While new technologies such as cloud based systems have helped organizations gain better visibility and control over their spend, gaining visibility still requires quite a lot of domain expertise and localized knowledge. The nature of every day spend management involves missing data, inaccurate “dirty” data and users spending via direct searches, where it has not been possible to get them using the system. All these contribute to gaps in visibility and, therefore, gaining control over spend.
The most common pitfalls to be avoided include: only capturing invoice header details. Invoice header details plus itemized descriptions, invoicing details, purchase order, part numbers and descriptions means that greater visibility will result in greater control over spend. Here the most common problem is holding off on implementing a visibility solution until the data improves e.g. correcting inaccuracies, poor spelling, errors in data entry, inconsistent naming of items etc., whereas it is by virtue of the fact that a visibility solution has been implemented that data and, therefore, correlating improvements in spend reduction, will be seen.
Clarifying minimum Service Levels will give your supplier a benchmark against which to review poor data and make recommendations on how a visibility and control procurement platform can improve matters and produce a substantial Return on Investment. Failure to do so means that it is possible a vendor can identify some unexplained complexity in the data which results in a project over-run or poor data quality; setting clear expectations will help the vendor overcome such complexities and understands the expected deliverables.
Overcoming pitfalls in spend management visibility will mean addressing certain key areas, including: coverage of spend to be identified to a specific accuracy level; identifying the percent of spend to be covered – this is important as reaching for a certain level may outweigh the cost ie the effort expended to gain the visibility on say the last 10% the benefits may be outweighed by the costs that will be incurred to achieve this level of visibility.
It’s important that the system provider guarantees minimum coverage as well as percentage spend. In many organizations, spend is spread across buildings, divisions, departments, geographic boundaries as well as categories and some categories such as complex spend categories are more difficult to get control over. By guaranteeing a certain percentage of spend covered as well as across the system, organizations will benefit from better visibility and, therefore, control.
Ensure that levels of accuracy correspond to the quality – there’s no point in increasing coverage if the quality of the data input and analysis drops as this will affect the quality of the results and consequent spend reduction delivered.
Put milestones in for measurement and make sure that data can be corrected along the way.
Above all, looking at gaining better visibility and control simply by immediate needs ie trying to look at it via supplier or category is a niche solution that can end up being more cumbersome and costly in the long-term as the organization tries to layer new solutions on top as each new spend situation arises.
The best approach will always be to take the bull by the horns and implement an eprocurement system that can then be used to highlight the errors in the data and the methods used and processes for spend. By doing so an organization will build the firm foundations on which to build and maintain better visibility and control over spend.
For further information on how to gain visibility and control over complex spend categories request a copy of the new White Paper.