The process of spend management can benefit a business both in the short term and for future growth as well. Businesses always appreciate when there are hidden sources of revenue that crop up. This is especially true when it comes to the procurement process. However, this rarely happens as many companies find it challenging to keep track of transactions, inventory, and more if they still utilize outdated procurement methods.
Technological Innovations in Spend Management
Before going into the software that aids companies in procurement and better spend management, it seems fitting to outline what spend management really is.
Many individuals perceive spend management as a way for a business to cut down on unnecessary procurement costs. However, in addition to this, businesses also look to integrate their spend management strategies with long-term business priorities. These priorities include complying with legal standards, social responsibility, and management of risks in the supply chain.
With the rollout of procurement software, spend management underwent rapid change, especially when it came to the manner in which business owners analyze the spending of their revenue. Therefore, it is evident that a new form of analyzing spending in procurement is commonly known as Digital Spend Management. To understand how each technological advancement has impacted spend management:
- Artificial Intelligence (AI)
The introduction of AI into procurement software allowed companies to utilize machine learning algorithms to better understand where the money is being spent. These algorithms essentially classify the spending during procurement into categories and sub-categories.
By doing so, it helps to decrease the complexity of the process and pinpoint which category or subcategory was taking up the most revenue. For example, one could review the e-invoices created with the software to categorize the spending. In addition to this, AI also plays an important role in spend analysis which in turn is the crux of spend management.
- Big Data Analytics
Procurement teams used the concept of Big Data to carry out extensive analysis to find out where the majority of the spending takes place in the procurement process. By using procurement software, a company receives a compilation of most of the data that is recorded while procuring goods. Thus, a business owner can form a comprehensive idea of what inefficiencies in the supply chain and even possible risks that may present themselves.
The introduction of this technological innovation made it possible for business owners to make their spending completely transparent. This is because the IoT devices are an effective way to keep track of spending because of the way it functions. That is, data can be transferred from one place to another using something as small and convenient as mobile devices.
Therefore, companies can now carry out essential data input and monitoring services from anywhere. This proved to be especially beneficial to the companies that had several storehouses or chains like supermarkets across different states. Companies can now be more aware of what the revenue is going.
The Advantages that Digital Spend Management Offers
Now that most businesses favor the introduction of digitalization while implementing spend management, it only seems fitting to determine what benefits it brought to companies. As mentioned above, visibility in the spending on procurement was the first and foremost advantage that every company experienced. However, in addition to this, the companies were able to benefit from the following:
- Real-Time Data
The use of IoT-connected devices and AI meant that a company could receive data regarding its procurement processes in real-time. In fact, most of these procurement software display all this data on a single dashboard to make it more easily accessible. Using this data, the chief financial officers or CFOs are capable of making better decisions financially. This allows a company to exert control over the spending and subsequently aim to reduce spending.
- Reduction of Maverick Spending
Maverick spending refers to the process of buying goods or services from supplies without following standard procurement procedures. They are usually characterized by orders that are completely unique to previous orders and the contract that was drawn up between the supplier and the company.
These can be especially damaging to the expenses of the company as they can drain resources, create delays, and more. Therefore, by using procurement software, a company will be able to determine if an individual or a group of individuals has made a rogue purchase disregarding corporate rules.
- Increase Versatility
As mentioned before, the use of artificial intelligence in collecting data is that it goes one step forward and categorizes that data. Therefore, offering a more simplified picture of spending. Once this is done, the company can look to find trends and utilize supplier data to ensure that they are receiving the best goods for the best price.
Digital spend management has also resulted in making supplier data more visible. For example, a company can use the data collected to determine the average delivery time of a supplier or the quality of goods and services provided.
- Fact-Based Improvement
The data collected by the devices in the procurement processes can also be used to design a more profitable procurement strategy. By noticing the aforementioned trends in purchasing, the company can take a step back and analyze if the current spending is worth the price. That is if there are ways the company can obtain the standard quality of goods at a lower price. Therefore, with digital spend management, there is room to create strategies that are data driven.
Future of Digital Spend Management
At present, procurement teams are looking to go beyond specific technological innovations. Rather, they are looking to incorporate a concept known as “Agile”. These agile methods have produced interesting results for spend management and procurement, in general, in the automobile company. The idea behind the agile methods is that it helps to implement smaller increments that bring more rapid results.
For example, take the introduction of automation into procurement. It was a small increment of simply bringing in certain technology or devices to lessen the burden of manual tasks on the individuals that worked in that particular field. This had very positive benefits in the short period of time after which it was implemented as human errors were reduced significantly.
In fact, some experts even state that introducing agile concepts will be a hybrid strategy that combines the procurement methods from the previous generations and software used. The success of these methods depends heavily on the data which is collected by procurement software as a source of insight.
Digital spend management has done a world of good for businesses across the globe. It has essentially made it possible for businesses to reduce costs while maintaining the quality of their services.