5 Ways to Improve Spend Management Without a Procurement Department
For midsize companies without a procurement department, spend management may be somewhat of an afterthought. Understandably, these businesses often feel like they need to direct their limited resources towards other initiatives such as increasing sales, but today’s technology makes it increasingly possible for midsize companies to easily improve spend management.
In doing so, midsize businesses can optimize spend while improving in other areas such as employee and customer experience, risk management and ultimately increase profitability. Specifically, to reduce spend management costs and risks while increasing control without a procurement department, companies can:
1) Use Spend Management/E-Procurement Software
The advent of spend management and e-procurement software platforms, which can be integrated as an all-in-one solution or in separate parts, can help companies make the most of their resources. These platforms can automate and streamline areas such as expense tracking, budgeting and sourcing.
So even if there’s no procurement department to monitor tail spend, for example, spend management and e-procurement platforms can automatically capture tail spend data and provide this information in easy-to-digest dashboards. As a result, CEOs, CFOs or other employees without procurement expertise can efficiently recognize which areas of spend require their attention. From there, they can quickly implement changes such as lowering limits for purchases that do not require approvals to avoid rogue employee spend or utilizing a platform’s ability to recommend lower-priced offerings.
2) Streamline Payment Methods
Without a procurement department to track and manage all purchasing activity, it can be difficult to stay on top of all employee spend, particularly if that occurs outside of e-procurement platforms and with multiple payment methods. If employees can use any payment method, including their own personal credit cards that they then submit reimbursements for, the process can be cumbersome and inaccurate.
Instead, midsize companies can try to streamline payment methods, such as by issuing corporate cards where all spend data from those cards automatically feeds into one company bill. Better yet, businesses can look for e-procurement platforms that generate payment methods within the system, such as how GoProcure users get a single-use virtual card generated for each approved purchase. That means all purchases made within the platform automatically get captured, so employees don’t need to worry about getting reimbursed and their expenses are clearly captured within the system.
3) Designate a Spend Management Lead
Even if your company doesn’t have a formal procurement department and utilizes technology to streamline spend management, it’s still a good idea to designate either an individual or a department as the go-to source to handle spend management issues. For example, at a midsize company, a CEO may be able to handle this area in the sense that they have the final say on matters such as setting the thresholds for what purchase amounts require manager approvals. Or a department such as finance may be able to handle spend management, such as by approving invoices and supplier contracts. Either way, clarifying this role helps everyone within the company understand how these issues can ultimately get resolved and who they should go to with related questions, rather than having issues fall through the cracks.
4) Clarify Approval Processes
Similar to why it’s important to designate a spend management lead for midsize businesses without a procurement department, it’s also important to clarify approval processes for purchases. Employees should know whether they need to ask their manager, the CEO or whoever else is required to approve purchases above certain limits, as well as approve related items such as expense reports or service provider invoices. If employees are unclear about who they need approvals from, they may get frustrated, make mistakes and even cut corners, such as by not filing expense reports or going directly to someone like the CFO without a manager being aware of what their direct reports are up to.
5) Gain Employee Buy-In
Lastly, midsize businesses without a procurement department can improve spend management if they get employee buy-in on the company’s related processes and systems. Just as employees should know who they need approvals from for purchasing, they should understand and be comfortable with other areas such as using e-procurement platforms and payment methods. Companies can even go a step further and encourage employees to improve spend management in order to gain rewards like an extra PTO day for the person that flags the most issues that can cause various reputation and operational risks like late orders, negative supplier news or faulty products.
By following these five best practices, midsize companies can maximize their resources and improve spend management without needing to formally create a procurement department.
To learn more about how your business can improve spend management and streamline purchasing, schedule a demo with GoProcure today. You can also read more about how procurement leaders can play a critical part in helping companies stay on budget, manage risk & gain the products/services needed for performance. Get access to the whitepaper here