Spend Matters welcomes a guest post from Jessica Warren of Hubwoo.
Tail spend mis-management, or rather the lack of management altogether, costs organizations millions every year. Yes, we have all heard of “maverick” spending where buyers purchase low-volume items off contract and often pay way above the contracted value, even making duplicate purchases in some cases. “But we have an eProcurement solution, a solution that we paid dearly for, just stick to the catalogued items – it’s straight forward!” we hear procurement executives exclaim in frustration as employees seemingly flitter away spend on non-core items despite the heavy investment in an eProcurement solution.
Don’t be so hard on your employees. It may well be that the very eProcurement solution you invested in is holding them back from bringing all of your spend under management, specifically in the case of tail end spend.
Here are a few reasons why tail spend management may seem like a lost cause:
1) The key to getting a grip on your tail spend is supplier enablement.
Not all suppliers are enabled – as a matter of fact, only the top 20%, i.e. “strategic” suppliers, are likely to be enabled. This could be due to a couple of things. Maybe supplier fees are curbing suppliers’ interest or ability in being onboarded to a network, or maybe this is due to a lack of support from the solution provider in getting them onboarded and automating the process.
Supplier enablement and spend under management are directly related.
2) Services are being purchased off-contract
The procurement of services comes with unique challenges. It is not always possible to know the quantity or type of work required at the time a services requisition is created, resulting in difficulty ordering services on contract.
3) Forgetting about the second “P” in P2P
Outdated payment processes significantly impact cost and efficiency savings, especially where tail spend is concerned. There is a tendency to still use manual checks and expense reports to process lower volume purchase payments, costing valuable resource time which could and should be applied in more strategic areas.
“Whether it’s from default, neglect, ignorance, temporary aloofness or by habit, procurement (and A/P) organizations habitually fail to deliver on eProcurement and e-invoicing results.” –Jason Busch
Want to get ALL of your spend under management? Read the Spend Matters paper: A P2P Implementation Guide: Avoid the “Dumb Ways to Die”