When it comes to business expenditure, less is more is not always the rule of thumb.
As with any business activity, there is a balancing act involved in ensuring that value is created, opportunities and benefits are enjoyed, and a business is thriving. To achieve this, you need funds.
To maintain a healthy inflow of funds, you need to ensure that your output is optimised.
The need for efficient, streamlined finance functions is rooted in this fundamental need that is at the core of every organisation operating in the modern market.
That is where spend management comes in. The larger your organisation becomes, the more likely it is to suffer inefficiencies that can trickle down to even the most minor processes.
Addressing inefficiency at its core begins with spend management.
The pressure is high on the finance team of each organisation to maintain optimal performance. If your finance operations hit a wall or suffer systemic failures, chances are, your wider business operations will face similar adversities.
This means that it must be primed to balance a number of priorities at all times. This goes beyond clear-cut spend management or lower costs. For your finance function to thrive, it requires a host of optimised auxiliary functions.
From setting forecasts and implementing budgets to cash flow risk management, these factors play a vital role in the success of your finance processes. Approaching these needs strategically and forming a step-by-step pathway to mitigate financial risks is the only way forward for more effective spend management.
Businesses must remain in a constant state of evolution.
While this has a lot to do with the volatility of the market, the changes a business undertakes is no indication that the business itself is unstable. Instead, it can showcase your responsiveness to the market as well as resilience and flexibility that will serve you well through a crisis and beyond.
This flexibility must be reflected in your spend optimisation strategy.
If your business needs are always changing, your spending too will change. This means the spend optimisation strategy that kept your finances in check a few months, or even weeks, ago, may no longer be relevant or effective as time goes on.
Your spend management platform must be attuned to these requirements and offer you the right framework for dynamic cost optimisation.
Enhancements on a service level, the optimisation of consumption behaviours, and the right innovations are foolproof methods we utilise to ensure that your cost optimisation strategy is able to respond to whatever comes its way.
While the process itself may take time to perfect and will need to be revisited at consistent intervals to remain relevant, the value of spend reduction is clear.
When a business is able to cut costs successfully, it makes room for better resource allocation and higher value addition opportunities. Not to mention a much healthier financial footing.
Despite this, however, many businesses fail to account for as much as 20% of their expenditure.
This generally occurs when only core expenditure is prioritised during optimisation—leaving other, seemingly minor costs overlooked.
These costs may include IT and telecommunication, fleet and fuel, logistics, marketing, professional services, maintenance, repair and operations, as well as the cost of utilities such as electricity, gas, and water.
Your spend management platform must provide an overview of all business expenses to ensure that your finances are optimised as a whole, and not just the spending that is linked to your core operations.
Addressing these challenges and shoring up weaknesses will lead to a better financial outlook.
Our strategic seven-step methodology is supported by our experience with benchmarking and swift category assessment tools. Tools and insights like this help you take on the challenges of spend reduction and help your finance function beat inefficiencies without compromising value addition.
By now, the value of effective spend management to any modern business is clear.
What is also clear is that digitalisation and technology is the only way to balance the many priorities of financial management while ensuring efficiency, quality, value, and risk mitigation.
Our approach utilises all the best practices of the industry as well as the cutting-edge tools we have at our disposal. We analyse your spending through levers such as audits, process improvements, sourcing, and competitive bidding.
We believe that for optimised spend management to be achieved, businesses require an approach that integrates all key operational functions under one strategy.
For some, this may mean addressing procurement inefficiencies because procurement is one of the functions responsible for the highest investment of business funds. For example, the right digital platform and procure-to-pay solution will help you achieve tail spend optimisation and enjoy features such as eAuctions, spot bids, and more extensive catalogues.
Your spend management platform will come to mean a wide array of things. From cost reduction to spend optimisation and tail spend management. When handled correctly, your platform will be able to help you boost value addition, improve your timelines, alleviate the burden on your operations and administration, give you a cost-saving advantage, and lower your overall risks.
Get ready for a more demanding business landscape with resilient and adaptive financial management today.
Here at Kronos Group, we help businesses transform their operations and reach new heights through our experienced insights and professional services in the specialised fields of procurement, finance, and project management.
Our services include:
A part of Kronos Group’s team since 2018, Julie is a leader who has honed her specialisation in business transformation and utilised her expansive financial expertise to power business strategy and add value to what we do. She has amassed experience (Pfizer, Sony, AXA, SMEC, Tradelink) all over the world in strategy, project management, analysis, and supply chain.