Global CEO of Expenzing, Ms. Ila Imani shared several ways of controlling spends in her interactive webinar- ‘15 ways to control corporate spending and reduce the cost of invoice processing by half’.
An extract of that session is shared below.
Modern CFOs are expected to ensure that capital is available for growth, facilitate strong governance with risk mitigation, enhance supplier relationships, and manage a lean organization with lean teams while maintaining a robust balance sheet. CFOs face increasing pressure to reduce costs year on year to increase profitability and operating capital.
How is it possible to consistently reduce costs year on year without impacting the growth?
One great way to do that is to plug wastages. Detected and undetected wastages are happening in all organizations. The ‘lean’ teams are already overworked and too backed up to do anything about it.
Does any of this sound familiar?
- No tools for negotiations and contract management.
- Constant internal and supplier follow-ups waste precious time and effort (more follow-ups = more urgent) and so paying too early and losing precious liquidity
- Attracting monetary penalties due to late payments.
- Risk of double payment
The solutions to these challenges can be achieved through:
1. Culture, People, and Skills
2. Processes and Best Practices
3. Automation and Tools
How can culture, people, and skills help to plug wastages?
- Inculcating a culture of taking pride in cost savings-Asking for better prices and terms need not be awkward.
- Training on values of the organization
- Incentivizing of proactive initiatives and spend control/cost-saving ideas
- A zero-tolerance policy in terms of corruption
- Discouraging/Penalizing of last-minute purchases
- Move away from ‘person-specific’ dependencies regarding purchases and vendor selection.
What Processes and Best Practices will help in Spend Management?
- 100% centralized procurement with defined KPIs
- No PO without Budget check. All procurement to be PO-based and No invoice payment without approved PO.
- Initiating procurement process after getting detailed business specifications approved.
- Record every payment against item code + GL code. You can control what you can measure.
- Segregate duties of procurement and AP.
- Granular and detailed Delegation of Authority matrix defined .
- Have maximum possible rate cards and rate contracts to leverage the power of a negotiated item at every purchase.
- Proper and timely asset management and tracking.
What to automate?
- Make it easy to approve requests/vouchers using emails or on mobile.
- Centralization of Vendor selection and purchase process.
- A digital platform for online and fair bidding, negotiations, and inter-team collaboration.
- Enforce DoA and related notifications, reminders.
- Automatic reference for historical purchase and vendor data on a need-to-know basis.
- Automated checks for compliance of processes and policies. Ex: Enforce time limits to make sure ‘last minute’ requests are flagged.
- Manage Supplier Contracts with automated reminders, renewals, easy reference of functional/commercial terms.
- Define and control who can change the background information like supplier tax and payment details.
- Get suppliers to enter their data into the system on Supplier Portal, using the allocated POs.
- Build necessary intelligence to flag duplicate and seemingly duplicate invoices.
- Centralize ALL payments and minimize petty cash requirements at the branches/remote offices.
- Structure employee expense policy and enforce using an automated tool
And finally- prevent frauds and scams by implementing these simple suggestions.
- All information is to be accessible only on a ‘need-to-know’ basis.
- 100% product adoption wherever implemented- no exceptions.
- Creating and communicating whistleblower policy and process.
- Cybercrime prevention initiatives in collaboration with the IT team.
- A Kaizen approach to constantly enhance the DoA, audit frequencies, processes around supplier management.
- Regular internal and external audits.
Conclusion
These are a few out of many best practices across industries that have helped organizations bring their costs down, prevent leakages and exercise financial control successfully. Should you want to discuss any specific solution with us, or want to implement something similar in your organization, we are all ears and happy to help at Expenzing!
