Many corporate organizations do not have adequate visibility of their expenditures. Especially with goods and services for secondary activities, ordering often does not take place under management. The proportion of maverick spend is high as a result, despite there being plenty of arguments to counteract this. Further automating the purchase-to-pay process for both direct procurement and indirect procurement helps organizations increase spend under management.
Centralize procurement in direct and indirect procurement
Getting more control over your spending starts with the procurement process. Generally, corporate organizations focus their procurement management on direct procurement, that which directly impacts the primary business process.
Purchasers use the ERP system on a daily basis for supplier management, in which they record the agreements they have made with preferred suppliers for the supply of goods or services. Purchases made from these suppliers are recorded centrally in the ERP system.
💡LEESTIP: How the Kraljic matrix improves your supplier management and procurement process
This central recording of purchases and bringing these expenditures under management takes place much less with indirect procurement. And even if agreements are made with suppliers of routine products, the step is often too big for employees to order through a formal process.
The functionality of an average ERP system is limited in this regard. Manually filling in various fields to place an order takes a lot of employees' time.
For routine products, they are more likely to choose to place an order on the site of better-known retailers or a nearby store; that is, with suppliers with whom favorable arrangements may not have been made. This creates maverick spend.
Because we see this especially in indirect procurement, where although the average order value is low, the ordering frequency is high, many hidden costs of procurement can be reduced if indirect procurement is also brought under management.
Purchase to pay software helps get indirect spend under management
Purchase to pay software offers more extensive options for this than an ERP system, is more user-friendly and has a lower TCO. Purchase to pay software can be used in addition to your ERP system to automate all steps from request to payment.
This gives you more insight into the process and all spend with less manual effort. For example, in the suppliers where you can gain purchasing advantage or in what proportion of spend is not yet under management.
A well-designed purchase-to-pay process also includes making it as easy as possible for employees to order products themselves. An accessible purchasing portal reduces the likelihood that they will still choose their own channels to make purchases. In this way, you can reduce and preferably eliminate maverick spend.
Employees can make their purchases only from your organization's chosen preferred suppliers with whom you have been able to negotiate favorable purchasing terms in advance.
Because this may involve thousands of items, it is impossible to load all these products into a procurement management solution. A good procurement portal therefore offers not only the possibility of adding e-catalogs, but also the ability to integrate with your preferred suppliers' webshop.
Employees go through the purchasing portal to the supplier's web shop, select one or more product(s) they want to purchase, and then are linked back to the portal to confirm their purchase or have the order request authorized.
Expenditures are predictable and under control
Because the purchase is already captured and known at the front end of the process, the financial spend is also predictable and under control. By automating the purchase to pay process of both direct and indirect purchases, you increase your spend under management and, as a bonus, you have made the entire purchase to pay process transparent and auditable.
Want to know more? Then read our white paper on increasing spend under management: why and how. Or contact us.
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  Christian Willemsen |
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