National Connections, Local Ownership
National Connections, Local Ownership

Indirect Spend: 4 Steps that Can Make Little Things Add Up to Major Savings

You may be unnecessarily leaving hundreds of thousands of dollars on the table. Here are 4 ways to mitigate this problem.

This blog first appeared on the AmeriQuest Business Services website.

Pens, paper, notebooks, laptops: for most, the existence of these items falls under the realm of indirect procurement. Unfortunately, this is a process little understood by employees and financial executives alike. Many companies treat indirect procurement, or procurement not directly associated with a business’s core competencies, as minor ad hoc purchases that require no strategy to perform. However, this misconception can leave hundreds of thousands of dollars on the table in 2017 for a single given business.

While there is a growing emergence of third party procure-to-pay technology and services to help businesses manage their indirect spend, a majority of the options available offer piecemeal solutions, rather than holistic solutions. This lack of centralization and compliance can result in higher costs, exorbitant shipping costs, fewer bulk discounts, double-purchasing and more.

Properly managed indirect spend through a third-party P2P provider presents a wealth of savings and cost avoidance opportunities for this new fiscal year. Here are some ways you can set your company up for success with indirect spend:

4 Ways to Control Your Indirect Spend

  1. Aggregate indirect expenses company-wide.  While your company’s manufacturing department and accounting department might not have much in common, the success of both departments does rely on access to indirect tools, such as staples and computers. In large organizations, siloed departments can wreak havoc on a buyer’s ability to gain company-wide efficiencies. By aggregating the needs of all departments into larger, bulk orders, executives in charge of indirect procurement can implement a company-wide contract that will allow for perks such as volume discounts.
  1. Educate employees on indirect spend. Having a world-class procurement system in place can only go so far if employees are not aware of proper protocol and practices. By cutting down on employee purchasing outside of established protocol, financial executives eliminate the need for cumbersome and risky expense reporting and ensure all purchases made are saving money for the bottom line.
  2. Strive for centralization. Large organizations can often fall prey to disorganization and decentralization through lack of communication and transparency. Effective spend management works best when buys are centralized and coordinated across departments. This is best handled through a highly visible and transparent cloud-based system that allows financial executives to monitor purchases in real-time.
  1. Make it automated and holistic. Businesses are looking to automate back-end processes and indirect procurement in order to focus on their core competencies and reduce the number of man-hours needed to manage these processes. In the past few years, B2B businesses have implemented piecemeal technology solutions from third party vendors specializing in various components of the procure-to-pay process. In 2017, we can expect to see companies moving to single-source solutions and suites that can support all end-to-end financial processes including indirect spend management.

For many organizations, problems with indirect purchasing can go much deeper than expected and can destroy budgets with little to know acknowledgement.

Discover how to streamline and automate your indirect procurement through organization-wide protocol and centralized, transparent purchasing data

Leave a comment

Your email address will not be published. Required fields are marked *