When we are struggling to increase or maintain revenue we need to protect the bottom line!
I am not sure if it is because I am Scottish or because before my long career in the IT industry I was an accountant, but my obsession with spend control within an organisation is verging on the obsessive.
Now as a businessman I better understand the need to grow an organisation through sales, and indeed sometimes through acquisition. We all want our companies to grow and deliver better bottom lines whether that is for the benefit of shareholders or just for the benefit of the company.
In the current climate, growing a business by increasing revenue is a tall order and in some industries, with shrinking revenues. Often organisations try to maintain sales through discounting or sales, for example in the retail industry, which whilst helping to maintain turnover means that tighter margins and ultimately profits suffer.
Whatever way we look at it, growth is a difficult task and organisations start to look at ways of reducing cost. We have seen the reduction levels of staff within the financial sector and store closures in the retail sector.
The concept is simple – with reduced revenues the only way we can maintain profit is to reduce cost. Now I’m not saying there is no case for some redundancies or closing down stores that are not profitable, but controlling expenditure in an organisation is paramount.
So how do medium to large organisations get a grip on the expenditure? The answer is simple – improve your procurement systems and empower your procurement departments to deliver savings.
eProcurement delivers real savings to organisations through better control of spending and eliminating maverick spenders, in addition to reducing internal cost within an organisation.
The control of expenses for employees outside of the normal purchasing process is also another huge area for consideration. Most commonly, travel and accommodation costs incurred on behalf of the organisation need to be reclaimed.
In many cases the process to do so is a manual effort, with no validation or appropriateness checks. Claims get paid without authorisation or reference to the ‘corporate rule book’. A lack of control in this area introduces risk!
Aberdeen Research estimate that organisations are losing $260B in annual profits due to their inability to organise and analyse spend data and implement best practices to capture lost savings. That’s staggering!
The strangest thing is the ease that spend control can be implemented, the low-cost to do this and the incredible buy-in from end-user due to the simplicity of using these Web-based interfaces. This takes the hassle out of deciding what to buy and the requirement to have to think about account coding.
So my advice, to all Australian organisations with over 100 staff that are able to buy things, is to take a close hard look at protecting your bottom line.
eProcurement and spend control is the most sensible approach and best investment your company will ever make, not only in the difficult times but when the good times return.