In our last post, we noted that Basware recently released its annual Cost of Control study for 2010 and pointed out that Finance’s top 10 challenges could be easily solved with good, modern, spend analysis and e-Procurement solutions. The study also outlined the top 10 strategic finance priorities for 2010 … which can also be addressed by the adoption of good spend analysis and e-Procurement systems. For example:
Spend Analysis would address:
- Increasing Profits and Top Line Performance
Profit = Cash In - Cash OutSpend analysis reduced cash out.
Therefore, spend analysis improves profit margins.
- Maintaining or Improving Profit Margins
Spend analysis allows you to consolidate spend among fewer suppliers and fewer SKUs. This reduces overhead and increases profit margin.
- Planning, Budgeting, and Revenue Forecasting
Once you know your actual year-over-year spend, volume trends, and market trends, your forecasts and budgets improve greatly.
- Risk Analysis
Augment the data with (financial) risk information and quality/performance metrics, and you can quickly see which suppliers likely pose the greatest risk to your operations.
- Regulatory Compliance
You know what suppliers you’re spending on and how much is going to socially responsible suppliers and how much isn’t. Augment the product data with carbon emissions spending and you know if you’re within limits or not. Etc.
E-Procurement would address:
- Reduce Overall Purchasing
A modern e-Procurement system with approvals, checks, and balances would insure nothing is bought that isn’t approved, on-contract, and within-budget without managerial exception.
- Cash Flow and Working Capital Management
You can see how many purchase orders are outstanding, how many invoices are upaid, what discounts are available to you if you pay early, how much cash is actually free, and even take advantage of receivables financing.
- Improving Short and Long Term Operational Efficiency
You can cut DPO and DSO in half, eliminate paper processing, and make your team 80% more efficient. Over the long term, you can reduce the headcount devoted to tactical “paper pushing” and increase the headcount dedicated to strategic spend analysis and sourcing, which increases organizational savings per employee.
- Environmental Practices
No paper. Spending to environmentally irresponsible suppliers can be denied. Etc.
- Accessing Credit
If you know what you have, and you can demonstrate the reliable payment history, even if the banks turn you down, you can get receivables financing.