The Procurement Financials Category

The Allocation Game — Managing Cost Before Money is Spent

finance

Spend Matters welcomes this guest post form Steven Krueger, principal, and Matt Polvara, senior manager, at Ernst & Young LLP.

With more interest rate hikes a likelihood, banks are poised for growth. But that doesn’t mean they should stop their cost reduction programs. By strategically reducing or eliminating costs, and in particular by optimizing infrastructure costs (which account, on average, for about 40% of a bank’s cost base) banks can be leaner and more agile in a changing economic and regulatory environment. They will be better positioned to face off increasing threats from FinTech firms that are aiming to introduce disruptive technology-enabled business models. Ultimately, banks can reallocate funds they saved to invest in products and technologies to defend or grow market shares.

Overheard on the Quad: What We Learned When Supply Chain Finance Went to University

Michigan State University

Even with the increasing shift in focus to the importance of return on investment for a college education, many young men and women these days pursue a college education to answer foundational questions about themselves. It’s no surprise, accordingly, that so many university mottos include the word “veritas,” a nod to students and professors alike searching for “truth.” Likewise, as our sister site Trade Financing Matters explains, supply chain finance recently went back to school, under the tutelage of Professor David Wuttke of the EBS Business School. His team at EBS, in collaboration with Orbian, has been seeking the truth about trade finance, including a few foundational questions of their own.

Procurement Metrics: Understanding the Economic Language of Value (Part 2) — Expenditures, Expenses and Financial Reporting (CapEx, COGS and G&A) [Plus+]

finance

In the first installment of this series, we discussed the term “spend” (the noun, not verb), in the context of supplier spending, in a fair amount of detail. We discussed addressable spend, and what's included and excluded for the purposes of spend visibility/management, but also for the purposes of using spend within procurement performance measurement and benchmarking. In this installment, we dive a little deeper in terms of comparing and contrasting spend to other terms, as mentioned in the title.

Procurement Metrics: Understanding the Economic Language of Value (Part 1) — Spend [Plus+]

buzzwords

One of the challenges that procurement faces is "speaking the same language" as finance, as well as the language of its stakeholders. A marketing department, for example, may use the term “investment” for its spending. Similarly, many procurement organizations categorize some of their added value in a category called “cost avoidance,” even though the term is not taught or recognized formally by the finance function.

Even within procurement, many terms are used inconsistently. Consider the term “addressable spend.” Is all spend addressable, as represented by cash disbursements going to external parties? Or is it supplier spending that is reasonably under the influence of procurement? If you say the latter, what defines “reasonable”?

The friction and misalignment common between various functions often results from stakeholders not having a basic understanding of terms that seem similar but yet can be very different. This problem is exacerbated when the stakes are high and you start getting measured and benchmarked on these metrics. To prevent this, procurement needs to be “business multilingual” and understand the variations of terminology so that it can best speak these languages and help the organization make the best decisions to create value.

This is what we’ll address in this analysis, with a focus on procurement and finance within the enterprise. Clearly defined terminology is the foundation from which higher-level concepts, performance metrics and benchmarks can be consistently understood — and improved.

Sponsored Article

How To Avoid Fake Spend Under Management (SUM)

Supply Chain Fraud

Savings is the primary performance measure for procurement. These key savings measures must be qualified relative to the actual spend under management to have true value. A definition that directly supports the savings KPI, however, is not always present. This leads to the illusion that spend is under management when often it is not, thereby deteriorating the overall savings results.

How to Justify Spend Analysis to Finance/IT When There’s No Clear ROI (Part 2) [Plus+]

funding

Yesterday, we discussed the first five of 10 possible strategies to justify a spend analysis initiative to finance/IT despite the catch-22 that comes from not knowing the potential value that may come from the initial investment. Today we pick up with recommendations six through 10 and close with some final remarks and recommendations.

How to Justify Spend Analysis to Finance/IT When There’s No Clear ROI (Part 1) [Plus+]

finance

Analytics are all the rage. And spend analysis is Procurement 101. So, getting some reasonable investment shouldn't be a problem, right? Wrong. The problem with analytics is that the identified value is all “option value.” You don't know how much value opportunity you will uncover with the analytics until you actually perform them (and implement the identified opportunities)! This article is designed to help you overcome this catch-22. We've prepared 10 strategies to help you get the ball rolling with IT and finance (even if the ROI isn't clear).

7 Tips for Measuring Savings

finance

Spend Matters welcomes this guest post from Paul Gurr, managing director at Provalido.

Although everyone measures savings, there are remarkably few areas of consensus around how to actually do it. Practitioners have spend countless hours debating exactly what constitutes a saving, and although different organizations will have valid reasons for wanting to measure things in a certain way, there are a few principles that can help when considering savings measurement. Here are seven you can start applying today.

Exploring the Future of the Recovery Audit Market: Reading the PRGX and Lavante Tea Leaves [PRO]

Supply Chain Fraud

The recovery audit market has a long history that’s rooted, in part, on the fact that accounts payable organizations make mistakes when paying suppliers. These errors often stem from poor visibility into accurate master data surrounding contracts, transactional documents and related supplier information that lead to AP mistakes. Root causes include: overpayments, duplicate payments, currency errors, credit memos, incorrect line-level pricing, missed "deal" memos/notes and logistics charges.

Getting to the bottom of these disparate documents and data sets has traditionally been a largely manual process, albeit one that recovery audit firms have somewhat automated with homegrown tools in the past two decades. Given what they do in the field, providers that serve this market, including PRGX, APEX Analytix and Connolly (now a division of Cotiviti), have historically had more in common with other diagnostic providers such as REL (now part of Hackett Group) than typical operations consultants and procurement/AP solution vendors. But the recovery audit sector is starting to change. Services-based firms are getting into analytics, supplier portal, supplier management and related software areas. And in non-industry-specific and nuanced environments (e.g., retail), solutions from P2P, AP automation and e-invoicing providers such as Ariba, Basware and Coupa are helping to catch payment and other mistakes before they’re made.

This Spend Matters PRO analysis, the third in a series that explores and analyzes PRGX’s acquisition of Lavante, explores the past, present and future of the recovery audit market, and what technology-led changes in it are likely to mean for firms, customers and customers. See also: PRGX to Acquire Lavante: Solution Overview, Comparative Solution Capability and Competitive Analysis (Part 1) and PRGX Acquires Lavante: PRGX Analysis and Customer/Prospect Recommendations (Part 2).

ICYMI: The ‘Alternative Version’ of Distributor Finance

distributor

There is a major opportunity for cloud-based, e-commerce platforms to leverage seller-centric distributor finance with OEM manufacturers. This ‘alternative version’ of distribution finance is also suitable for many industries, as David Gustin, editor and co-founder of Trade Financing Matters, recently wrote in an article on Spend Matters, OEM Distributor Finance: The Next Frontier. Yet it’s an opportunity too few are taking advantage of.

Why to Involve Procurement Early in Supply Chain Finance Planning

reverse factoring programs

Reverse factoring programs require a careful internal process orchestration that must include procurement, accounts payable, treasury and executive leadership to be successful. During an outstanding panel discussion led by The Trade Advisory’s Tony Brown at the CFA’s Supply Chain Finance/Factoring World event in Miami last week, two panelists, Kyriba’s Eric Riddle and Wells Fargo’s Stephen Elson, provided contrasting examples of what successful and poorly performing reverse factoring programs look like.

Partnerships, SCF+ and More: Taulia’s Crossroads (Part 2) [PRO]

crossroads

In the first installment in this series, we provided our own recent history lesson on Taulia and how it got to where it is today — and the crossroads it currently faces from a strategy perspective. As we wrap up our Spend Matters PRO update on Taulia, we explore a number of specific areas of its business today, including a deep dive into its SCF+ offering, a tech-enabled and simplified approach to reverse factoring for the long-tail supplier masses instead of just large vendors. We also explore how Taulia is currently positioning itself today as it engages customers and how, on many levels, its core offering is a Trojan horse for what it really wants to sell with partners (but why that foot in the door with procurement, IT, accounts payable and treasury is an important as a first step and how these different worlds are converging). Granted, it would be easy — and not incorrect — to observe that the broader e-procurement market and purchase-to-pay (P2P) market remains distinctive from Taulia’s core sector today. Yet going forward, one can make the case that the worlds of generic (indirect) and category-specific buying, transactions, financing and payment will come together. And this is where understanding Taulia's emerging strategy matters.