Spend Management: An Answer to the Why’s and the How’s | Software | Computers

Over the years, spend management has emerged to become one of the strongest strategising tool for enterprises to adopt definitive improvements in their supply chain management systems. Automating the process of gathering data, classifying them, auditing and viewing the records has saved the company countless man hours and human effort and also reduced the chances of error drastically. The primary goal of any spend management software is to provide a clear idea of what the management is buying and who is supplying it to them. It should also help reduce overall expenditure of the company by spending more effectively and enabling the team to make better business decisions. But how does this system work? Why is it so important to a company to strategise its sourcing? How efficient is the system in comparison to the traditional spreadsheets and pie charts? We hope to address these questions through this article.

Spend management is a software that consists of different modules of procure-to-pay applications. The applications include e-procurement tools, contract management tools, invoice automation capability, and inventory tracking capability. Spend management essentially groups all the expenses into well defined categories and identifies all elements that have affected the costs of the products. Spend management may or may not undertake risk analysis for future forecasts.

In most companies, procurement and payment is handled by two different departments. But it has been observed that by combining the two elements, it becomes easy to gain visibility, monitor and report, and increase compliance. The spend management system works hand-in-hand with supplier management tools to help gather supplier related information and details about the past and current contracts and its terms. It also reduces time taken to place an order, time spent on accounting for suppliers and follow up on delivery and other tasks. It provides a platform conducting bidding sessions and contract awarding process. This ensures that the company gets high quality goods for lowest prices.

The software in its initial stages will require significant customisation and integration depending on the policies and the complexities of the organization. But once that is done, the admin needs to modify the settings only when the company introduces new policies or adds new fields for monitoring into the system.

By implementing spend management, the company can reduce instances of maverick spend. By minimising instances where the company buys goods or services from outside a preferred process or system, the company can save on premiums in the total costs through discounts and other pre-negotiated terms. Spend management systems implement mechanisms for supplier approval and auditing which prevents maverick purchasing by imposing penalties if it occurs.

According to spend management’s strategy, if more spend is directed towards one supplier, the company stands to gain better price leverages. This, of course, is subject to the supplier’s capabilities, prices, location, delivery history, and customer satisfaction among other parameters.  Spend management system can gain access to some of the established database containing supplier details, supplier history, customer feedback and other vital details the procurement team will need to ensure an informed decision is taken.

Spend management essentially regulates the supply chain management of the company as it has a direct impact on how assets and inventories are procured and managed. It helps evaluate the total cost of ownership for a product or service. The entire system is a dynamic chain which updates itself with every single procurement thus being able to generate concise reports and up-to-date trackers. It creates long term savings for the company.

Enaviya provides Expense Management Software, Travel & Expense and Spend Management

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