Spend Under Management: An Essential Guide

June 13, 2024
Corey Jackson
Spend Under Management

Taking Control of Your Spending

In today’s competitive business landscape, managing your expenses effectively is more important than ever. But with a multitude of purchases happening across different departments, gaining a clear picture of your organization’s spending can be a challenge. This is where spend under management (SUM) comes in.

This guide will equip you with a comprehensive understanding of SUM, its benefits, and how to leverage technology to optimize it.

What is Spend Under Management?

SUM refers to the percentage of an organization’s total expenditure that is overseen a designated function, typically procurement. Spend under management encompasses three key aspects:

  • Monitoring: Tracking how and where money is being spent.
  • Controlling: Ensuring spending adheres to established policies and procedures to prevent maverick spending (unauthorized purchases).
  • Optimizing: Getting the best value for the money spent through processes like strategic sourcing, negotiation and supplier management.

Spend under management strengthens a company’s financial control by ensuring a higher percentage of its total spend is actively monitored, controlled, and optimized. This includes using structured procurement processes and strategies to get the most value out of every dollar spent across all expense categories.

The Scope of Spend Under Management

SUM encompasses all categories of an organization’s spending, both direct and indirect:

  • Direct Procurement: Costs directly tied to production, such as raw materials, components, and finished goods.
  • Indirect Procurement: Expenses that support daily operations but aren’t directly involved in production, such as office supplies, utilities, and software licenses.

Key Benefits of Spend Under Management

Implementing a strong SUM strategy offers several advantages:

  1. Cost Savings: This is a major advantage. By gaining control over spending and implementing strategic procurement practices, companies can identify areas for cost reduction. This can involve strategic sourcing, negotiating better deals with suppliers, optimizing buying process, and eliminating maverick spending.
  2. Improved Spend Visibility: Spend under management brings more transparency to how money is being spent across the organization. This allows for better analysis of spending patterns, supplier performance, market trends, and identification of areas of inefficiency. With clear data, companies can make more informed decisions, enabling proactive adjustments and agility in responding to market shifts.
  3. Streamlined Operations: Efficient spend under management processes can significantly improve operational efficiency. Automating manual tasks and establishing clear purchasing procedures frees up valuable time and resources for employees.
  4. Enhanced Compliance: Stronger SUM helps ensure adherence to company spending policies and approval workflows. This reduces the risk of unauthorized purchases or non-compliance with supplier contracts.
  5. Stronger Supplier Relationships: By bringing more spending under management, companies can build stronger relationships with their key suppliers. This fosters better communication, collaboration, and potentially leads to preferential treatment, better service levels, and a more resilient supply chain.
  6. Reduced Risk: Unmanaged spending exposes a company to various risks, such as fraud, non-compliance with regulations, and disruptions from unreliable suppliers. Increased spend under management helps mitigate these risks by providing greater oversight and control.

From Chaos to Control: How Technology Empowers Spend Under Management

The Manual Mayhem of Yesterday

Imagine a world of overflowing filing cabinets, scattered spreadsheets, and endless reconciliations. That’s the reality of traditional spend management – a cumbersome, error-prone process that hinders financial efficiency. Thankfully, those days are over.

The Digital Transformation

Modern technology offers a robust toolbox to revolutionize your SUM approach:

  • Streamlined Procurement: Specialized procurement software streamlines the entire procurement lifecycle, from requisitions to approvals and invoicing.
  • Centralized Contract Management: Contract management solutions centralize contracts, automate creation and management, and ensure compliance with terms.
  • Supplier Relationship Management: Supplier Relationship Management (SRM) platforms foster collaboration with suppliers, promote transparency, and strengthen relationships.
  • Spend Analytics: Advanced analytics tools act as financial microscopes, dissecting spending patterns, supplier performance, and cost structures.

The Power of Technology

Technology offers several benefits, empowering businesses with:

  • Optimized Processes: Workflows are streamlined through automation. Automation eliminates tedious manual tasks, minimizes errors, and boosts efficiency, freeing up valuable resources for more strategic pursuits.
  • Cost Control: Data empowers informed negotiations with suppliers, consolidation opportunities are identified, and areas for cost containment are pinpointed. The result? Measurable cost savings that directly impact the bottom line.
  • Risk Mitigation Made Easy: Contract management solutions ensure compliance with contractual obligations, proactively identifying and mitigating risks associated with non-compliance. Sleep soundly knowing your agreements are ironclad.
  • Partners, Not Just Vendors: Imagine a world where suppliers are not just vendors, but strategic partners driving innovation and value. SRM platforms foster open communication and collaboration with suppliers, leading to better service levels, potential co-innovation, and mutual growth.
  • Actionable Insights: Raw data is transformed into actionable intelligence. Spending trends are unveiled, cost-saving opportunities are identified, and strategic decisions are supported by concrete evidence, not guesswork.

The Strategic Imperative

Technology isn’t just a convenience, it’s a strategic imperative. Businesses that embrace technology gain significant advantages:

  • Efficiency Unleashed: Automation minimizes tedious tasks, freeing up valuable resources for strategic initiatives. Focus on what truly matters – driving business growth.
  • Agile and Responsive: Access to real-time data enables swift decision-making and a dynamic response to market changes. Seize opportunities before your competitors even know they exist.
  • Risk Management Redefined: Early risk identification and proactive compliance management build organizational resilience against potential disruptions. Weather any storm with confidence.

Technology has transformed spend under management from a cumbersome task to a strategic advantage. By harnessing these powerful tools, businesses gain control, optimize costs, and unlock a world of financial possibilities.

Steps to Optimize Spend Under Management

Here’s a breakdown of the steps you can take to optimize SUM:

1. Assessment and Analysis:

  • Gather comprehensive spend data: This includes all spending across the organization, both direct and indirect. Look for areas where data might be missing or siloed.
  • Categorize spending: Segment your expenditures into relevant categories to identify patterns and potential areas for cost savings.
  • Evaluate supplier performance: Analyze your suppliers’ performance based on factors like cost, quality, and delivery times. Identify opportunities for consolidation or negotiation.

2. Set Clear Objectives:

  • Define your goals: Determine what you want to achieve with improved spend under management. This could involve cost reduction, improved efficiency, or better risk management.
  • Set measurable targets: Establish clear metrics to track progress towards your goals. These could be percentage reductions in spending, cycle time improvements for procurement processes, or supplier performance benchmarks.

3. Implement Strategic Sourcing

  • Develop sourcing strategies: Define how you will source different categories of goods and services. This might involve developing a vendor shortlist, establishing quality standards, or negotiating better pricing.
  • Supplier negotiation: Leverage your buying power to negotiate better deals with suppliers. Focus on securing favorable pricing, terms, and service level agreements (SLAs).
  • Consider alternative sourcing options: Explore options like e-procurement platforms or reverse auctions to find the best value for your needs.

4. Streamline Procurement Processes

  • Standardize procurement procedures: Implement clear and consistent policies for purchasing across the organization. This reduces maverick spending and ensures compliance.
  • Automate workflows: Automate manual tasks like purchase order creation, approvals, and invoicing. This improves efficiency and reduces errors.
  • Invest in procurement technology: Consider implementing procurement software to manage the entire procurement lifecycle, from requisition to payment.

5. Strengthen Supplier Relationship Management

  • Develop strong relationships with key suppliers: Build trust and collaboration with your most important vendors. This can lead to better communication, innovation, and long-term benefits.
  • Segment suppliers: Categorize your suppliers based on their importance and performance. This helps tailor your engagement strategy for each group.
  • Monitor supplier performance: Regularly track and evaluate your suppliers’ performance against agreed-upon metrics.

6. Continuous Improvement:

  • Monitor and measure your progress: Regularly track your key performance indicators (KPIs) to assess the effectiveness of your spend under management initiatives.
  • Identify areas for further improvement: Regularly analyze your spend data and supplier performance to identify areas where you can further optimize costs and processes.
  • Adapt and refine your strategy: Be prepared to adapt your spend under management strategy as market conditions, supplier performance, or your business needs evolve.

Strengthened Financial Control

Effective spend under management is a strategic approach that benefits businesses in multiple ways. It leads to better financial control, improved decision-making, and ultimately, a stronger and more competitive organization.

Are you ready to take charge of your organization’s financial health?

Engaged in Complex Procurement?

Current SCM is a cloud-based software that streamlines the process of project-based procurement & materials management and drives collaboration among project stakeholders. The term “project” can be defined as a construction project or a manufacturing project, or it can simply represent the way a business organizes their procurement (e.g., by project, program, product, client, division, business unit, region).

Current SCM offers a unique platform to manage the end-to-end process of project-driven supply chain management, including support for the planning, procurement, and management of both materials and services. Current SCM includes a robust set of project-based toolsets, including Project Planning, Material Planning, Service Planning, Vendor Document Requirements Management, Requisition Management, Bid Management, Purchase Order Management, Service Order Management, Material & Document Tracking, Inspection Management, Vendor Invoice Matching, Project Inventory Management, Project Asset Management, and more!

And Current SCM excels in accommodating diverse project requirements with unrivaled flexibility & control, including project-specific User access & permissions, cost structures, business rules, approved vendors, workflows, terms, reports, and much, much more!

If you engage in any of Project Procurement, Technical Procurement, Direct Procurement, or Third Party Procurement, Current SCM will optimize your procurement & materials management workflow. If you engage in all four, Current SCM will revolutionize the way you do business.

Contact the team at Current SCM today to learn more!