begin, the market is increasingly confused. In this article, we aim to cut through the hype and explore the issues that matter and the key requirements for successful eProcurement:

Establishing internal controls
eProcurement is about more than just paperclips
Driving efficiencies through the purchasing process
Collaborating with other authorities in procurement
eProcurement as a means of energising the local economy
Complying with supplier payment targets
Visibility and accountability in procurement

1. Establishing internal controls

What matters – Whilst every procurement professional seems attracted to the prospect of harnessing Internet technology to improve eSourcing or supplier collaboration, many feel it is more pressing to establish control over the buying process and wish to implement a rigid purchase-to-pay process first. As one local government CPO told us recently, “We need to set our house in order and establish some control, and only then can we think about putting the icing on the cake”.

For local authorities wishing to make an impact on their organisation, rather than simply being able to tick the eProcurement box, this is an obvious place to start.

Key requirements – Most local government organisations lack the basic controls around procurement. We believe that an effective eProcurement solution should offer:

The ability to encourage the use of preferred and approved suppliers, so that it is the authority and not the individual who decides which suppliers are used.
An efficient way to ensure that all purchases are fully approved before being submitted to suppliers (approving invoices after the event is too late as spend is already committed).
The ability to track spend against budgets, prevent (or warn about) potential overspends and the ability to examine the organisation’s financial commitments in real time at any given moment.

2. eProcurement is about more than just paperclips

What matters – A common criticism of eProcurement is that it is only good for streamlining the purchasing of stationery and other simple or "catalogue" items. But the opportunity is there to control, monitor and reduce a much greater proportion of non-staff expenditure.

Key requirements – In addition to administrative procurement it is important to consider the ability to seize control of other types of non-staff spend, including:

Capital expenditure, with integration to an assets management system.
Utilities, telecoms or other contracted spend which requires pre-payment approval and analysis, but very different procurement procedures.
Services purchasing, where the “receipting” process is unnecessary and which is difficult to catalogue.
Internal cross-charging or service provision.
Employee expense claims.

3. Driving efficiencies through the purchase process

What matters – Many local authorities have not implemented an efficient purchase-to-pay process and, as a result, suffer from process inefficiencies. Paper-based systems typically result in an enormous workload for Accounts Payable staff, who need to reconcile what was ordered, what was actually delivered and what is stated on the invoices. Most semi-automated purchasing systems, such as software provided with a finance system, tend to be designed for centralised procurement, and therefore do not lend themselves to a decentralised process.

Key requirements – Balancing the need for an efficient process with the desire for financial controls is often the most difficult part of any eProcurement implementation. Key requirements include:

A solution that is so easy to use that staff can quickly request or order goods/services without training and without needing to understand the procurement process.
Electronic workflow that routes requests around the organisation without the need for paper, and which can be used to automate the process of resolving invoice discrepancies.

4. Collaborating with other authorities in procurement

What matters – Collaborative procurement initiatives have been outlined as a key method of driving public sector savings by many of the Government’s efficiency reviews. Local authorities are being encouraged to work together and share some procurement services and exploit economies of scale when negotiating new deals with suppliers.

Key requirements – eProcurement solutions can support your collaboration with other local authorities. Major considerations when evaluating possible solutions should include the following:

Supplier networks and eMarketplaces should complement an authority’s existing procurement strategy. Be careful of electronic trading models which effectively handover control of your supplier strategy to a third party. In particular, be careful that supplier networks and eMarketplaces which require suppliers to pay a joining fee and in reality offer little more than an online supplier directory. Wise authorities are using more discerning models which allows control over the supplier community, whilst still offering the benefits of electronic trading.
An eProcurement solution that is designed to promote cross-organisation collaboration should be capable of integrating with a range of internal systems. It is important not to implement a "cul-de-sac" solution, that only allows collaboration with authorities using the same platform.
An eProcurement strategy should offer a means of embracing the local SME community as well as larger national suppliers. Many eProcurement systems are fine when dealing with suppliers who have invested in an eCommerce infrastructure, but as a local authority there is also a responsibility to smaller local businesses who might not be as advanced when it comes to IT.

5. eProcurement as a means of energising the local economy

What matters – eProcurement provides local government with a unique opportunity to give something back to the local SME community. The right eProcurement solution not only enables SMEs to compete for local government contracts on a level playing field, but also offers them new opportunities to trade with each other and with other authorities across the region.

Key requirements – Most eProcurement systems emphasise the availability of global suppliers through subscription-based directories or “punch-out” to sophisticated websites. However, we believe that an eProcurement solution should promote economic development with features that enable:

Local SME suppliers to manage catalogues online.
Suppliers to trade with each other and with other registered buying organisations (regardless of the buyer’s purchasing system).
Automated supplier adoption procedures, which walk the supplier through the process of doing business with the authority and undertakes any relevant supplier certification.
Suppliers to monitor the status of their invoices to the buying authority online.
Suppliers to send electronic invoices without the need to invest in back-office systems.

6. Complying with supplier payment targets

What matters – Local government is under pressure to increase the proportion of undisputed supplier invoices paid within 30 days. For most authorities, however, the inefficient purchasing and accounts payable processes makes 30 days an unrealistic target. Worse still, for most organisations it is impossible to even check their compliance, as they have no means of monitoring the payment cycle.

Key requirements – eProcurement offers an opportunity to radically improve the efficiency of the supplier invoice and payment process, making the prospect of paying suppliers on-time realistic. To assess the value that an eProcurement system can offer in this area, it is important to consider:

An invoice that matches an approved order and is properly receipted should be automatically passed for payment (i.e. does the system require only invoices with discrepancies to be dealt with by staff?)
Does the system automate the process of handling invoices that do not match the order to contain price or delivery discrepancies?
Can the eProcurement solution integrate Document Scanning or OCR to remove the need for Accounts Payable staff to laboriously process each supplier invoice?
Does the eProcurement solution include eInvoicing technology, which is increasingly important when dealing with SME suppliers in local government?
Does it offer the ability to report on the invoice payment cycle, both to query a specific invoice status or overall payment trends and KPI status?
Can selected suppliers log in to the system to monitor their own invoice status, eradicating the need for calls to the Accounts department to chase payment?

7. Visibility and accountability in procurement

What matters – Today most local authorities lack basic information on supplier performance, spending patterns, committed expenditure, etc. Developing reports to access this data tends to be a major undertaking for the IT team. In many cases the use of paper-based buying process prevents any kind of meaningful reporting whatsoever.

Key requirements – eProcurement offers the opportunity to unlock procurement and financial data, and make it available throughout the organisation wherever it is needed to support decisions. A comprehensive eProcurement solution should offer:

Detailed supplier performance reports based on actual purchasing data.
Budget and commitment tracking dashboards, allowing executives to monitor spending and commitments against budgets.
Real-time analysis of spend with drill-down capabilities.
The ability for any users to produce their own reports on available data, without the need for IT involvement.
The ability to report across multiple systems, combining data from several critical systems to establish a single view of data.

PROACTIS is an established author of Spend Control and eProcurement software, with an unrivalled track record of delivering successful cloud eProcurement projects across the public, not-for-profit and private sectors. To learn more click here.

PROACTIS Keynote - "Spend Control & Cloud eProcurement: How to Achieve Rapid ROI"

2011-08-12T17:36:00.000+01:00

The events of the global financial credit crisis have had a ripple effect on the economy and thrust Spend Control - and the need to gain greater visibility and control over cash management and the financial supply chain - to the forefront of corporate strategy.

PROACTIS will be hosting the keynote session at eWorld Purchasing & Supply in September 2011. "Spend Control & Cloud eProcurement: How to Achieve Rapid ROI" will discuss the steps that best-in-class companies are taking to streamline and accelerate Finance and Procurement processes, reduce operating costs, manage risk, and ensure compliance while improving visibility, control, and efficiency, and providing a foundation for increased profits.

Joe Taylor, Head of Solutions at PROACTIS, will explore the most important issues Finance and Procurement organisations are addressing to manage performance, and share real-life case studies on how to create an effective business case for Spend Control and eProcurement.

Session topics include how to:

Lay the foundation of procurement effectiveness by obtaining greater visibility and control of spend
Focus on the purchasing process to eliminate off-contract and “maverick spend"
Optimise the strategic sourcing process to maximise cost savings
Invest in SRM processes to build a supply base that delivers competitive pricing and performance
Eliminate the daily activity and paperwork in AP that does not add value

Keynote session: 11:05am, 21 September 2011, QEII Conference Centre, Central London

To register for the event, please visit: www.eworld-purchasing.com

PCards – A Partial Remedy to Reduce Costs

2011-08-10T14:55:00.000+01:00

Organisations continue to look for efficiency savings through automation, and procurement cards (PCards) can be an obvious place to start. In this article, we discuss the merits and considerations for PCard programs…

What are PCards?

PCards are a form of company credit card that is issued to employees who can then buy goods and services without having to process the purchase through a traditional purchasing procedure, such as using requisitions and purchase orders. The organisation issues PCards to employees, tells them to go ahead and buy what they need and charge it to the card. They can also restrict usage of the card to any supplier or category that has a preferred status. By taking advantage of credit card infrastructure to make electronic payments, PCards offer a simple payment system.

The attraction of establishing a PCard program is the automation and efficiency it brings. PCards reduce the processing costs and time required for purchase order creation, authorisation, invoice 3-way matching, payments, queries etc. This is particularly useful for the purchase of small items where the overhead costs can be hard to justify. PCards enable control of where purchases are made and provides an opportunity to lower prices for what is bought. In addition, by streamlining the process, PCards make payments quicker and allow organisations to capitalise on early payment discounts. Some issuers even offer attractive rebates on how much you spend.

There are benefits for suppliers as well, in terms of lower processing – offering less administration, faster payments and improved cash flow.

Types of PCards

There is a range of PCards available e.g.:

Company/Travel PCards – typically used by organisations for employee travel and entertainment related expenses
Supplier PCards – dedicated to purchasing off a supplier contract to ensure compliance (e.g. IT or equipment leases)
Ghost PCards – a card account issued to a specific supplier or supplier type to process all the organisation’s transactions
Fleet PCards – a card product used by organisations to pay for fuel and related expenses on company vehicles
eCommerce PCards – cards dedicated to high-volume transactions in order to eliminate the cost of invoice processing
Pre-paid and single use PCards – cards preloaded with a spend limit and/or used for one-off high value purchases or some specific project spend

Most organisations already use PCards in one form or fashion as a means to reduce the purchasing costs associated with buying low-value, high-volume goods and services. However, quite often this is just the beginning. It is important to consider other techniques to provide the ability to seize control of all types of non-payroll spend, including:

Simple or “catalogue” items
Capital expenditure
Utilities, telecoms or other contracted spend
Services purchasing
Internal cross-charging or service provision
Employee expense claims etc.

Challenges to PCards

While there are numerous benefits to PCard programs, not all organisations have taken them up. Some of the reasons and issues include:

Transaction control – many executives just don't like the idea of issuing cards to employees and/or buyers are security conscious and limit the use of cards (restrictions like transaction and spend limits and which suppliers will be blocked need to be managed to mitigate fraud and misuse).
ERP integration – PCard programs that are managed manually and not integrated into the ERP system incur more administration, cost and error. In addition, how the card charges are applied in the general ledger becomes problematic for accounting and budget control.
Cardholder administration – PCard programs generally require a person to oversee the issuing of new cards, terminate cards, monitor activity and communicate with the issuer.
Supplier enrolment and card acceptance – suppliers incur a cost to becoming a credit card acceptor and as a result not all suppliers participate in PCard programs

Integrating PCards with eProcurement

PCards and eProcurement should not be treated as two separate purchasing initiatives. There are some major advantages from integrating the two strategies. eProcurement solutions should offer an opportunity to harness the PCard, offering the ability to capture all non-payroll spend in the same system to enable true Spend Control and comprehensive procurement analysis. Key requirements include:

The ability to capture information about PCard transactions as they happen, allowing the financial commitment to be recorded
The ability to subject PCard transactions to the relevant pre-purchase approval and budget checking, where required
A means to automate the reconciliation of PCard statements and streamline the process of approving them prior to payment
An ability to report on PCard transactions alongside other purchase transactions

Place Your Bets: How to Build a Proactive Team & Procurement Organisation

2011-08-01T10:31:00.000+01:00

The topic of "how to build a proactive team and procurement organisation" was recently explored by PROACTIS at an executive roundtable, Monte Carlo Resort, Las Vegas. After much debate, senior procurement and supply chain executives were asked to place their chips on five key areas for achieving success. The results:

1. Understand your business. Review the company's strategic business objectives – know what your company does and how it makes profitability. Understand how purchasing happens in the organisation. Align priorities and resources to the business plan and not just revenue generation. Focus energies on how to impact the bottom line and ultimately shareholder value (or if you are in the public sector, return from budget).

2. Define and deliver value. Translate the definition of “value” to the rest of the organisation and use this as a basis to justify headcount moving forwards. Simplify procurement language and talk in speak that Finance and the rest of that organisation understands.

3. Be results orientated. In small companies the delivery of results is much more transparent. However, in larger companies you have a lot of "heads in the middle" and it is easy to lose focus. Ask questions repeatably and challenge the status quo. Define the metrics that each procurement practitioner should have to evaluate their performance (cash savings, redistributed savings, cost avoidance and the value from lost, obsolete or redundant suppliers etc). Explain the most effective reporting approach.

4. Build talent. Accomplish through others. Spend a large proportion of your time building talent, skills and capacity in procurement. Keep the procurement function “alive and kicking” (e.g. rotation schemes for category managers). Ensure your staff are not "controlled" by spend owners. Build succession plans.

5. Automate processes. Remove the grunt work out of the procurement process so more time can be spent delivering value (e.g. demand management, competitive bidding and supplier performance/risk reviews). Take a holistic view of the upstream and downstream procure-to-pay processes. Automation can ultimately help you "do more for less" and focus your talent more effectively.

What’s your view on the most critical ways to achieve success? Will their bets come good?

If you haven't yet "created" a space at the C-level table then try exploring these five areas. It may just be your ticket for success!

Buyers: Watch Out eProcurement "Newbies" About!

2011-07-26T23:57:00.000+01:00

Demand for eProcurement continues as organisations increasingly view the Spend Control aspects of their business much more strategically. Consequently, there has been a rise of new entrants wanting a piece of the action. As the market heats up, so too are vendor sales tactics.

Enterprise buyers must tread carefully in their due diligence, especially early on in the project so as not to waste time, effort or resources. In particular, watch out for:

Client lists that are boosted by registrants from online, free trials
Sales demonstrations that avoid complex spend and workflow processes
Marketing gimmicks such as "introductory rates" or "free" basic service with a later upgrade to a "premium" service
ROI guarantees that do not factor into account the client's unique circumstances (or get monitored)
Loss-leading pricing that is designed to buy market share and establish the organisation as an acquisition target
References in industry reports that have been paid for by the vendor

If vendor claims are dubious then what of the solution? Equally, if the commercial proposition sounds too good to be true, it probably is!

Look for "tried and tested" organisations, like PROACTIS, that have solutions built from extensive real world experience using today's most advanced and reliable technologies to support your critical spend control processes.

Fully internationalised to support global business
Proven integration with existing systems for streamlined processes
Microsoft technology for a reliable, scalable industry-standard platform
Intuitive design to drive broad adoption
Deployment options to fit any organisation and business model
Easy system administration to reduce total cost of ownership
Flexible licensing to deliver affordable world-class solutions for any need and size of organisation

Insight into eProcurement Project Success at PROACTIS Inc.

2011-07-26T23:50:00.000+01:00

Interesting interview with Mike Tossell, North American Client Services Manager, at PROACTIS Inc., to gain insight into the increasing number of Spend Control and eProcurement projects taking shape in North America. Some great evidence of cloud eProcurement deployments - enhancing clients ERP financial management processes and delivering cost savings:

Electronic Commerce: A fortune 100 organisation selected PROACTIS to replace Oracle iProcurement. Their objective was to adopt a specialist Spend Control and eProcurement solution capable of streamlining a high volume of commerce transactions across 18 countries. This included "out-of the-box" ERP integration, punch-outs to key vendors (Staples, Merrill, Lyreco, etc.) and a rather neat integration with AMEX. AMEX-V Payment offers a "virtual P-Card" enabling a credit card number for "one-time use" specific to each transaction. The vendor then charges the credit card number for the value of the order as apposed to submitting an invoice. In the first quarter, 3,500 requisitions were raised in PROACTIS by 1500 users, accounting for $16.5m spend. Next stage is 4,000 users.

IT Spend: A top 10 US law firm selected PROACTIS to manage procurement of IT spend. The firm places all spend out to a competitive bid with at least three vendors. They do not operate a preferred vendor list or in-house catalogues. Instead they prefer to use PROACTIS "quick quote" functionality to enable 300 users to complete demand requests and be processed by buyer-assisted sourcing. Vendors are invited to respond directly into the system with prices, attached documents etc. This offers simple evaluation and ranking of bids and full process automation.

Services Spend: Likewise, a top US hedge fund will use P2P Quick Quotes, along with PROACTIS eSourcing, Contract Management and SRM solutions, to manage the procurement of services spend. 50% of their total spend is on services - a large proportion of which is contingent labour procurement. Once a vendor is selected, the system automatically populates a PO for submission and provides the ability to track specific requirements for services (rates, hours etc.). Controls for supplier on-boarding was key and PROACTIS Supplier Central offered a central point for approval and distribution that can feed one or more systems with vendor records. The overall project is set to deploy to 1,000 users.

Geographic Coverage: A global manufacturer chose PROACTIS for its ability to fit any organisation and business model and handle the intricacies of multi branch structures, complex workflows, tax regimes, currencies etc. Their objective was to adopt a Spend Control platform for organisation-wide compliance and risk management. PROACTIS was awarded the contract over other eProcurement vendors because it could demonstrate evidence of support for global business. After deploying PROACTIS at HQ in California, it was extended to eight other territories in North America, China, UK and Europe by a single representative with little need for support. The global system was "live and kicking" in just three months.

Finally, a large US-based organisation in the "heavy construction" sector, who already live with PROACTIS in the North East, Central and other US States, is extending the PROACTIS project to a Pan-America roll-out of 3,000 users.

These projects clearly demonstrate that PROACTIS can be deployed to fit the way any organisation works. Whether it is centralised or it works as a distributed, perhaps multi-national organisation. Perhaps the need is for internal controls and streamlined processes, or maybe for more efficient electronic communication with vendors. It might be that access to external catalogues, vendor websites or multi-sourcing techniques is important, or management of complex spend categories, or perhaps visibility of internal contracts. PROACTIS can match any or all of the deployment requirements to deliver against such needs.

Nice job PROACTIS Inc.!

Failing ERP AP Processes Cripple Finance Organisations

2011-07-25T01:19:00.000+01:00

Just returned back from an interesting roundtable session on Accounts Payable (AP) automation with finance executives from leading household brand names...

A common challenge was the need to reduce costs, as well as the number of AP staff, while improve the effect of financial decision making. Yet, many continue to struggle with processes that are "heavy" in paper, error and delays, and inadequacies of ERP systems that do not go deep enough into the AP process.

The discussion focused on the need to tackle more of the upstream business processes, including supplier enablement, document/electronic invoice receipt and workflow approval routing to resolve ailing ERP processes.

Multiple ERP solutions
The situation could not be worse in organisations that have multiple ERP solutions or multiple instances of a single ERP. Executives struggle with disparate data and lack a single spend control "umbrella" to support a common AP process. As a result, their AP teams largely focus on "just paying suppliers" rather than being value-added departments that manage payment services and supplier relationships.

Broad function scope
While, ERP systems cover a broad function scope and offer a degree of integration across their different applications, such breadth often leads to a lack of focus on Spend Control issues - the impact of which is felt in AP. ERP systems were primarily designed to support the purchasing of direct material for manufacturing or sales and are cumbersome at best when it comes to indirect goods and services needed by the rest of the organisation.

Complex invoice processing
Invoice receipt, workflow, approvals, matching and overall process management are problematic, especially when purchasing activities are non-PO related or are processed outside of the ERP system. For most, invoice processing takes too long, especially where there are large volumes of invoice transactions or decentralised AP processes. The ability to validate, clean and process an invoice often takes days or months; not minutes:

Discrepancies are the rule
Invoices are held up in error
"Just paying" invoices is common
Early payment discounts are lost
Duplicate and suspect invoices are onerous to deal with
AP interaction with suppliers around payment status is extensive

The list goes on. Executives must seek to enforce a consistent AP process organisation-wide to improve productivity and reduce operating costs.

Supplier enablement
ERP vendors by their nature have tended to focus on deployments of a relatively small number of suppliers and fail to factor into account the requirements of middle market and small suppliers. Yet, these suppliers can account for the highest AP invoice workload and cost. While, ERP vendors have taken steps to automate a proportion of supplier transactions, clients need the ability to scale to hundreds, if not thousands, more.

Spend coverage
In tough economic times, executives are looking to extend their spend coverage and increase the value of their ERP system. There are a variety of techniques that can be used, of which the merits were discussed. Usually, organisations require a single platform that enables a choice of techniques to support a diverse supplier engagement strategy:

Increase the number of supplier catalogues
Embed suppliers within the processes to manage their own data and catalogues, collaborate and trade online, and manage their own enquiries
Adopt electronic commerce techniques e.g.

Punch-out
Receipt of invoice files directly from the supplier
Receipt of individual invoices via email with intelligent email scanning
Supplier entry or PO Flip on a Supplier Portal
OCR scanning (or a full document and data capture service) for paper invoices
Purchase Card statement integration

Ensure compliance across all suppliers, terms and prices
Manage spend and AP processes across challenging spend categories (travel, contingent labour etc.)

In summary, executives should evaluate solutions that can add-value to (not replace) existing ERP investments and extend capabilities into cost saving opportunities. This also means moving away from legacy, point-based approaches to a complete organisation-wide re-alignment that is supported by "best-in-class" automation and process support. AP invoice solutions can be used to reduce costs and provide increased throughput with existing resources.

PROACTIS solutions are architected for complex Spend Control processes and integrate with ERP systems, such as SAP, Oracle, Infor and Unit4. PROACTIS has extensive experience with enabling the electronic invoicing process as a core part of any P2P roll-out and within complicated ERP environments for both high and low volume suppliers. This includes electronic exchange of all types of business documents (on-boarding, purchase orders, supplier invoices, self-service and performance management) with the entire supply base, regardless of size and/or type of supplier arrangement (PO-based, non-PO-based, pre-approved etc.) or spend category.

Overcoming Barriers to Innovation Deployment in Large Enterprises and Government

2011-07-06T15:22:00.000+01:00

John Riley, co-founder at Innovation Initiative UK and ex-Managing Editor at Computer Weekly has just started a blog with ComputerWorldUK that highlights examples of how innovators have successfully overcome the many generic barriers to innovation deployment in large enterprises and government (http://blogs.computerworlduk.com/innovation-deployment/). Great topic John and very timely. For example...

It is well publicised that Government procurement directives for greater transparency and competition is making it a much longer and more expensive process for SMEs to bid – to the point where many won’t (or can’t) take the risk. Tackling the ‘tier one’ mentality is admirable, however unless there is an overhaul in policy there will, in many cases, need to be an overhaul to the underlying procurement systems so that ‘more can be done for less’. Complex tendering policy and processes, extended to more SMEs and the impact on supplier on-boarding effort and assessment of supplier risk, places significant strain on the purse to administer without the necessary tools. Whilst many departments are making progress when it comes to automation and collaboration, there are still far too many ‘tick-in-the box’ initiatives that hinder a step-change in transformation. Remember the Gershon Efficiency Review findings from many years ago – how many government departments can claim to trade electronically with suppliers today? It’s time for Finance and Procurement to step-up, be brave and push through innovation and change that in previous climates was thought inappropriate. The situation presents an opportunity for reflection, innovation and major system transformation.

Let’s just hope that in tackling the processes required to support the SME issue, Government’s procurement of its very own eProcurement isn’t constrained by monolithic and never-ending ERP-style projects, ‘silver-bullet’ initiatives that continue to claim the headlines but fail to deliver, or a return to the ‘tier one’ outsourcing mentality of the 1980s …!!

The Missing Link: The Role of Finance in Supplier Engagement

2011-06-28T17:00:00.000+01:00

Too often, responsibility for managing and monitoring supplier records and relationships is diluted across the organisation. But if Finance and Procurement seize the initiative and drive through an automated strategy, a spectrum of instant and long term benefits will make themselves felt on the bottom line, leading to greater efficiencies and more profitable supplier relationships.

Tough times require tough cost control measures. So your first, second and third response is probably to lose people. It feels like an instant saving and it shows up quickly where the board wants to see the consequences: on the bottom line. But there could be a more logical place to start pruning costs, and that's your supplier database.

Who Owns the Supplier Relationship?
Ask who owns the supplier relationships in your business, and a number of contenders will jostle for management position: operational staff who interact directly with suppliers; the legal department because it is responsible for contracts; governance gatekeepers because they oversee the compliance of suppliers' products and services in critical areas of the business; the sales team, because suppliers might contribute a vital element of a customer service or product.

The truth is that they might all have responsibility at key stages of the supplier engagement and management lifecycle. But there is no overall strategy to extract the efficiency and cost-saving benefits of proactive supplier management. Ultimately, supplier records are owned and run by a committee that never actually compares notes. And this lack of visibility is a constant drain on the business.

Proactively manage suppliers
The absence of centralised records means that that the same supplier might be duplicated many times across the business, obscured by inconsistent terminology and different spellings. Irrelevant records clog systems up. Suppliers themselves have no actual interface with the business's core systems for invoicing or tracking purposes. The business is constantly reacting after the event rather than managing suppliers proactively. And this is driving up the cost of procurement at every stage.

So here is a radical thought. Why don't Finance and Procurement take ownership of the supplier relationship, and drive an automated system-based strategy across the organisation that will rationalise records and provide a platform for leveraging the cost and efficiency benefits of improved supplier relationship management?

This is the key to building a comprehensive cross-business picture of supplier engagement, which will impact positively at every level and deliver savings straight to the profit line. It will crystallise the integrity of a single, accurate master vendor record. And it is a rapid, inexpensive option compared with cash-hungry alternatives: calling in costly consultants or initiating an unnecessarily grandiose supplier relationship management strategy.

The effect would be immediate. Administration costs are the biggest overhead for Accounts Payable, for example, and one of the banes of the CFO's life. Rationalising the supplier database alone has the potential to reduce the administrative overhead by 80 percent, simply by cutting a swathe through the volume of enquiries about approval and invoice payment status. Cross-organisational spend can be cut by up to 15 percent.

Automate supplier management
Using an automated system to categorise suppliers and classify goods and services means that everybody in the procurement chain can find what they need, based on the right engagements with their required categories.

Automation also removes the need for manual supplier record maintenance - another daily cost that can be excised at a stroke. Some specialists estimate that the overhead associated with fielding supplier records in Accounts Payable can be cut by 25 percent - and that the data integrity of supplier records passing into the finance system can be improved by an impressive 100 percent. The Accounts department is liberated from the paper chase to focus on invoicing and revenue gathering.

These are quick wins. The long term benefits of unified supplier data across finance and procurement are also invaluable in terms of reduced overhead and efficiency. According to a recent report from strategic advisory company The Hackett Group, companies who reduce supplier numbers can focus greater resources on managing relationships, develop purchasing leverage and reduce the cost of ongoing monitoring. If a company distributes 80 percent of its annual spend across 20 percent of its suppliers, says Hackett, each procurement dollar represents $2.10 of spend reduction.

Automation has the potential to deliver this level of ongoing savings in a way that penetrates the very heart of the business. It generates knowledge that informs negotiations with suppliers for better deals, helping to guard against price fluctuations and to model costs more accurately. And it can provide considerable improvements - as much as 65 percent - in the supplier accreditation process. For example, a typical business probably has numerous stationery suppliers in its database - even allowing for record duplication. These could be reduced and relationships with the selected few managed far more efficiently.

Rationalise suppliers
For Procurement, rationalisation also delivers considerable benefits on the risk management front - an increasingly pressing consideration, particularly for public sector organisations that typically engage with many thousands of suppliers and don't have the time and resources to undertake a comprehensive, largely manual review.

A supplier might be apparently low-value and low-volume, and hardly an obvious choice for management. But if they are supplying seemingly mundane food products to a school, for example, the potential risk of e-coli contamination should demand close monitoring. The knowledge generated by an automated system would help to identify, accommodate and categorise such specific requirements.

Pre-event risk management costs are notoriously hard to quantify, but in these circumstance, supplier knowledge is probably the most powerful tool to guard against potentially costly or disastrous events. Similarly, a system would enable administrative staff to see at a glance that criminal record checks have been carried out on all the drivers at a taxi company employed to ferry special-needs children to school. Or it would allow an accountable public sector authority to easily report on its suppliers' carbon emissions.

Commercial organisations face different but equally challenging rationalisation issues. They might, typically, have fewer suppliers but the logistics of running multiple sites, and growth often achieved by absorbing new businesses through merger and acquisition, raises the likelihood of supplier duplication on a potentially global scale - an issue that a best in class system could easily address.

Streamline supplier engagement
Then there are the rewards of streamlined supplier engagement. Automation means that the process of identification, adoption, approval, constant and consistent record updating, supported by a system that can manage supplier information regardless of the number of interfaces with the business's core financial systems, can be managed proactively.

Automation makes it much easier to request supplier information as an integral part of the relationship management, and for this information to be used internally to qualify and categorise the supplier. Questionnaires can be designed for on-boarding different categories of supplier. The business can rank and score them according to their response to specific questions. If they are supplying hazardous products, do they have the necessary ISO accreditations, for example?

This might require a shift in your organisation's approach to supplier management at every level, but unless somebody gets a handle on the records and establishes a policy for cleaning them up, the hidden costs of poor or non-management will continue to eat away at the business's profit margins. It makes sense for the CFO, in tandem with Procurement, to take the initiative.

And once the system is in place, it opens up the potential for a host of further benefits. Departments with specialist knowledge, such as IT, can engage directly with the supplier approval process through the system. It becomes a platform for switching on a range of shared services that enhance the procurement process: self-billing, for example, driving purchase order compliance throughout the organisation, and gaining control of maverick spend.

Effective contract management and best-value sourcing - two goals at the heart of Finance and Procurement strategy - depend on good supplier relationships. Automation will eventually empower suppliers to manage their own profiles via exclusive portals, monitoring the progress of queries and invoice status. Smaller suppliers will benefit from being able to flip purchase orders back as invoices. And fat will be cut out of the process at every stage.

CFO's Agenda Compromised by Inefficiencies in Accounts Payable Survey Finds

2011-06-16T17:00:00.000+01:00

PROACTIS' survey demonstrates that the CFO cost containment agenda is being compromised by underperformance in Accounts Payable departments. The problem stems from Accounts Payable processes and controls that have not advanced significantly over the past few years translating into higher transaction costs and difficulties in managing working capital.

As part of a CFO Research Series, PROACTIS set out to determine the impact of different levels of maturity in Accounts Payable operations in supporting the CFO's cost containment agenda, by surveying more than 100 European medium-sized businesses. It found that CFOs must first address Accounts Payable performance, in particular the rising cost of invoice processing and challenges associated with 'maverick' spend, to improve control and visibility of the cost pipeline and reduce financial risk.

Among the key findings:

71% stated reducing costs in Accounts Payable was critical to their strategy, including putting in place controls to optimise working capital. In particular they felt it essential to improve reporting capabilities versus transaction processing.
63% of respondents said their Accounts Payable team is primarily focused on approving invoices which had already been committed and fire fighting related discrepancies.
More than two-thirds of respondents process over 75% of invoices manually
48% believed there are 'major' deficiencies in process that limit Accounts Payable in collaborating more effectively with internal and external stakeholders.
85% of respondents confirmed they had 'little visibility' or 'no visibility' of committed expenditure beyond Accounts Payable
Over 83% of respondents said that the average cost to process an invoice is in excess of $55 or 'did not know the cost'. For the top performers this reduced to less than $5.

"Accounts Payable optimisation is a serious challenge for CFO's and not least in times of economic uncertainty" said Simon Dadswell, Director of Marketing, Proactis Group. "The results of this study show CFOs need to reconsider the role Accounts Payable plays in supporting company objectives."

"Accounts Payable must become less reactive and help CFOs to improve the control and visibility of indirect goods and services procurement company-wide, obtain clear visibility of commitments vs. budget, and enforce consistent spend authorisation. Without this in place, the easiest route for employees is often outside of corporate control" continued Simon.

The impact of such 'maverick' spend, whether innocent or malign, is that economies of scale are lost and off-contract buying invites corporate risk and even fraud. This has an enterprise-wide impact - reducing margin with all its implications; introducing inefficiencies and providing limited visibility of corporate liabilities."

To remedy this problem, PROACTIS has developed powerful purchase-to-pay functionality to manage all non-payroll spend and empower the CFO with the information necessary to effectively contain costs. The software is being used by in excess of 350 major corporate customers in over 70 countries spanning the Commercial, Public and Not-for-Profit Sectors.

PROACTIS streamlines purchasing and invoice handling processes, imposing vital controls over spending, delivering instant cost-base visibility and automating typically inefficient paper intensive processes. Importantly, PROACTIS integrates seamlessly with other operational systems, such as ERP or Financials, using a future-proof methodology to reduce cost and risk.

Download the survey paper for the full research insights

Is it Time for Convergence of Finance & Procurement to Drive Spend Control Projects?

2011-06-09T11:21:00.000+01:00

The convergence of Finance and Procurement that has defined the evolution of effective Spend Control as a global corporate goal should have been a natural process: a meeting of similar minds and shared objectives. In practice, it has more often been a collision, sparking the spasmodically promising but rarely fulfilled realisation that more closely aligned agendas could deliver substantial benefits to the bottom line of the business.

Strategic alignment between functions
The lack of consistent strategic alignment between these vital functions means that Procurement's potential role as a vehicle for cost saving is frequently underestimated by Finance, and undersold to budget holders across the organisation. Many CPOs now report directly to CFOs, but the relationship is still misfiring.

CPOs tend to think that big-ticket items should be the main focus of any indirect cost control strategy, and fail to realise that more efficient day-to-day spend - increased automation, a widely-adhered-to spend management policy, and improved supplier performance - is actually the key to instant and substantial savings on the bottom line.

At the same time, CFOs are so focused on the instant hit of attention-grabbing cost-saving projects that they fail to spot Procurement's potential for delivering constant, reiterative savings through an integrated, automated Spend Control strategy.

Too often, their respective agendas - the CFO's short-term desire to reduce risk and liability through a more visible, streamlined purchase and supply process, and the CPO's longer-term fixation on the intricacies of best practice and supplier management policies - are allowed to drift along in parallel. As a result, they lose sight of the fact that their objectives are actually similar, if not identical.

Both sides are missing a major opportunity. Finance never moves beyond its necessary obsession with hard numbers to a closer understanding of Procurement, and may even ignore its possibilities as a cost saving centre altogether. And Procurement continues to come under increasing pressure from misaligned processes, badly conceived policies and entrenched policy evasion.

CPOs working more closely with CFOs
The solution itself is straightforward enough in theory. CFOs need to shift their focus from being pre-occupied with identifying a series of quick, cost-saving measures and realise the merits of driving ongoing cost control projects. And CPOs need to work more closely with CFOs to raise their profile within the business. They need to become more successful champions of their own contribution to the organisation's profitability, looking outwards at how their initiatives can impact directly on the bottom line and how they can use automation to achieve tighter integration with budget holders across the business. And they need to acquaint themselves far more intimately with the heartbeat of the organisation.

This might mean translating the quality of their interaction with a number of business processes - everything from research and development, packaging and logistics to human resources, warehousing and accounts payable - into financially quantifiable benefits.

If an interaction has a price that can be reduced by improving the supporting process - through rationalising the supplier base, for example, or generating benchmarks that will help control 'maverick' spend - the Board will understand its value to the bottom line more readily. Sitting at the CFO's right hand, the CPO has a golden opportunity to exploit this new and relatively untapped sphere of influence.

In practice, of course, the picture is more complex and the solution will almost certainly require a more concerted and creative alliance between the two functions if it is to deliver on its promise.

To begin with, the CPO should make sure that Procurement KPIs are linked to specific financial goals, and that the emphasis is on KPIs that are widely understood across the organisation: supplier performance, negotiated cost savings, volumes of purchase order and invoice transactions, for example.

This is the most obvious way for a CPO to realign their softer, process-driven, best-practice approach behind the CFO's agenda of rapidly realised financial and cost-saving benefits. By allowing Finance to drive Spend Control projects, the door will be opened to a more productive and mutually trusting partnership. The CFO will see a way to improve the under-management of spend and cut out inefficient administration costs, and the CPO can deliver this while addressing their complementary agenda of reduced supplier risk, properly negotiated purchase agreements and improved supplier intelligence.

At the same time, the CPO can become the established intermediary between budget holders, negotiating with them to ensure that their interests are represented when procurement policies are defined.

As the relationship evolves, the CFO will almost certainly see the CPO as a priority port of call for short and long-term cost savings rather than merely a transactional gatekeeper. The evidence to support this will start to accumulate immediately.

The cost of supplier management
Pre rationalisation, supplier records are usually a minefield of duplication and inconsistency - all contributing to administration costs and inefficiencies. Something as simple as creating a supplier portal could slash as much as 80% off the cost of supplier management, just by automating the appointment and list cleansing process.

For the CPO, this will be the foundation for supplier policing and performance monitoring, generating risk intelligence and an audit trail of adherence to corporate supplier policies. For the CFO it opens up the possibility of driving savings through more efficient, automated supplier relationships - by introducing direct, electronic invoicing, for example, and practically eradicating the cost and inefficiency of manual processes.

A host of further, rapid cost-saving benefits will follow, not least enterprise-wide spend management with the potential for banishing paper-based processes, enabling the real-time visibility of spending status across the organisation and the instant identification of anomalies and inefficiencies.

With automated policies in place, the CFO can drive specialist sourcing with a list of preferred suppliers and pre-negotiated terms in place, taking the Yellow Pages out of the equation and cutting the 'maverick' spender off at the pass by removing their easy option of buying a new PC from the stationery budget.

Contract overruns - widely accepted and taken for granted - could be another target as the CFO wakes up to the benefits of closer alignment with Procurement. Automation will generate timeline reports and trigger alerts that prompt contract managers to review progress well ahead of any unnecessary and costly renewal.

Technology: the primary enabler
Clearly, leading-edge technology is the primary enabler for these shifts in strategy and influence. And here, too, the CFO might need to adjust their attitude towards Procurement.

With past involvement in extensive ERP implementation projects, they might consider themselves well versed in procurement technology. But the procurement module lurking dormant in the existing ERP system may not be the optimum choice.

In fact, the status quo is probably a disparate array of systems for managing the various areas of Spend Control across the organisation, rather than a specific, best-in-class platform fit for the purpose. What's required instead is a system that extends beyond fragmented supplier relationship management applications to deliver comprehensive spend analytics, derived from tight integration with relevant financial and ERP suites and supporting the arc of the Source-to-Settle cycle.

Such a system will answer both the CFO's need for a mechanism that delivers instant cost saving, a demonstrable ROI and scope for further refinement and the CPO's desire for a vehicle that can drive evolutionary change. Again, though, it will meet their shared objectives.

And it will facilitate the necessary shifts in attitude. Armed with the intelligence generated by the system, the CFO will have a new appreciation of Procurement's strategic value to any Spend Control project; and the CPO can be more open to the benefits of pragmatism in supporting the CFO's quest for short and long-term efficiency gains.

Together, and united properly for the first time, they can drive the benefits of Spend Control projects directly to the bottom line.

Planning an International Spend Control Initiative?

2011-05-23T15:55:00.000+01:00

Traditional IT systems have generally been found wanting when it comes to addressing an obvious gap in enterprise cost management: indirect Spend Control. That's one of the reasons why so many ERP procurement modules lie dormant. But infinitely configurable and best-in-class systems are rapidly giving global enterprises the opportunity to establish common practices and spend visibility with short project lead times and minimal disruption. This gives you, as CFO, a vehicle for turning Spend Control into instant profit - as long as you plan your roll-out carefully.

Less than 20% of organisations around the globe are exploiting the benefits of spend management, according to investment bank Triple Tree. Given that between them they are spending more than $20 trillion every year on direct and indirect goods and services, that's a staggering degree of inertia.

Any single dollar saved would contribute instantly to the bottom line, and yet at a turbulent economic time when complete visibility on costs should be a priority, staff continue to follow ad hoc, 'maverick' purchasing practices around the globe.

CFOs must plug the gap
As CFO of a multi-national enterprise, you are effectively presiding over the leakage of your share of more than $500 billion annual profits that are lost through inefficiency and non-adherence to an effective spend management strategy - and missing a major opportunity to consolidate the financial and organisational benefits of a coherent, global Spend Control framework.

Mandate to cut costs
Urged on by the Board, you are driven by the need to cut costs and drive down administrative overheads, improve financial control and compliance with policies, and increase organisation-wide productivity.

It's clear that everyone will benefit. But as you contemplate the sheer scale of the challenge, it's equally clear that significant change will be required to see it through:

Accounts Receivable and Accounts Payable are immersed in manual processing, excessive troubleshooting and mountains of sticky-notes that represent an underlying lack of control. They should positively support the working capital and cash position.
Information Systems are largely locked down, fire-fighting existing IT issues. Instead, they should be effectively supporting common enterprise-wide Purchase-to-Pay processes: automating workflow, ranging from data capture to the review, approval, cost allocation, payment authorisation, delivery of goods, and more
Procurement is struggling to maintain accurate, complete and up-to-date information and is constrained by time-consuming and inconsistent supplier adoption and communication processes. Instead, they should be enabled to build improved relationships for best value procurement across the organisation.
'Maverick' spending is endemic. Methods should be created to reinforce the vision for improved Spend Control across all quarters of the organisation. This might sound like the platitude that a sharp-suited consultant would promote, but true compliance and control can only be achieved if 'maverick' spending is contained.

First step to spend control
With the evidence gathered, your first step is to establish a baseline in which you can identify the existing Spend Control position and measure performance against internal targets and industry standards. You must define the needs of the organisation and set goals and strategy for achieving them, without embarking on a monolithic process re-engineering project that is costly and time consuming.

This requires a clear idea of your organisation's global structure, including local behaviors that it makes sense to preserve, and elements that are ripe for collaboration and cost saving throughout the organisation. For example, you might decide to decentralise Accounts Payable or Procurement spanning across multiple sites and/or divisions in the same geographic area and deliver them as shared services across the Group.

Whether the model you arrive at is based on a set of common processes or the principles of shared service, it will require a supporting system that enables you to manage Spend Control and Procurement across your territories: language independent so that it is equally accessible to every user, allowing the mixing and matching of local and global suppliers, enabling an appropriate level of local autonomy, integrating easily with the variety of underlying ERP and business systems and accommodating local tax and currency regulations.

Fragmented ERP systems
Your COO might tell you that this is already available within your existing ERP infrastructure. But closer inspection will probably reveal that globally, this is highly fragmented with territories and countries all running their own systems and favouring different ERP and financial system brands. Further complications will almost certainly include various charts of accounts and different business processes - all the consequence of growth through acquisition.

The problem is that most eProcurement systems and ERP modules are developed to address the needs of the ideal - a single financial organisation with one set of ledgers. And your reality could hardly be more different.

In addition, many of these systems cover a broad function scope and offer a degree of integration across their different applications. Yet this breadth often leads to a lack of focus on issues such as bringing 'maverick' spend under control, giving visibility of the cost pipeline and delivering economies of scale.

This is where infinitely configurable, best-in-class Spend Control and Procurement solutions offer advantages and should be considered in an international Spend Control initiative.

PROACTIS: best-in-class
One example is PROACTIS, which is very different from the purchasing module of an ERP system. PROACTIS includes a full suite of modular, integrated applications to support all key aspects of the procurement cycle. Each application is built around proven best practices, with a depth of functionality not often found in packaged software products. Each application can be implemented individually or in combination to complement existing ERP back-office systems and financial packages.

Compare that with the concept of trying to impose a monolithic ERP procurement module across ten territories, each with their own unique mixture of environments. Without rolling the system out across them all, it would be highly problematic to generate complete visibility of Group spend - your ultimate goal - and consultancy, training and integration issues would probably turn a project that should be delivering results in weeks into a five-year development epic.

PROACTIS supports procurement of the tremendous variety of indirect goods and services needed throughout the organisation, as opposed to the relatively few direct materials or products that are usually driven by automated MRP or replenishment methods.

Rapid adoption
PROACTIS has been designed to be practical for complex organisational structures, and it is highly configurable as an overlying procurement platform or within any number of specific, pre-existing environments.

And it has the look and feel of an intuitive front-office application that a generation of Microsoft users has come to expect and willingly embrace. This is where many ERP systems are found wanting: they have been designed for the Finance professional in mind, not the casual user. But unless a system is easy to use, and everybody has access to it, it will be impossible to get any control over 'maverick', discretionary spend.

In one global organisation comprised 2,000 independently managed offices, PROACTIS has been deployed as a single spend management front end across four different ERP platforms. Wherever they are in the world, the user logs in to the same intuitive system, but customised to their location and job function. They know nothing of the underlying sophistication - they simply take advantage of it.

Resistance from territory managers
Once you've made your system choice, you may still encounter resistance from Territory Managers who see it as a threat to their autonomy. Just because the Board is convinced about a rapid global return on investment, it doesn't follow that everybody else will fall into line, particularly when they are concerned about protecting their own Profit and Loss (PNL).

They might see pressure to deploy the ERP procurement module as using a sledgehammer to crack a nut and, even while they are paying their share of the system's cost, they would rather pursue a different solution that is less likely to impact on their established methods of remuneration.

Driving change across the organisation
Triple Tree's estimates have already shown that Spend Control is hardly a nut-sized problem. And this is where the Board - and principally the CFO, aided where possible by a high-visibility CPO - has an opportunity to drive change across the organisation, cutting through political issues to demonstrate the benefits of the new system and encourage comprehensive end-user adoption.

Many employees will respond positively to evidence of how cost savings they make by using the system contribute directly to the business's profitability. But ironically, as CFO, you may find yourself pushing non-financial benefits to your Managers in smaller divisions and territories.

For example, increased visibility will actually help them to manage their PNL and budgets more effectively and identify areas for cost cutting. The system may also offer them a way to iron out the discrepancies, inaccuracies and limited analytics hitherto generated by the variety of underlying platforms and applications that now come together under its integrate umbrella.

The double whammy of avoiding a massive Process Re-engineering Program simply to establish a system-based model for spend management, and achieving an elevated view of Spend Control should ultimately provide a winning argument against even the most stubborn resistance.

Addressing the Transparency Barrier in Complex Tender Processes

2011-05-16T11:43:00.001+01:00

Blaenau Gwent County Borough Council is a Welsh local authority with an annual expenditure of around £130m. Although it is one of the smallest councils in the country it manages some sizeable tenders - not least, a joint £40m tender for a waste treatment project, and a major learning centre construction project currently underway to regenerate the site of a former Corus steel works.

As Procurement Manager Lee Williams explains, at £112m, the construction project is the largest tender process yet initiated by the council, although it is well used to running a wide range of tenders, from small, low-risk tenders to complex OJEU-related sealed bid exercises. Procurement is an increasingly regulated and compliance-driven process for the council. And this presents it with significant challenges, particularly at the high risk, high value end of the tender spectrum.

Q. What is the range of tenders you manage, and what resources does Procurement have?
A. Everything from pens and pencils to refuse and waste management, and construction contracts. The largest is £112 million worth of regeneration on a former steelworks site. We've got a central team of four people within the procurement function and procurement is devolved across the authority, with us having a mandatory involvement on anything above EU thresholds.

Q. What are the complexities of a typical procurement project?
A. We're currently running a joint £40m tender for procuring food and green waste treatment services. We're the lead authority for a Pre-Qualification Questionnaire (PQQ) exercise. In all, 13 councils are involved, and they have arranged themselves into four separate hubs. The PQQ will enable us to shortlist bidders. The next stage will be to enter into a competitive dialogue on a hub-by-hub basis. We've got a 60-strong team because of the size and complexity of the project. Since the PQQ was issued, we've reacted to more than 150 questions and clarifications, all conducted via the dialogue facility on the system, so you can see the logistical scale. As far as Blaenau Gwent is concerned, we'll also be using the system to support the competitive dialogue process for our own hub.

Q. Is this a typical cycle for the tendering process?
A. The cycle is typical, the scale isn't. There are 13 authorities involved - and as well as appointing officers to the team, we've appointed external advisers, and consultants for the financial, legal and technical aspects. They've all had input into the procurement cycle, and we're quite easily able to allocate external resources to the contracts through the system.

Q. What government guidelines must be adhered to during the tendering process?
A. At the lower end (up to £50,000), everything is governed by internal rules, which are the authority's Standing Orders for Contracts. Officers are able to use either an existing arrangement, or secure at least three written quotations.

Anything above £50,000 is subject to the formal tendering procedure, whether it's goods, supplies or works. The Standing Orders for Contracts allow us to source in a variety of ways: from local suppliers, or companies that have previously bid for contracts, for example. A lot of this is currently devolved within the authority.

That takes us up to Europe, where there is a minimum requirement for five tenderers. And again, this is devolved. Some departments seek advice and guidance from us. Others ask us to manage it on their behalf. For goods and services above the EU thresholds - £139,000 for services, and £3.5m for works - we have a mandatory involvement. At that stage we are responsible for issuing any contract notices and assisting the departments to structure the relevant documentation and evaluation criteria, and overseeing the evaluation and award process. Once we get above those limits we are governed by the consolidated supplies directives within Europe.

Q. The council is currently running its highest value tender yet. Can you describe some of the challenges?
A. This is a £112m learning centre construction project that we will build on the site of a former Corus steel plant. We could have gone out on one contract and awarded it to one developer, but we've gone down the framework route for the first time, to try and retain a competitive element throughout the process and gain best value for money. We will shortlist five bidders to this framework and they will be allowed to participate in any mini competitive element we have in each of the specific construction projects on the site.

Q. How do you ensure fairness and transparency in the awarding of contracts?
A. The climate is increasingly challenging. The latest case law and information we receive from the legal authorities is that everything has to be completely transparent, open and ethical. Everything that is added to or accessed must be part of a full audit trail. Because of the way we've structured the tasks to each type of procurement within the system, it's quite clear when the evaluation criteria need to be set.

Q. How do you manage ongoing contracts?
A. We are able to develop specific contract management programmes and requirements on an individual basis. By clicking on the system and the relevant contract, we can see that meetings are taking place, how the successful bidders are performing. There will be certain key points at which, if they do fall below a particular performance issue, we would flag it up with the department. It's all about transparency and visibility.

Q. How have you dealt with unsuccessful bidders?
A. We provide a basic response giving scores and an overview of bidders' shortcomings. We've always offered them the opportunity to come in and have a more formal debrief, particularly on the larger scale tenders, so that we can identify where we can add value and offer assistance, or recommendations on where they can change for future submissions. The information is held in one place. Being able to pull it together quickly gives confidence that the process is working correctly, so companies are not in a state of limbo waiting for feedback.

Q. How do you measure the success of a tender?
A. There are a number of KPIs that we look - quality of service, timeliness, whether is it meeting client requirements, how it matches up with the initial specification and the required outcomes. We also request feedback from the supplier - we think we know best, but we need to interact with the market and the experts, so we're constantly reviewing how we go to market. If there is potentially a better way of doing something, we would look to incorporate that into subsequent procurement processes.

Q. How do you measure the value of an automated tender process?
A. If we just take out the paper-mountains, the cost of printing and supplying hard copy documents, the saving of officers' time, the savings of automation will be significant. The fact that it's online, at desktops, means you don't have to attend meetings and be constantly on the road. And for best practice, the structure and the templates are right in front of you, so it's a helping hand for officers who are not used to going through this sort of process. One eye will always be on cost, but success could also be measured in an increased level of service for the same resources. The aims and objectives would be the same without automation: that's the challenging culture that local government in Wales has found itself in for the last decade or so, with constant cuts, and an emphasis on value for money and shared services.

Q. How has automation helped you structure the tender process more effectively?
A. We're able to categorise specific procurement processes - goods, services or works -and the relative values. If officers are not experienced in procurement, the system will take them through a step-by-step fully compliant procurement process. It gives a great structure to the process we need to follow at every stage, whether it relates to internal reports being required, or whether it's the EU timescales that dictate we need to do something by a given time. The fact that then we can identify and allocate the tasks to various team members gives a sense of ownership to all the team. Historically, they've built up a library of manual documentation, of basic templates, which need to be tweaked for individual procurements, but they can now locate them in a central resource, and they can be replicated on a contract-by-contract or tender-by-tender basis.

Q. How does automation make your job easier?
A. A lot of it is about visibility. We can allocate resources to each contract. From a management perspective, it gives me an early indication of workloads, and what we've actually got on. It also identifies if people aren't meeting targets and date requirements, and we can manage that accordingly - in my own team or in any department that's been allocated to the procurement teams. We're always under pressure time wise and people tend to work in minimum timescales, so they've got to be made accountable - and the system allows us to do that. It's all about transparency. There is a full audit trail at every stage of evaluation.

Q. How would you assess the benefits of eTendering over your previous procurement system?
A. The process used to be largely paper-based. For some of the quotations below £50,000, there was the odd exception where it came back as an email within a controlled environment. But as soon as we invested in the PROACTIS eTendering system, there was a drastic change. The individual procurement processes have remained the same, but it's so straightforward and easy to access the information, and to manage it.

Q. How does it help you achieve your goals - particularly transparency and value?
A. It's a constant learning process for us and as we roll it out to individual technical users, they soon appreciate the benefits, particularly from a time saving perspective. But it also allows us to run a tight ship across the council. It reinforces what we need to go through at every stage, while acting as a complete guide for non-procurement professionals, so that they can engage with the procurement process more fully than before. It's still early days. We started by using it as an introduction - managing RFQs for smaller contracts. But clearly, the higher value, higher risk contracts fit very nicely with the system and it has really come into its own with the complexities of the waste-handling contract. On the logistics side, the ease with which we can now manage the process from the desktop and reduce the traditional paper trail of tender documents is a great benefit. It's managed, transparent and there's a full audit trail.

Sourcing for Best Value: How to Get Started

2011-05-10T13:57:00.000+01:00

Sourcing is the ongoing, long-term procurement of goods and services. Savings of 15% to 25% can be achieved through establishing a focused sourcing initiative to find and qualify the best suppliers based on price, quality and service, and least risk.

The sourcing process covers the collection of requirements, development of supplier questionnaire or RFx document and a list of suppliers to invite to bid, the publishing of the request, supplier response receipt, evaluation of responses, short-listing and final selection of the supplier. Methods used include supplier questionnaires (e.g. RFI), formal bids (e.g. RFQ or RFP) and regulated public posting.

However, industry analysts estimate that labour intensive processes account for 12% to 15% of the sourcing cycle and consume as much as 30% to 50% of a commodity manager's time.

Organisations are often constrained by offline and labour-intensive methods and localised decision making. They find it difficult to collect requirements from end users, rules that govern the process are complex and the task of evaluating supplier responses is paper intensive. The result is a low percentage of spend being strategically sourced and a high percentage of negotiated savings remain unrealised.

How does your organisation compare? Ask yourself these questions:

How many tenders/RFQs are raised per anum, per FTE?
How many new sourcing events do you expect this year?
Do you have a consistent sourcing approach - can you describe it?
Are sourcing activities implemented at the local level only - often involving a price-only metric?
How do you target the right suppliers in sourcing & RFQ's?
How do you accurately identify and address policy non-compliance?
How do you manage capacity across your team?
Are all purchases made in line with these agreements?

In order to support a best value sourcing strategy, technology is also required to automate and control the process and ensure transparency. This includes providing:

Sourcing controls including process templates with workflow incorporating: dated activities and milestones (completion of questionnaire, closing date etc.), sub-event activity for division of labour and milestone and schedule management
The ability to automate the management of RFx questionnaire design, electronic publishing, response management, scoring, valuation and contract award to be able to do 'more for less'
Other items like quotation management and OJEU integration (if you're in the public sector), may be required, and
eAuctions that support a multi-parameter process (based on price, quality, delivery) and iterative bidding, electronic process and revision of bids for certain types of sourcing events.

Typically, the opportunity for return on investment is high (and not just through process efficiencies). Consider a company with £100m of spend and 5 full time equivalent managing procurement and conducting sourcing events manually. If only 30% of spend on goods and services is currently strategically sourced and 13% savings is typically achieved through better negotiations. By placing a further 10% under management and using the same resource can deliver £1.3m savings.

Naturally, there are a number of external factors to consider and of course many other cashable and non-cashable savings opportunities:

Consolidating the supplier base to achieve volume discounting
Increasing supply in categories where there is exposure to risk
Increasing the number of purchases made on the company's own terms and conditions versus the suppliers
Exploiting automation to free-up managers time to focus on value-added activities like supplier performance reviews, etc.

Download this free "15 minute health check" guide to perform a high level assessment of your sourcing process; identify issues and their causes, and understand how this is impacting performance. Common issues we often find include:

Overspending - Spending more than necessary because purchases are not competitively sourced
Supplier risk - Suppliers may be unable to perform and bring unexpected liability
Manual intensive activities - Considerable manpower required for sourcing events
Inconsistent processes - Sourcing events are inconsistently executed
Transparency - Inability to show a fair and methodical approach has been used

This guide will help you to evaluate whether your current sourcing process warrants further investigation, without the need for a time-consuming and expensive full-scale analysis, and provide you with a tool to initiate conversation with the relevant people in your organisation.

Start your "15 minute health check" today

Sarbanes Oxley (SOX) – Corporate Purchasing Falling Short of Compliance?

2011-05-03T10:39:00.000+01:00

Sarbanes Oxley (SOX) is a US law passed in 2002 to strengthen corporate governance and restore investor confidence. It requires that executives must publically state their responsibility for establishing and maintaining as adequate internal control structure and procedures for financial reporting. This Act, created following corporate accounting scandals, places accountability for financial reports at the very highest levels of an organization. Non-compliance could result in jail sentences, hefty fines, not to mention bad publicity. Even with these consequences and companies spending thousands on compliance issues, executives are still overlooking a major area for compliance – corporate purchasing. The corporate purchasing department may well be the one area where SOX will snare your company. Why?

When you pull back the covers on many companies’ operations two startling facts often become apparent: First, the lack of process around indirect purchasing in otherwise highly institutionalized companies. Second, the lack of executive interest in improving the purchasing process. (Yes, the latter is usually responsible for the former.)

Yet, compliance to SOX act requires a change in both the purchasing process and the level of executive interest in purchasing. Companies must review every area impacting the numbers going into financial reports, and executives must sign off on their accuracy. Your company has probably spent time scrutinizing revenue tracking, accounting practices and executive perks. But, how closely have you looked at purchasing?

Ask yourself:

· What controls do you have in place to detect kickbacks and other purchasing-related fraud?

· How detailed is your audit trail?

· How often do purchase orders get changed?

· Who approved purchase requests and then deleted them?

· How often does someone make a purchase and then get the PO?

Can’t say for sure? Then sound the alarms. It’s time to play catch-up before the SEC catches you.

Fortunately, purchasing is a field offering a professional accreditation program and generally accepted best practices – good places to start. Check with your local Institutes for Purchasing and Supply for details on both. But employing accredited purchasing professionals and adopting best practices won’t make you compliant with SOX.

Technology is the key to gaining compliance. The right software helps in three primary ways:

1. Enforcing a consistent and reliable process for managing your overall spend. Purchasing software can and should let you automate approval routing for purchase requests. In addition, purchasing software enforces spending limits and supports contract-based purchasing.

2. Auto-recording a clear and comprehensive audit trail of all activity related to spend. Enforcing a process is a start, but actually keeping a record of every step in the process puts you in compliance. If there’s a question, it’s easy to know who was involved with a particular transaction and what actions they took.

3. Providing evidence through built-in reports that purchasing processes are (or aren’t) followed. Purchasing software gives you data on purchasing activity so you can detect any abnormalities. Review purchasing volumes to detect if spending is unusually high in a certain department or location. If you use RFQs, compare quotes to actual prices aid to look for consistency. Conduct an analysis of non-contract purchasing to make sure contracted items aren’t being bought for a higher price with a non-contract vendor.

Finding the right technology to bring your purchasing process into compliance is not difficult. After evaluating your current processes, document the areas in which you would like to see improvements and areas where you think need to be compliant with the Act. Once you have set forth these parameters, you can begin searching for the right technology.

During your search, ask each software vendor these key questions:

1. How long have you been in business?

2. Is procurement software your main product and specialism?

3. What is the implementation cycle?

4. Do you provide cloud-based and/or on-site training before the system goes live?

5. When should we expect to see a return-on0investment?

6. What other customers do you currently work with and what type of results have they experienced?

7. Do you have other customers in our industry? If not, then why do you feel that your product will work for this company?

8. What type of business process improvements should our company see and within what timeframe?

These questions will lead you down the path of understanding whether certain software can handle your companies’ needs. You want to find a company that has been in business for a while and whose main product is procurement software. These companies typically have the expertise in the area your company needs and will be able to provide you with a better quality product, support, and services. And of course, good purchasing software will pay for itself within a year – so ask about ROI and ask for statistics from other customers and how they achieved ROI.

Bringing purchasing into compliance with SOX is more than an end in itself. In the short term, sure, you need to make sure you don’t run afoul of the law. But in the long term your company will benefit financially. An Aberdeen study concluded that a company could reduce expenses at least 3.5% annually by implementing software, and we frequently see cost reductions greater than 10%. Spend control is a fast way for organizations to identify and rationalize excess costs.

Isn’t that alone worth taking a hard look at your purchasing process?

How Law Firms Can Meet Increasing Challenges for Profitability

2011-04-28T08:00:00.000+01:00

The Background
In today's complex and dynamic environment, law firms are facing unprecedented pressures on fees, billable hours and earnings. In recent years, growth in the law sector has slowed due to a decline in Mergers & Acquisitions and a reduction in existing and potential clients. This has resulted in increased competition and has forced law firms to identify new ways to drive profitability.

For some, the response is to focus on the easiest target - the cost of external council - and the reflex is to increase hourly rates. However, a better resolve for law firm management is to take closer inspection of the systems, processes, and controls for indirect spend. Research suggests that organisations need to reduce just £1 of indirect costs to have the same impact on shareholder value as generating £5 of new business revenue.

In many law firms, current approaches to managing indirect spend falls short, especially when compared to those of their corporate and institutional clients; particularly in sourcing, purchasing and settlement for commodity spend areas such as IT, temporary staff, outsourced-services, travel and marketing etc. Indirect expenditure represents a hidden and largely untapped area of potential savings.

The result, law firms have an opportunity to achieve operational and bottom line benefits:

Consistent obtainment of "best value" for goods and services
Improved financial control and compliance with organisational policies
Reduced cost of the procurement process
Improved management visibility
Increased organisation-wide productivity

The Major Challenges Facing Law Firms in Managing Indirect Spend

Increase Purchasing Visibility
In order to minimise costs, optimise the use of available funds, and maintain essential financial controls, law firms must have a greater degree of control and visibility of the purchasing process. At the same time, their employees must be able to quickly locate and request the goods and services they need. This must be supported by intelligent routing and approval of transactions to ensure purchase collaboration with approved suppliers and compliance with buying rules.

If the purchasing process is unstructured, lacks proper controls or is too cumbersome in an attempt to control it, valuable productivity is lost, critical purchases are delayed and the cost of the process grows. What is needed is a Spend Control solution to support the day-to-day purchasing process in a way that ensures compliance with organisational sourcing and authorisation rules and offers full cost-pipeline visibility.

Optimise Accounts Payable
Most spend management issues will surface in a law firm's Accounts Payable department. For example, many firms don't insist on an authorisation signature or approval process before goods or services are purchased. Consequently, invoices turn up unannounced - after the firm has been fully committed and the money is spent. Accounts Payable then has to chase down the originator, determine if it is an internal charge or disbursement, and code it accordingly. Needless to say, this is extremely inefficient. Worse, there is no control over what is spent, exposing the firm to downstream processing issues, maverick spending, budget overages, and fraud.

Many Accounts Payable issues can be resolved by implementing an automated purchase/cheque request process utilising workflow for approvals. Employees and administrators can select items or services for purchase online. Requests are percolated up to management electronically where they are approved online or via PDA. Automating the front end of the process is critical to controlling costs. It prevents unauthorised spending and streamlines Accounts Payable processing.

Streamline & Automate Invoice Management
Relying on paper-based processes to handle inbound invoices drives up costs. Law firms need to address the time and resources Accounts Payable teams spend inputting invoices, validating and matching invoices with purchase orders, handling supplier inquiries, and dealing with discrepancies and approvals.

They require increased capabilities to consolidate and simplify the receipt of invoice details regardless of format directly into their Purchase-to-Pay system, facilitate the capture of paper invoices to eradicate labour intensive processes, automate invoice coding and matching to enable straight-through processing, and create self-invoices for trusted suppliers based on agreements they already have in place etc.

With invoice management solutions, law firms can drive out cost from the bottom up. They can validate invoices at the time of submission to minimise errors and rework, eliminate most of the invoice handling costs by receiving invoices via direct integration with back-end systems, gain real-time visibility and control into the status of all invoices and optimise working capital.

Eliminate Unnecessary Write-Offs
Nothing is more frustrating than writing off legitimate client expenses, yet many firms find themselves in this position. One cause can be the log jam of "mystery" invoices handled by Accounts Payable at the end of the month. Lost, miscoded, or delayed disbursement invoices can miss the billing cycle and, therefore, the billing window.

Spend management systems eliminate this problem by identifying reimbursable costs and the associated client matter before a purchase is made. When the invoice arrives, the disbursement coding is automatically pulled through to the invoice. Accounts Payable can easily perform a match and expeditiously forward it for disbursement.

Enable Quick and Easy Budget Checking
As legal engagements have become more project-based, budget tracking has grown in importance. Most firms operate blindly against budgets until month-end close. Spend management systems can check budgets before expenditures are committed and before invoices arrive. This lets partners know where they stand on an engagement at any time and prevents budget overages.

Improve Cost Visibility by Employee and Client Matter
Closely related to budget checking is the notion of accountability. Many firms have difficulty attributing costs accurately to specific client matters or employees. By implementing a formal authorisation process, it becomes clear where expenses originate. Spend management systems also help by using coding mechanisms that ensure accounts are charged accurately and appropriately. Additionally, this saves accounting from having to research, recode, or reclassify entries.

Reduce IT & Telecommunications Expenditure
IT is often the single largest spend area in law firms and requires close scrutiny. Too often IT expenses are buried in employee expense reports, hardware and software is purchased when similar items already exist elsewhere in the organisation, and there is limited visibility of potential assets. In addition, service and maintenance agreements are poorly managed.

A Spend Control system enables the IT team to define standard IT configurations and ensure the correct suppliers are engaged and appropriate corporate standards are applied when employees make purchases. IT experts can be included in the authorisation path for all IT requests giving them better control of sourcing the most appropriate configuration of equipment from internal inventory and/or suppliers. In addition, logging of IT equipment serial numbers and asset tags upon receipt enable law firms to track inventory on hand.

Manage Disbursements
Law firms have significant costs tied up in disbursements; monies which they have to pay to third parties to help prepare for client cases e.g. court fees, stamp duty on property purchases, fees for medical or other expert reports. Often when a cheque payment or BACS is raised on behalf of a client it is inappropriately managed and ultimately suffers from not being recovered. In order to eliminate write-offs, this process is automated by Spend Control systems with disbursements booked to the correct client account and against the appropriate matter and including controlled authorisation workflow and security of sensitive client information.

Leverage Aggregated Spend
In most law firms, purchasing is dispersed across the organisation and fragmented across numerous suppliers. A well-deployed spend management system will consolidate all the firm's spend activity to preferred suppliers. This allows the firm to leverage quantity discounts and preferred contracts, a major source of instant savings.

Better Control of Outsourcing Agreements
In spite of the trend towards outsourcing and sub-contractors, few law firms have formalised procurement processes when selecting services and even less run a similar process when renewing agreements. Effective process controls must be established to structure, streamline, and track the entire sourcing process from requirements specification, through to the publishing, response and evaluation of requests to suppliers/contractors, and ultimately, to the award and management of contract.

Keep Track of Contract Compliance
Contracts and Supplier Relationship Management are key spend control areas for law firms. Nothing is worse than one of their many high value contracts tripping over into the next financial year and missing the chance of review and renegotiation; nor when supplier qualification is too subjective, providing little visibility of risks.

What is needed is a well-structured set of tools to support efficient, consistent supplier recruitment, qualification, on-boarding, and performance appraisal. Equally, a platform for central management of all supplier contracts, providing clear visibility to buyers at purchase time, automatic capture of activity and reminders for key dates and events.

Move Towards Sustainable Procurement
Many law firms are now looking at sustainable procurement as a legitimate strategy and assessing the impacts of products or services they buy on the environment. The objective is to increase competitive advantage, as both public and private sector clients assess the environmental credentials of competing law firms, strengthen their brand, enhance employee and community relationships, and achieve cost savings in lower consumption of energy and resources.

This requires a comprehensive Spend Control solution that can support all key procurement processes, provides built-in controls to ensure corporate compliance and offers flexible deployment options to fit any law firm and business model.

Address Greater Business Complexity
A number of law firms have become truly international, with thousands of employees operating in dozens of countries. Others have entered into partnerships across geographic territories to grow a virtual international division. Creating seamlessness between teams and systems is a significant challenge in the context of disparate architectures and operational practices. What is needed is a comprehensive solution that streamlines the Procure-to-Pay process, while integrates with core operational systems, is easy-to-use and readily adopted by end-users, and offers fully internationalised support for global business.

PROACTIS
PROACTIS' experience of working within the legal sector to improve Procure-to-Pay initiatives with cutting edge technology makes us extremely well placed to help leaders and managers address the challenges of controlling indirect costs and optimising efficiencies. Organisations in the legal sector who have selected PROACTIS include:

Herbert Smith
Begbies Traynor
Eversheds
Clifford Chance
The Law Society

Sir Peter Gershon Was Right

2011-04-21T08:00:00.000+01:00

In 2005 Sir Peter Gershon laid out the issues and challenges of Public Sector Expenditure and a set of recommendations, so how did we end-up where we are?

Is it possible to believe the subsequent 2009 review of the results achieved? The Operational Efficiency Programme: Final Report concluded "good progress has been made in recent years on efficiency, with government having over delivered against Sir Peter Gershon's Spending review targets by 20 percent, saving £26.5 billion."

How did it go so wrong, so quickly? Did we actually achieve the savings? Was Sir Peter's challenge too soft? Or was it, as many people suspect, we just can't count!

The recently announced cuts and the proposed actions are based largely upon the same set of issues that the Gershon Report identified, so fingers crossed the same "bean counters" are not used.

In fact, it doesn't matter how many efficiency reports are completed by ministers, leaders or quangos; when it comes to assessing the health of the operating environment and ability to achieve value for money, the UK Public Sector has been in denial - almost delusional.

The Gershon Report, for example, pointed out a very obvious technique (amongst many) to reduce costs by trading with suppliers electronically. So let's do the litmus test: how much is currently traded using electronic means? Cynics argue that many traded electronically just once in order to get a tick in the box and ensure their budgets were not affected. Is that what Gershon meant? He is still around, why not ask him?

There are practical steps that can be taken today to achieve efficiencies that are cashable and real. The focus must be on actions not publicity, on doing not talking and on taking the initiative and not worrying about the "old way" of doing things.

We are where we are, so let's just get on with it. Be pragmatic - look for opportunities to eliminate duplication and non value-add activities and automate manual processes.

Top Tips for Cost Reduction: Supplier Engagement

Be realistic and understand your current position: Profile historic expenditure, measure it, work out whether you actually need it and examine any gains that could be exploited by doing it differently (e.g. electronic versus paper). We call this a Spend Analysis.
Rationalise the supplier database: And if you need a mantra - More is the Enemy of Better - This alone can reduce the administrative overhead by 80 percent, by cutting a swathe through the volume of enquiries about invoice payment status.
Push management costs out to suppliers: Let suppliers answer their own queries and update their own details. Use electronic tools for RFP (tender) publication, supplier bid submission, buyer bid evaluation and supplier management processes. How can you possibly manage thousands of suppliers effectively otherwise?
Remember one-size doesn't fit all: Adopt electronic ordering/invoicing strategies to suit a varied supply base and transition them to electronic trading: Supplier Punch-Out, Purchase Order Flip, PCards, eInvoicing, etc.
Eliminate error: Use an automated system to categorise suppliers, goods and services so that everyone can find what they need, based on the best prices, lowest risk and right engagements. Connect users to pre-negotiated contracts and ensure compliance.

The staff working in Public Sector Procurement know what to do, give them the support they need and allow them to work smarter. Having the right systems and processes in place will reduce cost, improve control and increase visibility of spend. Settle for simple quick wins to make your people more efficient and take the gain.

Was Sir Peter Gershon right? We think so. Let's hope the new efficiency recommendations do not fall on industry deaf ears.

Supplier Risk - A Major Strategic Challenge

2011-04-13T08:00:00.000+01:00

In a poor economic climate, managing supplier risk has become a top concern for organisations (and under greater scrutiny from their investors) due to the strategic, financial and operational impact that can result from supplier failure: disruption of service and product delivery, loss of revenue, increased costs, supply chain failure, and reputational damage.

According to Aberdeen Research - "The CPO's Agenda 2009":

49% of executives identified the need to better manage business, operational and financial risks on an enterprise-wide basis
31% reported protecting the organisation and its brand as a top pressure in driving risk management
26% are mandated from corporate management/board level

Organisations are especially wary of the financial vulnerability of their suppliers and suffering any form of loss from critical suppliers failing.

Supply chain activity that adversely impacts the public perception of the product/service resulting in sales loss and adverse PR
Events that cause disruption to availability of supplier service resulting in greater substitution costs
Unanticipated changes in pricing and availability for products/services having an impact on margin and costs

Yet, many do not have a formal program or the necessary controls in place to manage supplier risk. They have limited visibility of their supplier base and are unable to identify early warning signs. Ultimately constrained by inaccurate and duplicate information locked away in multiple operational systems and inefficient processes. Questions remain unanswered, e.g:

How effective are their suppliers performing?
What percentage of the supply base can be categorised as at risk?
Is the risk concentrated in a particular commodity, region or industry?
How can a new supplier's ability be effectively measured?
How is supplier information co-ordinated across the organisation?
What are the supplier support costs?

It proves difficult to review each supplier relationship, identify potential threats, decide where intervention is required and take appropriate action. Let alone provide support for other sourcing, procurement and finance initiatives with accurate management information and consistent underlying processes.

One response is to undertake an in depth assessment of the financial vulnerability of key suppliers across multiple divisions - A time exhaustive process that involves key financial metrics for solvency, financial health and trading position. More in depth operational reviews will be necessary to support contract negotiations, decision making and more effective supplier management.

This may at least put in motion a project to identify and limit supplier risk and keep at bay the attention from concerned parties (investors, customers and insurers etc.); albeit temporarily. However, the underlying business framework must be addressed to remove the constraints of inefficient manual processes:

Scores of employees undertaking manual activities
Manual data cleansing exercises of supplier records
Ad hoc and ineffective corrective action projects
Highly repetitive manual entry of the same information
Substantial resources consumed by supplier administration etc.

What is required is the deployment of strategic procurement software for improving supplier visibility, risk control and automating critical processes:

A single entry point for suppliers to update their information and interact with the organisation
A repository for supplier information that enables assessment of new forms of supply, on-boarding, approval workflow and contract management processes etc
Features to support proactive supplier management including alerting, automated requests for updates, score carding etc
Automation tools that provide support for the complete supplier management lifecycle: identify, qualify, transact, monitor, analyse and manage suppliers
Seamless integration with other corporate spend management tools for risk, compliance and qualification management

The result: a 360-degree view of supplier information and performance that enables you to more accurately identify, assess and undertake potential risk mitigation strategies such as; consolidating supply amongst existing suppliers, renewing/extending contracts, pre-paying for contracted items, identifying secondary sources of supply and/or helping to arrange for supplier financing etc.

In short, leading-edge strategic procurement solutions, like that of industry leader PROACTIS, enable executives in Sourcing, Procurement and Finance to:

Eliminate cost and pain of manual effort
Facilitate increased visibility of supplier risk
Enable better communication with suppliers
Improve the continuity of supply
Minimise unplanned reactive costs

No Room for Compromise: Best-in-Class Procurement Systems put ERP in its Place

2011-04-04T08:00:00.000+01:00

If your drive to implement a comprehensive Spend Control strategy is urging you to reassess the eProcurement module that lurks unexploited in the depths of your existing ERP system, it might be time to think again.

Indirect spend control has the potential to deliver instant business-wide savings to the bottom line - as long as it embraces the complete procure-to-pay cycle. ERP systems will certainly address fragments of the cycle. But rooted in manufacturing and distribution, they lack the nimble, flexible and holistic capabilities required to manage the procurement environment of today's service-oriented business environments.

Pressure to take the ERP route
The pressure is certainly on to take the ERP route. After all, that's where the historic technology investment has been. Different voices will shout about what they consider to be the best options for quick-win solutions. Accounts Payable will demand point-solutions for example, eInvoicing to lower their in-tray. And IT will invariably want to rationalize existing systems suppliers.

But Accounts Payable is just one element of the complete expenditure cycle, and IT is hardly where most uncontrolled spending actually takes place. If you make spend control a slave to your choice of technology rather than a considered process redesign project, you could compromise a major opportunity to take complete control of the procure-to-pay cycle across your organization for the very first time, delivering total financial visibility and meeting the challenge of managing 'maverick' spend head-on.

Unexploited opportunities
This is an opportunity that a best-in-class eProcurement platform is designed to exploit in its own right, unlike modular and disparate ERP procurement systems, which might only monitor certain elements of the cycle and probably come late to the party and only then through acquisition to the ERP vendor's portfolio. Check when they last underwent a major technological enhancement and you will probably find that it's been several years.

The scale of this unexplored opportunity is enormous. Up to one third of large enterprises have yet to buy any kind of eProcurement system, and a quarter of them are not using any kind of eProcurement tools. As many as 60% of ERP customers eProcurement licenses have not yet been installed, and there could be a very good reason why the ERP option has lain dormant since the main system was implemented.

ERP: A legacy of dashed expectations
ERP implementations tend to create their own legacy of dashed expectations: longer-than-expected projects that exceed budget, relatively low satisfaction rates (13% according to one recent report, a lack of employee buy-in - ERP systems are notoriously finance-focused, owned and delivered by MIS and tricky for non-IT literate users to adopt, and a low ratio of benefits realized.

And while there is no doubt that ERP systems have extensive operational data gathering capabilities, their technology focus rarely allows them to use that data to enable a transparent and accurate view of the entire procure-to-pay process. If you take this route to spend control and allow technology to drive the project and replicate what you are already doing, you risk missing some of the key benefits you are setting out to deliver.

Compliance, which should be a major goal for any expenditure cycle management project, can only be encouraged and enforced if the eProcurement platform incorporates appropriate enterprise-wide spend controls, authorization rules and budgetary constraints, for example.
And with the pressure on to deliver quick results, the risk of embarking on a potentially lengthy and complex ERP integration project throws the likely benefits of a best-in-class eProcurement system strategy into an exciting new light.

Where ERP systems tend to lack the workflow rules that enable a complete set of business benefits to be realized, purpose-built eProcurement systems use workflow to enforce electronic authorization, regardless of how complex the organization's spend control hierarchy might be. And if they are easy to use, 'maverick' spenders will buy in to the strategy more readily. Employee workarounds that you previously never had sight of until the order was received will be no longer.

What's more, as senior decision makers look to Procurement to deliver rapid cost savings, expectations of the chosen underlying system rise accordingly.

Managing working capital carefully
Managing working capital more carefully - and delivering savings to the bottom l
ine - requires flexible payables automation so that spending cuts don't disrupt the business or its services. Spare capital can be put to work, financing early payment to suppliers - but only if the supplier data is properly captured and managed. This is meat and drink for the best-in-class eProcurement platform that has been designed from the ground up to encompass these degrees of complexity.

Many organizations have invested in technology to manage purchases after the event, but they rarely think about taking this to the next level. Take supplier or contract management, for example. There might be thousands of records in the ERP system database but the information they represent is untapped. How many of them are duplicated? What type of relationship do they represent? How could they be used to rationalize an authorized list of suppliers? Answer these questions and a vital link in the expenditure cycle will fall into place. By investing in a best-in-class system, an organization could itself establish best-in-class credentials for the way it manages its suppliers.

Financial controls that prevent the issue of duplicate invoices, automated invoice matching with orders, goods received and payment schedules, comprehensive reports that are delivered via the latest web technology and incorporate key pipeline data - so often missing from disparate and multiple types of ERP systems lurking in the depths of the organization - these are all deliverable by best-in-class platforms from the moment of implementation.

Why compromise with ERP?
When it comes to seizing the chance to take control of the complete expenditure cycle on this scale, why would you compromise? Particularly when it also constitutes a great opportunity to consolidate the way your existing ERP investment underpins the business.
ERP alone can't cure a 'maverick' spend epidemic but an integrated best-in-class eProcurement/ERP partnership offers a potentially mighty solution that could bridge the considerable Spend Management gaps in a 'pure' ERP system.

Leverage existing ERP investments
Consider using the eProcurement system as a front-end requisition engine, feeding into your established ERP modules. These were never designed as intuitive interfaces and will always be anathema to casual users, who will habitually find ways to work around applications they don't understand and will consequently make themselves invisible to Finance. An eProcurement system will drive compliance and authorization.

Even as an interim solution, without the significant overheads of an ERP implementation, a best-in-class system can deliver immediate and significant cost savings. Once they are established as a mechanism for streamlining the complete expenditure cycle, proving them on the CAPEX front and delivering quick savings to gladden the heart of the most cynical CFO, many organizations decide to continue using them.

Best-in-class: ahead of the curve
Because best-in-class vendors are constantly refining and adding to their technological capability, new modules that enhance the value of the investment and lower the risk of driving through a Spend Management strategy emerge regularly, giving more choice in terms of scale, implementation and integration.

Let's face it best-in-class vendors, like PROACTIS, eat, sleep and breathe Spend Control and eProcurement. Can your organization really compromise when it comes to the cost-containment agenda?

Rio Tinto Strikes Gold

2011-03-30T08:00:00.000+01:00

Congratulations to mining giant, and PROACTIS customer, Rio Tinto! "Profits of $14bn in 2010 is an astonishing figure in contrast to the timid returns from the rest of the commercial world" catching the attention of the world's press and featured in this month's Procurement Leaders cover story.

The mining industry has seen its fair share of ups and downs - taking the lead in recession and now recovery. The latest turnaround follows the result of strong demand for commodities in Asia and the Far East, which has sustained activity in extracting base materials, minerals and fuel. In 2011, capital spending is estimated to rebound to three times of that for 2009 (>$60b), according to MICA company reports. Indeed rival BHP Bilton has announced plans it will spend upwards of $800bn over the next few years on 'organic growth projects', according to Supply Management.

Pressure of a Sharp Rise in Demand & Restricted Supply
As the sector increases its production levels and adds to mine expansion plans, the ongoing creation and management of an effective supply chain is paramount to success - not least in a market that is becoming increasingly capacity-constrained. The renewed confidence is filling the order books of the manufacturers that support the industry. A sharp rise in demand will result in the need to effectively capitalize on supply across territories and create a supply chain that can cope with increasing number of projects, as well as manage a period of intense activity for Procurement teams. The pressure will be on to "do more for less" in the shortest possible timescales in order to sustain a competitive position.

Spend control and eProcurement technology will play a fundamental role here to support organizations growth plans. In particular, tools for sourcing, compliance management and supplier engagement:

Sourcing removes the constraints of offline/ unorganized methods that lead to missed opportunities in negotiated contracts with vendors, localized decision-making and non-repeatable processes that provide limited supplier coordination. It allows for competitive bidding; facilitating optimal pricing and vendor selection on a wide range of spend categories which results in very large savings when compared to traditional processes. This combines best-in-class processes with automation to complete the sourcing cycle, inclusive of project management, RFx automation, vendor identification, bidding/ negotiations, and advanced optimization tools.
Compliance management is the process of ensuring all organization-wide purchases are in line with corporate policies, established budgets and negotiated vendor agreements in order to avoid costly off-contract purchases. It also provides key performance indicators (KPIs) measuring adherence to stated policies and includes analytical capabilities where deviations occur.
Supplier engagement is designed to handle sourcing, procurement, transaction processing, order management, and invoice and payment status functions, to create a single view of an organization's spending practices and manage engagement with a diverse range of suppliers - from initial registration, qualification and on-boarding; through sourcing events, periodic reviews and information updates; to daily purchase and payment activity. This is essential to build and leverage a strong supplier base, plus focus resources on high risk and/or high value suppliers, as well as high volume/ low value suppliers that consume a lot of manpower to manage. In addition, it enables better information exchange between Finance and Procurement to support forward planning and negotiation strategies and provide an early warning system where risk of supplier failure is likely.

PROACTIS has seen a marked increase in the number of oil, gas and mining sector organizations evaluating spend control & eProcurement technology to support their growth plans. These solutions range from sourcing best-value deals and vendor relationships to ensuring compliance and automating purchase-to-pay processes. Customers include ROC Oil, Northern Petroleum, AWE Ltd, RTZ Simandou and Addax Petroleum plus a number of vendors that support the industry.

Cloud eProcurement: Cut through the Technology Hype & Market Confusion

2011-03-29T17:15:00.000+01:00

One topic that is fast rising to the top of the eProcurement list is "cloud computing":

From an IT perspective, cloud computing has opened important new options for the way in which organizations deploy enterprise systems. Virtualization of applications and the supporting systems infrastructure, the emergence of cloud computing service providers, and new approaches to software licensing make it possible for organizations to look at selected enterprise systems as a "service" rather than a capital expenditure. Without the need for extensive IT resources, such services can be deployed more quickly, often at a cost that is lower than the cost of operating the system in-house.

For Finance and Procurement, cloud computing is enabling a new level of communication and collaboration that, in turn, is enabling eProcurement innovations in sourcing, supplier engagement, contract management, and the entire purchase-to-pay process. Thoughtfully designed cloud-based software applications also provide new flexibilities that enable organizations to incrementally improve business practices in a way that moves them steadily through the journey to Class A spend control e.g:

Easy secure global access. Web-based access and mobile communications that make it possible for employees, Procurement teams, and suppliers to use solutions whenever it is convenient for them; and regardless of where they live, work, or travel. Organization-wide, inter-divisional visibility that enables a spend control program that spans the entire enterprise.
Enhanced supplier communication and collaboration. A range of Web-based capabilities that enable safe, secure and automated two-way communications with your suppliers from initial introductions through on-boarding, bids and proposals, catalogue management, and throughout your relationship.
Reduced cost of trading. Extensive electronic transaction processing capabilities that reduce the paper handling, human interaction, and errors involved with traditional approaches to commerce functions such as placing orders, processing invoices, and making payments. Options to fit all of your different trading relationships and supplier IT capability levels.

The net result is that cloud computing is enabling organizations to streamline spend control and eProcurement processes, reduce both purchase and IT costs, and, in general do more for less.

However, a word of caution: when considering the many options available it is important to cut through any technology hype and market confusion and get a straightforward description of what vendors are doing and the advantages their approach provides to you and your organization.

Below are just some of the questions to consider:

Delivery: What is the vendor's track record? Is it a 'one-size fits all' solution and configuration? Can you choose the delivery approach to suit the strengths of the solution class (or a combination for different components)? Can you move from either an installed-behind the firewall to an external private cloud model or vice versa? How much flexibility do you really have?
Pricing: Is licensing transparent and predictable? Will fees ramp up on both the buyer and supplier side? Will you be penalized by "teaser pricing" based on limited seats and features? Will the price increase when the business uses the software for what it was originally intended for? How much does it cost really e.g. compare upfront and ongoing costs?
Functionality & architecture: What is the depth and range of the solution footprint? How well will the application adapt over time? Is the vendor playing catch-up on development e.g. launching enhancements every few months? Do changes affect everyone? Do they offer the scalability, reliability and security larger organizations require of mission critical systems?
Data: What kind of data will be in the cloud? With who is data shared? Who technically owns the data? Can the vendor 'snoop' on the data for their own use? How quickly can the data be accessed or retrieved for reporting? Where will the data reside? What happens if you terminate the contract e.g. do they offer access to and export your data?
Integration: Is there out-of-the-box integrations that can support complex enterprise requirements? Is there disparity between the vendors "claimed" and "actual" integration? Is there a standard for data formats and flexibility for handling customization rapidly?
Performance: Is the vendor meeting its availability targets? In the event of a failure or breach how is the vendor expected to respond/ make things right? How are risks identified and mitigated before the event?
Support services: How does consultancy and support fair in comparison with other vendors e.g. does the service go beyond just an FAQ page on a website or a list of third-party providers that some SaaS-only vendors offer? Does a lack of consulting skills mean cheaper not better - do you want technology for technology sake or a step-change in process improvement?

PROACTIS is excited about the opportunities offered by cloud computing and recommend that every organization consider cloud-based options as they move forward with new spend control and eProcurement projects. But we also recognize that this is not a "one size fits all" situation. That's why we have invested in the range of options and capabilities necessary.

Download the solution brief: "Unlock the Cloud for Spend Control and eProcurement Innovation" to learn more.

Jeff Banks Slams Retailers Use of eAuctions

2011-03-28T08:00:00.000+01:00

Celebrity designer Jeff Banks has hit out at a rising tide of bidding wars in corporate clothing industry. The former presenter of BBC's The Clothes Show and co-founder of corporate clothing retailer Incorporatewear said that procuring in an internet bidding war was "unsustainable and threatens the future of the industry", according to Insider Media.

Banks was referring to the 'reverse-eBay' style auctions, in which companies bid against each other to set the lowest price for a contract and are becoming more common as buyers focus on cost cutting:

During a reverse auction, which is typically conducted online using specialized software, bidders progressively reduce their prices in response to competitors' bids. Only the buyer is able to see who is offering each price and can use the software to combine qualitative scores and pricing to measure competitiveness. Vendors often view reverse auctions as a mechanism for buyers to squeeze price concessions of them and prefer to sell through traditional channels in order to emphasize differentiating aspects of their proposition such as quality, service and performance. Yet, reverse auctions aren't always price-only and the winning bidder may not be the lowest price.

Reverse Auctions have been used successfully for many years across industry sectors, for example the public sector's use of IT eAuctions to save money on products including Desktop PCs, Laptops, Tablet PCs, PDAs and Servers etc. The public sector has been steadily moving towards eProcurement strategies and there has been a marked increase in the use of reverse auctions over the last 5 years.

The issue cited by Banks, results not from the technology itself but how it is applied. Reverse auctions work well in ultra-competitive environments and only when you are comparing goods/services on a "like for like" basis and there is a clear and unambiguous specification. They should not be used to replace the whole negotiation process. Reverse Auctions are typically used by organizations as part of a 'kit bag' of sourcing tools e.g. in the final stages of the process where all "none-price" factors and qualitative evaluation have been conducted using other techniques.

Organizations must consider the various pitfalls that can prevent a reverse auction from being successful. These include ambiguous specifications, inviting inappropriate vendors to bid, entering goods that are unsuited for auctions and paying less attention to quality when it is necessary. In addition, auctions open the local market to global suppliers and logistical issues can be problematic unless planned for.

Before charging ahead with an eAuction it is essential organizations prepare well in advance. This may also mean listening to vendor concerns and obtaining input on specifications. Communicating with the potential supply base is a key element to any sourcing initiative - ensuring the process is mutually beneficial to both customer and vendor. For example, it is crucial that the auction is run smoothly and so answering any bidder questions before the event and holding pre-auction training sessionswill be invaluable.

Stage 1: Establish clear, achievable timescales e.g. avoid year end, holiday periods etc
Stage 2: Define requirements and profile the category
Stage 3: Understand the supply market and the market pressures vendors face
Stage 4: Generate the vendor portfolio and identify participants
Stage 5: Jointly develop evaluation criteria and specs
Stage 6: Forecast future volume requirements
Stage 7: Prepare and issue a well-prepared request for proposal/ tender etc.
Stage 8: Participants complete qualitative evaluation online
Stage 9a: Tenders assessed and a shortlistestablished
Stage 9b: Confirm specification
Stage 10: Results are carefully analyzed
Stage 11: Vendors may be informed of their ranking in a qualitative evaluation
Stage 12: Conduct pre-event training if necessary
Stage 13: The eAuction is run
Stage 14: Qualitative and quantitative weightings are built in to the bids
Stage 15: The "winning" bidder is awarded the contract

eAuctions, if supported by the right technical quality and functionality, offer a quick and highly efficient means of procurement. However, the normal rules of sourcing still apply - develop strategy, solicit and evaluate bids, negotiate with and select vendors, and implementation. eAuctions may not be appropriate for every sourcing event but used wisely are a vital tool in the kit bag for procurement.

AP Automation: Quick Returns & Hard Savings

2011-03-22T07:00:00.000Z

Accounts Payable processes have typically grown organically in line with the growth of the organisation; the need to pay suppliers has been seen as a transactional function and of little additional value to the organization. With the growing desire to align processes with company strategy, Accounts Payable processes are now getting the attention they deserve as organizations look to implement processes that are efficient and effective in the delivery of objectives to the organization.

In this article, PROACTIS and business partner Intelligent Capture look at the business case for Accounts Payable automation:

Use Case: Focusing on quick returns and hard savings
An organization is processing in the region of 10,000 invoices every month with a small degree of automation. The accounts payable Manager has decided that it would be beneficial to introduce automation earlier into the process but does not have the time to fully assess the operation and collect detailed information. Based upon the understanding of the process, the focus becomes key areas that will drive real cashable benefits from the new system - the amount of resources involved in the process, early payment discounts, duplicate payments and reduced costs in document storage.

The labor intensive aspects of the process:
Various industry standards outline that a "high performing" Accounts Payable function can process between 24,000 and 27,000 invoices per FTE per annum. The accounts payable Manager is aware that at the moment, he/she has 7 people involved in the processing of invoices, with the current performance level being 17,143 invoices per FTE per annum. If the department could reach "high-performing" levels, the invoices could be processed with 5 people, this would allow the remaining two people to become involved in "value-added" activities such as supplier statement reconciliations or supplier relations.

Equally, the Accounts Payable Manager may focus on a specific segment of the process that he/she is certain will benefit from invoice automation. It may be identified that the keying and exceptions management process is particularly inefficient.

Having looked at "intelligent" invoice data capture solutions that result in over 90,000 invoices being input per person per annum, the accounts payable Manager looks at the current manual process and finds that 30,000 invoices are currently being entered per person per annum. This is a significant saving that particularly addresses an area of great inefficiency within the cycle.

Early payment discounts:
The introduction of an automated accounts payable process enables processing cycles to be shortened, as such the opportunity exists to seek additional discounts from suppliers in return for more rapid payment. After analysis, an organization making £250 million worth of supplier payments finds that 25% of payments are eligible for a 1.5% discount, translating to nearly £1m in savings.

Document storage:
Paper invoices within a manual process may need to be posted/ faxed as part of an authorization process. The automation of this process can lead to substantial cost savings, not least the time spent filing/retrieving documents in addition to the storage costs. At the same time the employee time spent telephoning, faxing and printing is also substantially impacted. According to a study by Gartner, the average document is copied between nine and 11 times, then taking into account the previously mentioned storage costs and inefficiencies, they came to the conclusion of a cost of around £8 per invoice.

When looking at the physical storage of documents, whether this is internal or to a third party it is important to look at the cost of the space, even if this is estimated as a % of the total space of the building that the organization utilizes.

Duplicate payments:
When handling paper documents it is not uncommon for invoices to get lost or misplaced, often this leads to a duplicate invoice being sent by the supplier. The original is then found and processed, unless the Finance/ERP system has effective controls this can lead to a duplicate payment. With Accounts Payable functions often not having either the people or time to focus on supplier statement reconciliations, the opportunities for inefficiencies and potential duplicates is heightened and an ongoing risk. It is fairly common place today to have third party organizations who will come into the business to recover such costs and take a percentage of what it recovered.

According to a benchmark study conducted by the IOMA (The Institute of Management & Administration), 19% of organizations surveyed reported a duplicate payment rate of between 0.1% and 0.5% (percentage of invoices that where duplicate payment took place).

When taking into account the four areas highlighted above, it is not uncommon to see enormous savings and real examples of such savings do exist with payback periods estimated at shorter than 12 months.

Understanding the existing process
To ensure that the correct solution is adopted, it is essential that the pains and problems within the processes are understood. An internal assessment is required to understand all of the issues; the answers to key questions will help you to develop a business case for implementing an invoice automation solution:

What types of invoices do we receive? (e.g. stock(GFR)/non-stock (GNFR)/PO/non-PO)
How is each type currently processed? (e.g. are non-PO manually routed across sites?)
How many invoices are received and processed per annum (by invoice type)
Is this volume set to grow/decline/remain static over the next 3 to 5 years?
How many active suppliers are in the supply base (suppliers by type - stock/non-stock)
How many people are involved in AP to process the invoices?
How much does it cost to process an invoice today?
How long does it take to process an invoice?
Are early payment discounts available from suppliers? Are they being taken advantage of?
How many invoices become exceptions? (e.g. incoming invoices not quoting required information such as PO number)
How are the exceptions currently managed?
What systems are used to hold information relevant to the processing of invoices?

The above list is a common set of questions that PROACTIS and Intelligent Capture use to assist clients early within the process.

The Cost of Supplier Engagement

2011-03-15T14:33:00.000Z

Whether you are a private, public or not-for-profit organization, engaging "well" with suppliers is critical for the lifeblood of your organization, to:

serve the needs of your customers and constituents
differentiate your supply chain from the competition
increase margins, Earnings per Share (EPS) or value from budget

It also consumes a large percentage of cost of operations (staff time, effort, etc.)
The challenge is to put in place an effective, efficient supplier engagement strategy that allows you to streamline processes, remove duplication and human/finance error.

Supplier engagement process
Supplier Engagement is a broad range of activities that take place every day. Your Procurement and Finance departments interact continually with suppliers to:

Recruit and qualify potential new suppliers
Solicit bids and proposals, accept responses, and collaborate on solutions
Maintain important supplier information
Update supplier catalogs
Perform supplier reviews
Send purchase orders
Receive and process invoice transactions
Respond to supplier inquiries about invoice and payment status

That's a lot of activity performed by a lot of different people. And in most companies, much of that activity is still done in an unstructured manner using paper, fax and email. That means a lot of inefficiency and very little process standardization or control.

The cost of trading with suppliers
As a result, the cost of supplier engagement can be extremely high - even higher than financial and procurement executives sometimes realize. There are direct and indirect costs of doing it poorly.

The cost of the Procurement and Accounts Payable manpower consumed everyday just performing the "mechanics" of all this interaction can be huge. Experts say that it typically approaches 70% of the total cost of the Procure-to-Pay process.
The opportunity cost is even higher when you consider the results that could be realized by applying more of that time to activities like supply base development and working capital management.
The duplication of effort in having to define individual standards and processes for engaging with suppliers.
When cumbersome internal processes result in missed supplier reviews and too few competitive sourcing events, there is added risk that suppliers will fail to perform or even transfer liability to your organization, adding unexpected cost.
When poor communication processes make life harder for suppliers, it adds to their cost of doing business with your company - cost that is ultimately passed on to you in some form.
When purchase orders and invoices are paper-based and manually processed, time is lost, errors are made, and considerable manpower is wasted on non-value-add activities.
…the list continues.

The impact of effective, efficient supplier engagement
The impact of effective, efficient supplier engagement can be clearly seen in your organization's bottom line and competitive position. Doing it well makes your company "easy to do business with" for suppliers, resulting in strategic benefits ranging from reduced supplier risk, to lower overall costs of the goods and services you purchase, to the improved agility you derive from a strong, responsive supplier base. Doing it efficiently reduces waste, lowers operational cost, and accelerates business processes.

In a nutshell... Supplier Engagement is a critical, far-reaching activity. Good companies do it well. Leading companies do it well, and do it at far less cost.

Next action - high level assessment
If the issues in this article resonate with you, the next step is to perform a high level assessment of your supplier engagement process; identify issues and their causes, and understand how this is impacting performance?

Start today - download this free "15 minute health check" guide.

Spend Control “Health Check” for Finance & Procurement Executives

2011-02-22T11:45:00.000Z

PROACTIS today launched a new campaign featuring a series of "Health Check" guides that help Finance & Procurement executives to assess their ability to identify, capture, and control expenditure on goods and services.

The purpose of the campaign is very simple - to help senior Financial and Procurement executives quickly zero in on the key results of their spend control process, identify problems and drill own to the likely causes of those problems.

The campaign has been launched at a time when spend control represents one of the strongest growth opportunities for organisations due to the macro-economic challenges and the need for increased margins and operating control through cost containment.

About the Campaign
The campaign consists of a series of free "15 Minute Health Check" guides that enable executives to quickly perform a focused, high-level "health check" of their organisation's spend control processes, including:

Purchasing
Accounts Payable
Supplier Engagement
Sourcing & Tendering
Contract Management

These guides help executives to identify the areas that warrant further investigation, and to provide them with a framework to discuss the issues with the right people in their organisation.
As part of this campaign PROACTIS has set up a special website for Finance and Procurement executives interested in spend control and cost containment: www.proactis.co.uk/healthcheck

Supporting Quote
Simon Dadswell, Director of Marketing, PROACTIS: "Executives often wonder how well their organisation is performing in key areas but can't afford the time or expense of a full-scale analysis or benchmarking exercise. Even when a substantial initiative is being contemplated, an initial "rough cut" assessment is often the right starting point before investigating significant.

What is Strategic Sourcing/ eSourcing?

2011-02-21T11:44:00.000Z

Definition of Strategic Sourcing/ eSourcing
Strategic sourcing and eSourcing delivers savings by automating and streamlining the ongoing, long-term procurement of materials and services; providing the necessary tools to find and qualify best suppliers - at the right price, quality and service, and least risk. Methods typically used by private and public sector organizations for competitive bidding include; supplier questionnaires (e.g. RFI), formal bids (e.g. RFQ or RFP), formal bids (e.g. RFQ or RFP) and regulated public posting.

The business process includes:

Collection of requirements and determining service level requirements
Development of supplier questionnaire or RFx document
Researching and analyzing suppliers in the market
Development of a list of suppliers to invite to bid
Publishing of the solicitation
Supplier response acceptance
Evaluation of responses and selection of the supplier

Challenges of Strategic Sourcing/eSourcing
Over the past several years, strategic sourcing and eSourcing has seen dramatic increases in its use with the value of goods and services that are procured accelerating. Strategic sourcing and eSourcing initiatives are effectively aimed at increasing the amount of spend under management and reducing or eliminating:

On-spot buying or maverick spending
Offline, manual and unorganized sourcing methods that lead to missed opportunities for savings through improved negotiations with suppliers
Localized decision making and difficulty in collecting requirements from end users
Time and cost involved in evaluating supplier responses and the inability to ensure compliance
Risk involved in spend that is not strategically sourced

PROACTIS, a leading provider of spend control and eProcurement solutions, provides the capabilities to address these issues.

The Opportunity
According to analysts, organizations can achieve potential savings of 15% to 25% through deploying a focused sourcing initiative. In addition, labor-intensive processes typically account for 12% to 15% of the sourcing cycle and consume 30% to 50% of a Commodity Manager's time (Aberdeen). Here is an example of the savings opportunities:

Scenario: Company X who spend £100m p.a. on goods and services and have 5 FTEs in Procurement:

Under-leveraged spend: Only 30% of spend is strategically sourced. They typically achieve 18% savings through better negotiations when conducting sourcing events. If they could place a further 10% under management (using the same resource) that would deliver £1.8m savings.
Supplier consolidation: In just one, high value spend category spend was distributed across 50 suppliers. If they could reduce the supply base by 75% to a few suppliers they could realize 5% savings through volume discounting.
Risk reduction: By increasing the amount of spend under management and strategically sourced they could decrease the number of purchases made on suppliers terms and conditions and their exposure to risk.
Labor-intensive processes: By increasing the level of automation they could achieve "more for less" and free-up managers' time to concentrate on value-add activities.

Questions to ask your organization

How many suppliers do you have? What is the % increase?
What do you buy, from where and how?
How many tenders/ RFQs are raised per anum per FTE?
What % of total spend does this represent?
How many new sourcing events do you expect to conduct?
Do you have a consistent approach - describe it?
Are sourcing activities implemented at the local level only?
Do supplier evaluations typically involve a price only metric?
How do you target the right suppliers in tendering or RFQs?
How do you accurately identify and address policy non-compliance?
How do you manage capacity across your Procurement team?
Do you have standardized metrics enterprise-wide?
How many corporate contracts are in place?
Are all purchases made in line with these agreements?
How much spend is exposed to supplier risk?

Marketing Spend – A Category under Scrutiny

2011-02-04T10:06:00.000Z

Marketing spend: even this sacred cow is under scrutiny.

Marketing professionals can no longer mooo…ch around, living and dying by their creativity and side-stepping Procurement - in the view that they do not understand their niche expenditure and will cut budgets and harm precious client-supplier relationships.

It's time for a step change.

Marketing is one of the largest discretionary spend categories and represents a target to zero-in on by the financial stewards of the organization, especially in tough economic times.

For survival, Marketing must open their doors and join forces with Procurement to improve cost efficiencies, stretch budgets and achieve more for less from existing relationships.

Equally, Procurement must get the buy-in from Marketing and understand their process and relationships before making heavy-handed moves (this category isn't as straightforward to manage as other indirects such as office consumables, utilities, telecoms and IT),
….alternatively, Procurement will be left in the wings administering purchase orders, or a mandate from senior management will state that it has to happen so that a 'soft' buy-in isn't needed!

If tackled effectively, savings of 20% or more is not uncommon; by renegotiating old (cozy) relationships, improving the tracking of budgets and bringing out the best from suppliers:

Work out what you're actually spending across all parts of the organization.
Ensure that in future it is all subject to the same procurement policy e.g. no regional free-for-alls, purchase orders are raised and authorized in every case etc.
Target categories where you can achieve rapid savings e.g. media buying has become much easier as mainstream print, radio and TV circulation figures plummet and the market restructures. Procurement can help by managing the shortlist/pitch process, including documentation, scoring, fee negotiation and the agreement of commercial terms.
Renegotiate pricing options with existing relationships. Suppliers are under intense financial pressure and may be willing to be creative in their pricing and/or terms e.g. move from fixed-fee retainers to project-based, performance-related or time-based fees.
Pilot a program where Procurement can demonstrate their creativity in bringing out the very best from supplier relationships e.g. with pre/post-project reviews, optimizing briefing documentation and controlling project costs etc.In addition, mitigate risk (ensuring supply continuity, terms are created by your organization and not the supplier, meaningful audit trail etc.)
Identify any categories where standard sourcing processes can be applied (e.g. branded merchandise and printed materials) to deliver savings by streamlining the on-going procurement of goods and services. Procurement's role is to gather spend data, determine service level requirements, research and analyze suppliers in the market and manage competitive bidding etc.
Consider some items (perhaps printed material, advertising space or specific consultants) as catalogue items held within your purchase-to-pay system.
Adopt electronic methods (punch-out, PO Flip, email/PDF invoices, XML, purchase/lodge cards, supplier self-service etc.) for reducing the cost of transactions with suppliers (based on what you are buying from them, the volume, their strategic value to your business and IT capability) e.g. orders, invoices, on-boarding, catalogue updates, supplier reviews, invoice enquiries etc.
Consider outsourcing options e.g. printers might not be the cheapest option and buying through an agency may offer the opportunity to take advantage of trade rates.
Combine the spend volume from more than one category to improve the chances of getting better price points from suppliers. Have you grown in acquisition and have multiple agencies in use across multiple divisions? Do you have a clear agency strategy and common measurement as well as fee structure? Consider local/global/regional requirements.
Establish a method for tracking any deviation between actual and targeted savings. Get initial quotes and benchmark against where those eventually end up. Compare marketing activity to projects from previous years to measure the success. Agree which savings will be reinvested to stretch the marketing budget and which will be released as cashable savings.
Consider a second or third phase of sourcing projects to tackle the more difficult categories e.g. creative agencies and campaign development, where there is a strong creative element and it is difficult to cut through existing relationships.
Consider long-term arrangements with specialist agencies and providers, rather than involving internal marketing specialists in every procurement exercise.

Spend Analysis: Don’t Get Blinded by Data!

2011-01-21T10:05:00.000Z

Enterprises are often confronted with significant data availability and quality issues to achieve visibility of spend for:

identifying off-contract purchases
tracking and enforcing superior spending practices, and
addressing process inefficiencies.

For many, the response is to hire expensive outside consultancies to address these problems. This often results in large-scale data cleansing and enrichment exercises, taking months to deliver a snapshot of analyses that quickly become obsolete.
Issues of poor spend information include:

Disparate data: Spend data is scattered across multiple, disconnected systems (ERP, AP, eProcurement systems, purchasing cards etc.), territories and sites.
Inaccurate data: Spend data is often recorded inconsistently with errors and duplicates. Suppliers are often spelled differently and there is no link between their parent company and subsidiaries.
Incorrect naming: The use of terminology varies between business units and there is an inconsistency in naming practices for suppliers, products and services.
Limited analytics: There is not enough meaningful information held in the General Ledger and cost centres to drive procurement decisions etc.

While, the objective of creating good, well-structured information is admirable, most procurement teams need only take a "back-to-basics" spend analysis (or procurement review) to uncover huge reserves in potential savings.

They should not get lost in or be distracted by data as the only means for making sound decisions. Or allow the lust for ever-more granularity of spend data to overwhelm all sensibilities. Data itself doesn't make decisions or come up with good ideas: people do.

Start with a rapid two/ three-week exercise to establish the critical information about the enterprise and its spending behaviours. Review the 'as is' position within the spend control process, and use external experts with the right tools to help identify relevant process and policy changes, and derive a sense of magnitude with regard to improvement opportunities.

Do not turn the analysis into a never-delivering consultancy exercise; keep it short and sweet. Limit the scope if necessary. The review should include a discussion and review of existing data (noting its limitations to be addressed at a later date), uncovering key facts and detail surrounding:

Process (supplier management, sourcing, ordering, invoicing and on-going contract management)
Supply base, spend details and transaction volumes

Many of the answers quickly become apparent. A rapid exercise of this nature can easily highlight real benefit potential, in terms of efficiency, cashable benefits and risk mitigation, prioritised with details, scheduling and resource implications.

Consider: according to analysts, less than 20% of enterprises are utilising the full disciplines of spend control - let alone exploiting eProcurement tools to better automate these processes. This equates to substantial opportunities for savings (both cash and efficiency).

By pulling back the cover on spend, enterprises can find ways to reduce spending by up to 15% and cut cycle times by as much as 80%.

Improve negotiation leverage (use aggregated demand to negotiate better prices with suppliers and rationalise differences in prices charged by suppliers)
Consolidate suppliers (consolidate the supply base to select preferred suppliers and leverage the increased spending with suppliers)
Bring more spend under management (conduct sourcing events for the category to establish approved pricing and suppliers to realise savings)
Reduce maverick spend (reduce off-contract spending, realise savings on spend shifted to approved vendors, and reduce purchase-to-pay cycle times)
Improve budget compliance (manage comparisons between budgeted, actual and committed spend and ensure purchasing compliance with organisational polices)
Increase invoice matching performance (achieve straight-through processing of invoices to improve productivity and reduce costs) etc.

PROACTIS, a leading spend control and eProcurement vendor, is an advocate of such an approach and argues that "spend control is a journey of iterative process improvements supported by automation".

Recently, PROACTIS was commissioned by a public sector organisation to undertake this style of exercise. In just a few weeks, they identified in excess of £566,000 savings per annum (in isolation to process efficiencies) and put in place a set of action-orientated recommendations (see Spend Review: Cut Complexity for Rapid ROI).

Cost Cutting Top Priority for 2011

2011-01-10T10:05:00.000Z

Despite the high profile of topics such as continuity of supply, supplier relationship management, sustainable procurement and outsourcing, cost cutting on indirect goods and services has increased in importance among procurement leaders, according to the latest surveys.

Supply Management, a leading industry publication for supply chain professionals, reported the number of buyers who had cited cost cutting as their main priority had risen to 46 per cent (38 per cent in the 2010 poll).

For public sector buyers, this was down to government cuts, which the coalition is pursuing to reduce the deficit.
For the private sector, spend control is helping organisations to protect margins in tough economic times - identify and rationalise excess costs without risk to the core business operation, eliminate staff, or take risks by increasing end-user prices.

An Aberdeen Group Report, From Preservation to Prosperity - the CPO's Agenda for a new decade also highlighted cost as the dominant pressure driving purchasing improvement. In their latest survey, 69 per cent of procurement professionals stated the top-down directive to costs as the top pressure driving their focus. Secondary pressures included:

Increasing supply risk (27%)
Lack of visibility into enterprise spend (21%)
Insufficient number of staff (20%)
Insufficient skill of staff members to capitalise on savings opportunities (18%)
Increasing globalisation/ supply chain complexity (18%)

Whilst many of these secondary pressures have increased in prominence, they are still not the main priority for 2011.

Biggest ERP Failures of 2010

2010-12-21T10:04:00.001Z

A recent article by IDG News Service blames waste, fraud, lies and "cluelessness" for ERP (enterprise resource planning) project woes. "No year in the IT industry would be complete without a number of high-profile ERP project failures, ones that burn through mountains of cash, bring company operations to a standstill, generate bad publicity for vendors and toss careers in the trash" it said. The article continues to describe major ERP project failures including: New York's CityTime 'disaster' project dating back to 1998 that was originally budgeted for US$60 million but has since ballooned to a colossal $700 million, BSkyB getting £318 million settlement from Hewlett-Packard/EDS, Marin County's "rip and replace" of its ailing SAP system, and a pet food manufacturer who was awarded $61million in a lawsuit from ERP vendor Ross Systems, amongst others.

But arguably one of the biggest ERP failures not cited in the report is the limited deployment of ERP eProcurement extension modules. Actual deployment of eProcurement for the major ERP vendors significantly lag licensed sales. According to Forrester, 40% of Oracle's license sales and more than 60% of SAP's licenses have yet been installed. Is this because customers have undergone major "heart and lung surgery" in implementing core modules and do not have the stomach for a round two with the incumbent? It may also explain why a quarter to a third of enterprises with more than 1,000 employees have not bought an eProcurement product. Yet, the opportunities aren't insignificant: according to industry analysts Gartner, indirect spending is an attractive area to target cost reduction through the use of Spend Control and eProcurement because of its size - between 10% and 40% of organizations revenue. Spend Control consistently ranks as one of the top ROI value propositions in the entire technology industry and far outdistances the ROI opportunity of many other sectors such as ERP and CRM, among others. Sadly, it appears Spend Control is one of the best but least known ROI stories for ERP today!

Perhaps this should not be surprising. ERP systems cover a broad function scope and offer a degree of integration across their different applications. However, such breadth often leads to a lack of focus on spend control issues such as bringing maverick spend under control, giving visibility of the cost pipeline and delivering economies of scale. Since most ERP systems are primarily designed to support purchasing of direct material for manufacturing or sales, they are typically cumbersome at best when it comes to the purchasing process for the many indirect goods and services needed by the rest of the organization. They rarely provide the ability to access supplier websites or marketplaces, and they provide little, if any, integrated support for procurement processes such as sourcing, contract management or extending eProcurement into services categories.

By definition, when it comes to Spend Control there is no room for long-troubled ERP-style projects. Return on investment must be delivered rapidly without hitches and deployed to fit the way any organization works - whether it is centralized or it works as a distributed, perhaps multi-national, enterprise. Perhaps the need is for internal control and streamlined processes, or maybe for more efficient electronic communications with suppliers. It might be that access to external catalogues or supplier websites is important, or perhaps visibility of internal contracts. Best-in-class Spend Control and eProcurement match any or all of the deployment requirements to deliver against such needs; in a fraction of the time and a fraction of the cost associated with big ERP-style implementations. This includes offering a modular approach that allows organizations to deploy individual parts to complement existing systems, and to deploy in a cloud-based, phased step-by-step approach.

Cost Cutting Pressures Prompt Rise in Spend Control & eProcurement

2010-12-21T10:04:00.000Z

Organizations are constantly under pressure to increase shareholder value. In these tough economic times, building top-line revenue (increasing unit volume or the prices charged for goods and services) is difficult to achieve and organizations are shifting their focus to decreasing operational costs as the way to maximize profitability.

Research from Ernst & Young (E&Y) found cost cutting pressures as the fastest growing risk to global business in 2011. The study, which was based on a panel of more than 75 industry executives and analysts, across industry sectors, revealed the most significant change to the previous year's study is cost cutting which has moved up four places to take the number two position. The finding suggests the opportunity to improve the bottom-line and shareholder value without aggressively growing the top-line is top of the boardroom agenda. The challenge associated with this is to establish a spend control framework that consists of appropriate tools, processes and technologies that provide greater visibility, control and transparency of spend. This includes moving away from point-solutions whereby immediate savings are realized from "low-hanging fruit" to organisation-wide integration and complete automation of procurement and purchase-to-pay processes:

To enable a cultural change that allows employees across the organization to buy the goods and services they need on a routine basis without the need for professional buyers, but always within proper organizational policies and procedures.
To provide functional managers at all levels of the organization with the ability to make better decisions because they have immediate access to information related to purchase requests, budgets, commitments, and the entire 'cost pipeline'.
To dramatically streamline the Accounts Payable function while providing better control of payments.
In addition to providing a framework to maximize 'spend under management', enable the Procurement department to structure and streamline many of its daily activities, free more time to focus on finding premier suppliers, negotiate best value agreements, and maintain good long-term supplier relationships. And to provide more information for spend analysis, enabling strategic initiatives such as supplier consolidation.

Spend Control is the process of identifying, capturing, and controlling expenditures on indirect goods and services that translate dollars saved into profitability improvements. eProcurement is the technology solutions that support these processes to ensure efficiency, control and compliance. Used to its fullest advantage, Spend Control and eProcurement should help organizations go beyond just automating the way things are done today to establish new, better processes that significantly improve organizational performance and bottom line results. Whilst existing ERP and Finance systems are great, they don't do much to increase spend visibility and improve supplier interactions across the organization. What is needed is a way to transform disparate transactional data residing in ERP, accounts payable, general ledger, and operational databases into intelligent, actionable information and improved business processes that deliver bottom-line savings.

According to Aberdeen research, enterprises spend nearly half of every dollar earned on external goods and services. Each dollar in operational savings has five times more impact on profits than a commensurate dollar increase in sales. Spend Control and eProcurement offers a very viable alternative and the fastest way for organizations to identify and rationalize excess costs, without disrupting core business operations, to improve operating profitability.

The Budget Knife Falls

2010-12-20T10:03:00.000Z

Sadly, it's no surprise the UK public sector has been facing civil servant cut backs. In the last few years, the sector ballooned to make up more than half of the economy, rapidly out-pacing the European Union average for GDP. Figures recently announced by the Office for National Statistics now show signs of the devastation about to unfold: compared with the previous quarter, public sector employment decreased by 33,000 in the third quarter of 2010, to 6.014 million. Local and Central Government were the hardest hit followed by the Civil Service.

Wherever the knife falls on a departmental basis, it is already clear front-line services will be affected. The challenge has been thrown down to managers not just to provide services for lower costs, but also to come up with alternative ways of providing services to enable major cost reductions. Efficiency will not be enough - the Chancellor expects bankable savings and cost reductions on an unprecedented scale, and quickly.

Success will depend on strong financial management, sound financial information, and strategic and informed decision-making. Finance and procurement will have a lead role to play in managing outsourcing and collaborative programmes and reworking business models to prepare for changes such as cost reduction or wider transformation efforts.

To learn more about the priorities download Public Sector Efficiency & Reform: The Case for Spend Control & eProcurement

Our industry insights also suggest Finance departments have reached a tipping point, where costly inefficiencies can no longer be tolerated as organizations search out additional savings. Despite huge advances in eProcurement technology and practice, many have been slow to adopt end-to-end tools, opting instead for operational systems that still rely on manual processes and red tape.

Faced with the prospects of layoffs, the time is now to act. Managers should not avoid automation because of the perceived cost, but instead regard it as an opportunity to bring order to chaos and a bridge to better times. Cloud-based eProcurement solutions are available by subscription and offer a rapid ROI. They're scalable, cost-effective, and hassle-free. They're also easily integrated with your existing IT investments.

Spend Control & eProcurement – What are the Opportunities?

2010-12-13T10:03:00.000Z

Industry statistics suggest that spend control and eProcurement can enable organizations to save up to 20% of every dollar spent on indirect goods and services.

Now, whether we believe this statistic or not, there is no denying there are definitely opportunities for organizations to save money - as well as benefit from the other virtues of spend control and eProcurement, including increased financial control, compliance and transparency.

In this article, we look at how spend control and eProcurement can be used to automate processes across five key areas in the procure-to-pay cycle:

Sourcing
Supplier Management
Contract Management
Purchasing
Invoice Management

Firstly, we should probably clarify what is meant by spend control and eProcurement. Spend control is the term used to define the process techniques that are employed to identify, capture and control spend in a transparent manner. eProcurement describes the solutions that support procurement, buying and accounts payable activities and streamline supplier engagement.

Sourcing
According to Deloitte, the potential cost savings from strategic sourcing can be anywhere between 15-25%. And when you benchmark sourcing processes, they are often ad hoc and non-repeatable which eats up a large amount of time and reduces productivity. This in turn slows up procurement and introduces latency into the process.

Automation provides the ability to "do more for less", allowing buyers to:

Source more than just the "low hanging fruit"
Run an unlimited number of sourcing events at the desktop to uncover new bargaining positions
Work more closely with suppliers to achieve more innovative win-win ways to achieve savings.

Supplier Management
As stated by Gartner, more is definitely "the enemy of better": a 10% reduction in processing can be achieved by decreasing the number of suppliers. And this can be reduced by a further 10% by limiting spending to a few standardized items.
But whilst the cost opportunities may be clear, most will also accept that a greater level of automation equates to improved compliance and reduced risk. Spend control and eProcurement will automate the supplier management process, providing:

The tools to continuously vet suppliers and eliminate the "weakest links"
The ability to actively recruit where you are short of competition - removing reliance on one supplier
A means to categorize suppliers and meet your policy targets

Contract Management
80% of organizations find it difficult to locate a contract; as they get locked away in filing cabinets. So all the good work that has been done in sourcing is wasted as users are not connected to contracts. And the impact of poor contract management can be felt all the way into Accounts Payable.
Most organizations will agree that greater automation in this area will allow them to realize significant benefits from supplier contracts:

Cost savings by maximizing spend "under management" and "on contract"
Minimizing risk of supplier non-compliance (e.g. insurance liability)
Avoidance of unwanted renewals or improper payments

Purchasing
Analysts often talk about the huge inefficiencies across the purchasing process - from requisition and approval to goods receipt and payment. And although performance varies from organization to organization - in terms of order cycle times, the cost of processing orders, how much spending is controlled, etc. - the fact is that most do not have sufficient tools in place to:

Enable staff to find the goods and services they need
Authorize purchases without long paper-trails
Manage budgets
Provide Finance with full visibility of the cost pipeline

Invoice Management
Invoice management is very hard edged when it comes to statistics. Just ask yourself:

How many invoices per FTE do you process?
How many invoices do you receive electronically from suppliers?
What your match rate is?
How does your early/on-time payment performance rate?

On average, low performers spend four times longer to process an invoice than high performers and are highly reliant on paper and people-based processes. It's clear that a greater level of automation in Accounts Payable can deliver significant cost and efficiency savings.

So, whether you apply spend control and eProcurement to one or all five of these areas, the case for automation in the procure-to-pay cycle is compelling and the opportunities for cost and efficiency savings evident.

How to Eliminate Maverick Spend

2010-12-02T10:02:00.000Z

Maverick spend is an issue that every organization will come across. Also referred to as "rogue buying" or "off-contract spend", maverick spend, i.e. when employees make purchases outside the company procedure, can have a serious impact on an organization:

Economies of scale are lost
Unapproved suppliers are used, inviting corporate risk
Costs are attributed to the wrong accounts or departments
There's no option for spend analysis or visibility of purchasing trends
Opportunities for fraud are enabled
A labor-intensive paper trail to process expenses is created

So how can organizations avoid this? Well, maybe we should start by asking why employees feel the need to deviate from the corporate procedure in the first place.

Whenever staff need to purchase goods or services, they will often seek out the easiest route. If the current procedure is time consuming, complex and frustrating, it simply won't be followed. And although most maverick spend is innocent, organizations that don't have control over their purchasing are subjecting themselves to unnecessary cost and risk.

We're seeing more and more organizations starting to tackle this issue and companies such as CB Richard Ellis, Virgin Active and the University of Birmingham have gained compliance by providing staff with a purchasing system that's simple and easy to use - easier than their own maverick ways.

So what are they key elements of a successful purchasing system?

An intuitive and easy-to-use interface
A web-based purchasing system with an Amazon-like look and feel will enable employees to start using the system with little or no training. Using multiple "expression of need" methods will support all processes, including requisition to buyer, "Quick Quote" request to supplier and purchase order. Setting up template and pro forma orders will automate and streamline repeat tasks, making the ordering process quick and simple.

Controlled catalogues and suppliers
Restricting the suppliers and items that users can select when they login to the system will ensure that purchases only go through approved vendors at the price that Procurement has negotiated. Where necessary, staff can choose to make an "off catalogue" deal, but this will require additional authorization.

Up-front coding and commitment checking
By using the system to generate account codes as the order is entered, speeds up the processing of the order and reduces the time involved for the requestor, approver and Accounts Payable.

Having the option to check the availability of funds at the time of placing and order - taking into account orders placed but not yet received or invoiced (commitments/encumbrances) - will give the approver all the information they need to approve or reject the order.

Authorization workflow
Having a system that automatically routes a requisition or order through the correct workflow (dependent upon department, value, item, vendor, site-specific attributes, available authorizers, etc.) will eliminate the common paper-chase involved in the authorization process.

Making the status of the order visible at all times will enable the person who placed the order to clearly see the progress and next stage. Setting up the system to return rejected orders to the originator, for amendment or information, will provide an audit trail of each interaction so as to maintain purchasing control.

If the order is rejected, using the system return it to the originator for amendment or information will provide and audit trail of each interaction in order to maintain purchasing control.

So, by automating the purchasing process, organizations are able to direct more spend toward particular suppliers, negotiate more favorable pricing, achieve process savings, and analyze purchasing trends. Compliance is achieved and maverick spend eliminated.

Executive Interview: Cloud Computing for eProcurement

2010-11-19T10:02:00.000Z

So firstly welcome. I'd really appreciate you being very open and candid re Cloud Computing Rod. We seem to be getting far too many one sided arguments from different suppliers.

Q - I am sure our clients would like to know whether they can buy Cloud-based eProcurement Solutions from PROACTIS?
RJ - Yes they most certainly can. In fact all of our eProcurement offerings can be made available as 'Cloud' solutions. However, it should be fairly evident that our customers have already bought perpetual eProcurement licences in most case, so the much hyped benefit of zero upfront payment is kind of irrelevant. Also many of our clients are hosted and may in fact have achieved many of the benefits already.

Q - So is it fair to say that you see Cloud-based eProcurement as more relevant to new prospects?
RJ - Yes, I do, although many of our existing clients are examining how to achieve extra benefits, so they may also be interested.

Q - What do you see as the challenges facing new and existing clients if they are considering Cloud Computing?
RJ - I'm afraid it is the old story "how do you get from where you are to where you want to be?" As with all things, if a client had a blank piece of paper it would be simple, wall to wall Cloud solutions. But, most folks can't do this, and will inevitably end up with Legacy solutions that they are keeping, and furthermore need integrating and also require machines, and infrastructure to support them. I'm sure you get the picture.

Q - Do you support the theory that there are different types of Clouds?
RJ - Most definitely. From our perspective, it really depends on the type of solution and the number of people requiring access. Perhaps I can explain. Decision support Applications such as Salesforce.com, can in fact manage with the most basic Cloud capability. Users can afford to have 'outages', and variable performance. They tend to be small groups of users who can also figure things out for themselves if changes are imposed version to version. This I think of as comparable with Home Broadband. Whereas Enterprise Transactional solutions really need to have more defined performance and some form of guaranteed SLA and can be extremely large user communities who would become quite irate and generate huge problems if their orders and invoices couldn't be processed. In my view a Private Cloud is necessary. This is more like a Private dedicated Broadband.

Q - So does that mean that PROACTIS only have Private Cloud?
RJ - No in fact we are happy to let the client choose. In fact we recommend Cloud for our Portal products and Private Cloud for P2P and PurchasePoint. Although not everyone takes our recommendations!

Q - This is starting to feel like industry hype from the IT suppliers.
RJ - I understand why you feel that way, but in reality it is the next paradigm, following a long line of others - Mainframe - Mini - Client Server - Web - Cloud. In fact it could be considered a return to the days of Mainframe computers offering solutions for financial modelling before spread sheets came along.

Q - So do you have any recommendations or words of wisdom before signing off?
RJ - Much like all things, there is no Silver Bullet, but most of the benefits of Cloud Computing for eProcurement actually come from paying for your solutions differently, rather than the technology per se. It is also worth remembering that you will hear vendors saying that "you don't need to take any services or education because this is Cloud" - treat statements such as this with the contempt that they deserve, even the much talked about darling of the cloud, Salesforce.com, really needs consulting to get it working efficiently.