Coupa Community Intelligence – Most Important Spend Management KPIs

Spend management firm Coupa has issued a new 2018 benchmark report titled “12 ways to measure business spend management success”. You can download it here, free on registration.

Now we see many different reports – surveys, opinion pieces and so on – coming across our virtual desk every week, but this really is a bit different. And that difference means we can unhesitatingly say that every procurement function should take a look at it. That’s because the data it contains comes directly from the Coupa user community, and is based on real spend transactions going through the Coupa platform, rather than subjective findings or opinions from respondents. As the introduction says:

“This report, which presents data from Coupa Community Intelligence, provides 12 of the most important BSM key performance indicators (KPIs) across four categories: Process Efficiency, Digitisation, Compliance, and Savings. Unlike other benchmarks in the industry, this report is the first to provide KPIs based on actual spend transactions instead of subjective surveys”.

The definitions of each of those areas that the report addresses are as follows:

Process Efficiency: How efficient are your transactional processes for Business Spend Management?

Digitisation: How successful have you been in digitising your Business Spend Management processes?

Compliance: How effectively are you driving compliance through Business Spend Management?

Savings: What is the bottom-line impact of your Business Spend Management efforts?

For each KPI analysed in the report, there is a “leaders’ index” - the average of the top quartile of performance in that specific metric. So that defines a level to aspire to, if you’re not already there (and if you are there, or are better, then well done!)

It won’t be a surprise that Coupa observes how leaders have digitised their spend management processes, with minimal if any paper-based processes still lingering. As well as highlighting the benchmarks, the report also provides some recommendations – some “how to” tips in terms of improving process efficiency.

So if we take the Process Efficiency group, it considers three KPIs: invoice to approval cycle time; expense report approval cycle time and “Purchase Requisition-to-Order Cycle Time”, for which the benchmark is 11.6 Hours. Coupa explains –

This KPI measures the average time it takes for Leaders to complete a Requisition-to-Order cycle across all purchase requisitions, from when an employee enters a requisition to the time when the approved requisition is converted to a Purchase Order (PO). (Note: Some requisitions, especially those with high dollar amounts, require more approvers and take longer. These are included in this average cycle time.)”

While we might have confidently predicted some of the recommendations, others demonstrate the firm’s experience in this whole area and are more subtle (and useful) than you might expect – for instance, one of the perhaps counter-intuitive ideas under the “focus on approval efficiencies” heading is this.

"Reduce Total Number of Approvers - Contrary to a prevalent assumption, adding more reviewers to everyday transactions does not support frugal spending. Approvers who are not thoroughly familiar with the matter at hand will often follow the lead of a previous approver who is more familiar with it. Excessive approval requirements add little value but take up more time. Two approvers is the best practice average. More approvers may be required for higher-cost purchases".

So, all in all, the report is well worth a read and indeed deeper study – whether or not you are a Coupa user, we are confident there will be some good ideas and thoughts in here.  And we’ll be back with another excerpt next week – but do download the whole document here in the meantime.

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