Small Business Spend Management — Indirect Buying, Travel, Strategic Sourcing and Beyond (Part 1)

As a small business owner, I've often found myself not following the same tips that we provide to larger organizations when it comes to spending smart and buying less. Having rapidly shifted from a tiny services organization with a few contractors to a growing new media publishing group with a range of full-time and contract employees, I've watched firsthand how our lack of spending controls, inadequate sourcing focus and ability to eat our own platform/technology dog food has contributed to both direct and SG&A costs that are rising in disproportion to even our growing book of business. Now, this is some common stuff. After all, when a company is in hyper-growth mode, a focus on the top line overtakes any effort spent on the bottom, at least in a regular 50 hour work week (or 60, 70 or 80 as the case may be).

For example, rather than use a firm like Coupa to control our indirect spending, we rely on Amazon Prime (which is really just a simple means to enable our employees to buy -- without any cost controls other than cursory email approvals beforehand). I worry about looking at how much we spend with Amazon each month. Need a new computer? Just head down to the Mac store -- and make sure you get our 5-10% discount (fortunately, in Apple's defense, even though our per-machine costs are likely significantly higher than if we went through a CDW or a Dell for PCs, the quality of the builds, overall speed -- we estimate we save between 10-20 minutes per day on reboots and wake-ups -- and in-store business support absolutely justifies the premium).

Our approach to travel booking and T&E is not much better, though Rearden has offered to have us beta their new SMB solution to provide feedback and input, so I suspect we'll have some controls here shortly. But perhaps more important than procurement compliance controls and ensuring that those with buying authority shop off from approved vendors with specific discount schedules (if applicable) is the lack of sourcing and negotiation focus within the firm. This might sounds odd coming from the founder of Spend Matters. But we've found that you need to prod employees -- even those writing about the topic on a regular basis -- to make sure they're negotiating the best possible price. When we planned our first event earlier this year, we asked someone working on it if they had gone back with an alternative bid/benchmark price after receiving a quote from a preferred supplier. This individual said "no," but then quickly went to work, and secured an additional discount -- and still got to buy from the company she/he wanted to.

Strategic sourcing is more than a tool and a process in a small business. It's a mindset that requires that you define your specifications first, know the benchmark price (or get smart on it) and then negotiate and manage suppliers to total cost based on expectations you lay out in advance. Above all, it's not about using a solution from SAP, Oracle, Ariba or anyone else -- or even Excel for that matter. It's about a mindset and a philosophy. And making sure you have your employees invest the time and do their homework.

Stay tuned as we continue to investigate this topic, sharing tips from a recent WSJ article on the subject.

Jason Busch

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