Since the onset of the pandemic in early 2020, growing numbers of businesses that temporarily closed have sadly had to close permanently due to the long-term economic fallout. Although the state of the economy varies depending on your organization’s location and restrictions in your area, change within the business environment will be inevitable during 2021 and beyond.
However, this change need not be a threat to CFOs worried about risk management. Making proactive efforts to improve and secure your spend management strategy can become a great opportunity towards driving growth and success. Additionally, CFOs who make thoughtful adjustments to their strategy while relying on innovation will gain the ability to adapt to potential market risk. But where should you begin?
The first step to fine-tuning your financial strategy
Before implementing financial and business planning, firstly identify your organization’s financial strengths and weaknesses, which may differ from previous years. To help you successfully inform financial decision-making during this unprecedented time, you can use these five key spend management strategy questions to guide your process.
1. Are you adequately equipping your organization to operate in uncertain times?
Remote work is on the rise, and many companies are supporting it indefinitely. So you first need to consider if you’re setting up your organization for success within a remote work environment. Are you embracing digital channels, collaboration technologies and paperless workflows?
Not only does digitizing your spend management enable successful remote work, but it also streamlines purchasing cycles and supports cost-containment because of the following benefits:
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Improved compliance with corporate policies
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Improved spend visibility and real-time budget insight
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Ensured spend approval and accelerated workflows with on-the-go mobile capabilities
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Elimination of errors and overpayments
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Increased collaboration between cross-functional teams
Besides these benefits, spend management solutions allow you to categorize spend by expense type, supplier and even users. This capability ensures that you can back purchasing decisions with accurate data and determine the impact of spend before it's incurred.
2. Are you maintaining your corporate spend culture?
During periods of market disruption, maintaining a spend culture, or the processes and values your organization uses to guide company spending may become an afterthought. Although common in occurrence, letting this happen is a mistake and can result in excessive cost-cutting or overspending.
It makes sense why cost-cutting occurs during economic recessions: it can increase your organization’s profitability and be a healthy method of readjusting your budget. However, it shouldn’t be used as an alternative to your organization’s financial strategy.
The reason for this is that spend decisions are investments that generate ROI. By failing to invest in your organization, you may experience negative consequences. For example, businesses lose out on $75 billion every year by not investing in customer service and brand experience.
To prevent this from happening, proactively align budget-cutting and allocation with your organization’s strategic goals to ensure that you are prioritizing strategically-critical costs and reducing non-essential ones. This ensures that spend is “smart” and managed to drive operational success, rather than being viewed as capital that needs to be continuously dipped into as problems arise.
Alternatively, poor corporate spend culture can also result in overspending if employees are misaligned on proper procedure or are spending irresponsibly.
So now’s the time to ask: in the current remote and hybrid working environments, do you have systems in place to maintain the same culture of spend control that you had in your office environment?
Once you evaluate your organization’s spend culture under remote conditions and determine new controls to put in place, you’ll be on your way to maximizing every dollar spent.
Fortunately, web-based and mobile app-enabled spend management solutions can easily maintain corporate spend. For instance automated multi-level approval workflows streamline remote purchase requisitioning and expense reports by cutting out inefficient paper trails and email threads. Instead, a centralized digital request will be routed for approval as it collects approval data along the way.
Having a centralized spend management system promotes informed decision-making because it acts as a single source of truth on your organization’s spend data and reporting. As a CFO, you can immediately know all the crucial data you need, from the statuses of purchase requisitions and who completed an approval to whether a purchase is within budget.
Not only does centralization mean that employees can get the budget insight they need to guide responsible spending, it also promotes company-wide policy compliance within one system as spending policies can be configured with alerts that flag potential risks.
Meanwhile, a clear audit trail is automatically built within all transaction files to drive accountability and ensure visibility is maintained.
3. Have you documented your disaster-response processes and procedures?
With the pandemic has come a clear lesson: organizations must take the necessary steps to future-proof procurement and financial functions. Finance teams have made significant strides to maximizing efficiency and cost savings.
One of the easiest ways to achieve this consistently is by streamlining your organization’s procure-to-pay cycle. Some ways companies are accomplishing this is by:
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Centralizing procurement within one solution
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Revisiting and renegotiating current vendor contracts
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Adjusting budget allocation
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Minimizing unmanaged spend
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Accelerating procurement workflows
Another way to protect your organization’s financial functions is to leverage spend data and analytics to gain greater insight into supply chain risk. In fact, according to a recent Center survey, analyzing spend has become the top-ranked financial activity of 2020 and has beat the previous year’s winner: receipt and expense report tracking. This change in activity reflects widespread efforts to optimize financial decision-making.
To further support these survey results, organizations worldwide have traded in their outdated processes for advanced spend management solutions that offer additional spend analysis features. With these newly-implemented systems in place, business leaders can finally sustainably gain complete spend visibility, mitigate risks and support strategic supplier negotiations.
4. Do you have supplier visibility?
Speaking of suppliers, for many organizations, 2020 highlighted deficiencies in supplier diversification. Whether you’re moving sourcing closer to home or securing strong global sourcing, it’s crucial now more than ever to use best practices for selecting and managing suppliers.
Luckily, with the right technology, you can gain a deeper understanding of your suppliers by leveraging spend data to communicate and collaborate more effectively with them. Easily accessible supplier data offers many benefits, including:
Spend management solutions can even streamline taking on new suppliers by ensuring that all spend occurs with approved suppliers, which enforces a proactive risk-mitigation strategy and supply chain resilience.
5. Do you have a long-term, post-pandemic strategy in place?
While much of corporate focus is currently on short-term operational and financial requirements, enabling your organization to succeed long-term in a post-pandemic world is crucial to not falling to obstacles.
With this in mind, now’s the time to ask the following questions:
1. Are you able to ensure continuity should further disruption arise?
2. Do you have supplier strategies in place to effectively navigate this process?
To begin answering these questions, consider how your management, staff, suppliers and customers may be operating in the future. From there, you can determine if your financial and procurement systems are enablers of this new reality or if they have weaknesses that may need to be fixed beforehand.
Strategize expert spend management
By answering these five industry-encompassing questions as you develop your spend management strategy, you can leverage data insights and increased spend visibility to proactively manage your spend and drive growth.
Curious to learn more ways to reduce costs with a targeted strategy? Check out our recent blog on how to save with an effective procurement strategy.