How to Improve Procurement With Stronger Budget Controls
Even in non-pandemic times, many businesses struggle to maintain budgets. Too often, that means procurement departments face strict spending limits that hamper their ability to obtain the products and services they’d ideally like.
Yet implementing stronger budget controls does not necessarily mean companies have to cut costs. Instead, they can be used to avoid unnecessary expenses that push businesses into the red. They can also be used to unlock cost savings without making harsh cuts. Some of the ways to implement stronger budget controls include:
Streamlining Approval Workflows
To help avoid unexpected expenses that cause you to go over budget, it’s important to have clear, streamlined approval workflows in place. Ideally, these workflows can be automated so that the appropriate employee can ensure that each purchase aligns with a company’s financial strategy.
For example, some companies may allow employees to continue to work from home on a permanent basis. Or they might allow for a hybrid of in-office and remote work. As such, companies might establish a budget for remote work expenses. If employees just submit expense reports after completing these purchases, finance and procurement teams might not know how they’re tracking against budget until it’s too late and they go over.
Worse, employees might make purchases that could have been procured for less or maybe weren’t needed at all. A company might already have licenses available for software that an employee wants to purchase, or maybe if multiple employees want the same products, the company could obtain a bulk rate.
So, when employees want to make these purchases, it’s important that they know who to go to for approvals and for this process to be organized. If, say, all purchase requests above $50 automatically get sent to finance staff for approval, that might help businesses stay on budget more than if employees have to track down whatever senior department member might be available. Using spend management platforms can help to streamline and automate approvals so that finance and procurement teams can maintain visibility and control.
Tracking and Analyzing Expenses
Connected to streamlining approval workflows is tracking and analyzing expenses to find cost-saving opportunities. To do so, companies can utilize an e-procurement or spend management platform that automatically captures spend data, and they also may want to work with a procurement partner that can help analyze this data, along with any other spend that might not be captured by a procurement system.
If, say, your IT spend is approaching its annual budget, being able to track and analyze this data can help reduce the risk of going over. For one, tracking this spend helps you clearly know when you’re approaching the limit. It also can help you find cost savings, such as if you notice unusual patterns. Perhaps remote employees have been using their corporate mobile phones instead of in-office landlines, causing you to go over your allotted minutes or data. In that case, you may be able to cut costs by adjusting your telecom plan to a higher allotment to avoid overage charges.
Working with a procurement partner like GoProcure can help you easily identify these types of cost savings, along with other opportunities to reduce spend, such as by seeking rebates that you may not have known about.
Utilizing a Multisource Procurement Strategy
In addition to getting a better handle on approvals and spend data, companies may also want to adjust their sourcing strategies to try to stay on budget. By utilizing a multisource procurement strategy, as opposed to just purchasing certain categories of products and services from one vendor, businesses may be able to keep costs under control.
Having multiple suppliers to choose from can allow employees to more easily choose lower-priced options. And beyond making price comparisons, having multiple vendors in place can hedge against unexpected costs. For example, if a supplier has a backlog of orders and can’t meet your schedule, you wouldn’t want to have to pay for expedited shipping. Having another vendor that you can easily turn to in these situations can help you avoid these unexpected, unnecessary costs.
Plus, utilizing a multisource procurement strategy can help you negotiate better rates. If you’re signing a new contract with a primary vendor, but you at least have a decent sense of what similar suppliers are charging, you can use that knowledge to your advantage to find a fair rate.
Adding Budget Controls Through Technology
By implementing these types of budget controls, companies can more easily stay on track, even in difficult environments. While it may be possible to add these controls manually, utilizing technology like e-procurement or spend management platforms can lead to stronger controls, such as by automating approvals and spend data analysis, while also making it easy to onboard new suppliers.
Want to learn more about how using GoProcure procurement solutions can help you stay on budget? Request a meeting with our product experts today.