Daily Archives: November 14, 2014

It’s Illegal to Burn Money, But Yet Your Organization Does It Every Day! (So Find Out How to Do Something About It!)

Title 18, Section 33 of the United States Code says you shall not mutilate, cut, disfigure, perforate, unite or cement together, or do any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, Federal Reserve Bank, or Federal Reserve System, with intent to render such item(s) unfit to be reissued and if you do, you can be fined or imprisoned for up to 6 months. But yet, every day, organizations everywhere collectively flush billions of dollars down the drain, overpaying suppliers, including foreign suppliers, millions of dollars that can not be recovered and reissued by the organization for other business purposes.

If it wasn’t for the fact that the vast majority of these organizations don’t intend to overpay and waste money, since this money (and evidence of debt) flows through the American banking system, I would otherwise be inclined to argue that, technically, this gross incompetence in management of corporate funds is criminal.

For proof that the average organization wastes money, we simply have to look to the audit recovery industry which recovers, on average 1% to 1.5% of annual spend. And, typically, this is just what they can find with a quick, mostly manual, review of the top n suppliers that account for 2/3rds (66%) to 3/4ths (75%) of external organizational spend using a very loose interpretation of the 80/20 rule. And that’s just overspend. What about spend that should never of happened in the first place (because it was off-contract and 15% higher than contracted rates)? Or unrecoverable losses due to a key supplier not having mandatory insurance policies in place? Or gross violations of the T&E (Travel & Expense) policy (that border on criminal malfeasance) where the VP of Sales decides that a dinner costing 2K / head at the local strip club is a valid use of the organization’s P-Card?

But most of these situations are easily preventable by a Procurement system that is designed to not only enforce compliance, but make it easy. To find out how, check out Sourcing Innovation’s New White Paper on The Procurement Marketplace and the Power of Compliance (registration), sponsored by Vinimaya.