The Evolving Power in Spend Visibility

Spend Matters welcomes this guest post from John Callan, Senior Director at Coupa.

It’s no secret that businesses struggle with full visibility when it comes to spend management, with many still believing that it simply isn’t possible to find a comprehensive solution that is easy to implement but will also deliver value. Time and time again, we see the price that businesses pay when they lose control over the procurement process.

Spend that is fragmented across multiple categories and suppliers often leads to payments being incorrectly classified — or not classified at all — due to inconsistent and disjointed spend processes. This can render payments invisible, easily becoming the pocket where procurement fraud is concealed. Procurement fraud costs companies an estimated 5% of annual revenues each year, and the 2019 SAS report found that an astonishing 26% of organizations claim to have lost up to $150,000 annually as a result of procurement fraud or processing errors.

There are also many operational considerations. When spend is miscategorized, it results in poor, inaccurate data, potentially damaging the credibility of the procurement process. It can also be problematic for management when they are not given a clear picture of the business supply chain. With Deloitte finding that 65% of procurement leaders admit to having limited or no visibility beyond their tier-1 suppliers, it is clear that the legacy system is broken. Business leaders need more comprehensive, effective and data-driven business spend management (BSM) solutions.

Transparency enables agility

In the past, the manual task of optimizing spend was costly and inexpedient, but new tools and platforms offer comprehensive and unified strategies to manage it. Armed with full visibility and control, companies can save money and increase revenue while curbing potential fraud. Transparency also enables agility. When you can identify where spend is unnecessary, companies have the power to direct it to where it is most crucial.

In the consumer sphere, the advent of spend management visibility has already arrived. Modern apps and open banking platforms offer customers the ability to oversee their cash flow and spending habits and allow them to swiftly categorize spend and pinpoint where they spend the most money and where they could be saving. Consumers can easily see spending pitfalls, which may make them reconsider that morning latte when they realize how it all adds up. Businesses should and can have access to this kind of visibility and control too. While the streams may be more complex, intelligent technology and a data-driven approach can still deliver a consumer-like experience that simplifies and streamlines business spend.

No room for error

As artificial intelligence (AI) progresses, the immense value it offers to visibility within spend is clear. The technologies will transform the manual and resource-draining procurement process of the past, which have created environments where inaccurate data and fraudulent activity can thrive. Without automated processes or access to powerful, prescriptive insights, a great deal of effort and resources are poured into audits that often don’t even ultimately uncover fraud that may be present. AI has the power to transform these processes as it can oversee masses of normalized spend data, sift through transactions and identify fraud in real time.

AI tools can help structure and clean spend data in a format that shared services leaders can actually use. By improving the readability and quality of data files, you can prevent poor or disorganized data from disrupting your processes. AI-powered tools are able to extract, organize and present data in a fraction of the time and at a fraction of the cost.

Move from risk to opportunity

The analysis generated by AI tools can be leveraged to help better see risk concentration, including which parts of your business would be most impacted if a critical supplier defaulted on their obligations.

Moving beyond this, AI can help find patterns in businesses buying behavior and can anticipate purchasing needs. Not only can it be used to identify trends and suggest routine purchases, by examining millions of transactions, it can recognize repeat purchases issued by an RFP or run an auction to buy this particular service or item in larger quantity from fewer vendors at better prices.

It can also help you map out what you’ve bought from the same supplier to negotiate more effectively when renewals or expansion of contracts are due.

As well as the likes of AI, there’s a more crowdsourced element entering the fray. “Community intelligence” harnesses the power of collective insight. Through unifying data from hundreds of businesses spending and transacting with thousands of suppliers, platforms are able to generate meaningful insights. The benefit of cloud platforms is that it can learn from a wealth of spend data, which isn’t possible with home-grown or legacy solutions, able to make smarter recommendations as the platforms grow and more businesses participate.

Just as the GPS navigation system Waze is able to highlight issues instantly, such as bad traffic that just started, community intelligence can flag issues such as a risky supplier. In the same way, AI insights can suggest actionable solutions such as putting a risky supplier on hold, to save businesses time, money and issues down the line.

Businesses around the world are now able to mitigate risk, remain compliant, identify smarter spending opportunities and improve process efficiencies across all of their spend. The days of turning a blind eye and thinking legacy systems will keep up have passed.

Whether it is through AI or more traditional intelligence, it’s never been easier to adopt new ways for businesses around the globe to quickly and efficiently achieve the visibility that can digitally transform their spend management.