Coupa Benchmark Report – How Do Your Savings Stack Up?

Let’s take a final look (for now at least) at the new Coupa 2018 benchmark report titled “12 ways to measure business spend management success”. You can download it here, free on registration.

We’d stress again the importance of this comes not just from its content but the fact this uses data taken directly from purchase-to-pay related transactions carried out by clients and their suppliers on the Coupa platform and within the business network – this isn’t responses to a survey or subjective judgements, this is based on how organisations actually work.

As such, it is unusual and perhaps even unique in our industry – for the moment at least. We suspect there will be more of this type of information around in the future, as organisations  solution providers and users) get better at working out how to best make use of the data that flows from networks, as in the Coupa example.

Anyway, we covered the report here and here, but today we will look at the benchmarks relating to “savings”, which come after sections on process efficiency, digitisation and compliance. The two key benchmark measures here are “on-contract spend” and “realised savings”. In terms of on-contract spend, defined as the percentage of spend which is attached to a pre-approved contract, the leadership benchmark is 72.1%.

The report says this: “Only on-contract spend can result in visible savings, and offcontract spend detracts from the savings rate. Purchasing services under contract also reduces risk. If an uninsured vendor gets hurt on the company site, the company could end up footing the bill”.

We’re not absolutely sure that’s the best example of the risks around off-contract spend, but it’s true enough. Meanwhile, the benchmark for realised savings is 9%.  This is the percentage of spend which is saved by channelling spend through negotiated contracts and “improving spend management processes is the primary level for improving this metric”  Only on-contract spend can be counted towards “realised savings, and it is counted after spending occurs.

This is a tricky one, and perhaps moves away slightly from that objectivity we mentioned earlier. The average percentage saved is “ based on the difference between the original, pre-sourcing cost and the actual price paid”. But we’re not clear exactly where the data for that “pre-sourcing cost” comes from? Is it a price that has previously been paid through the system (in which case, what happens if it is a first-time purchase) – or is it an expected price recorded by procurement (or finance)?

Savings measurement has always been a difficult area, and indeed I’ve written entire papers on the topic for clients back in my consulting days. It would be interesting to know more about exactly how that particular Coupa benchmark is derived anyway.  But the final page in the report provides a very sensible overall conclusion, and we wouldn’t disagree with this:

“Finance, Procurement, and Operations leaders should consider including KPIs from this report in their management dashboards for Business Spend Management initiatives. While company priorities vary, these KPIs give leaders a standard basis for comparing their company’s performance to that of global leaders in four areas critical to Business Spend Management success: Process Efficiency, Digitisation, Compliance, and Savings”.

And the very final paragraph is also very sensible, leaving us with this good advice.

After you’ve selected your KPIs and implemented your Business Spend Management platform, focus on optimisation. Review your processes periodically to see if they can be streamlined, or if they need to be revised to reflect changes in company policy. Review your program goals as they change to ensure that your metrics are still measuring success against your goals. If you’re achieving or close to achieving your goals, look to making your targets more aggressive or taking the next step in your program maturity by expanding your goals”.

You can download the report here, free on registration.

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