While many organizations, quite rightly, focus procurement activity on materials and services that feed the production line – a significant portion of many organizations spend remains in expense management (often called Travel and Entertainment). In many companies this remains an untapped opportunity for savings, increased leverage or improved processes.

Whilst historically expense management hasn’t been viewed as a procurement issue (instead viewed as a purely administrative issue associated with the finance function), considering the value of spend and the execution methods used (i.e. cash or credit cards) incorporating procurement techniques, policies and governance into expense management can offer benefit.

Handling expenses often involves labor intensive processes associated with masses of paper documents and convoluted approvals processes. Expense claims get checked approved and reimbursed invariably without looking at why the spend was taking place or with whom. Given often extensive utilization of corporate credit cards this can pose a significant challenge to spend management.

Expense management is often a 3 step process requiring
• Tools & Systems
• Processes & Policies
• Sourcing and Management

Tools & Systems

Re-engineering expense management placing more emphasis on procurement can radically transform how much is spent and appropriate controls. However in practice overhauling these processes requires tools and systems to simplify and automate much of it. A common approach is to incorporate P2P methods through utilizing Pcards and transactional management systems. With the Pcard acting as the spend tool – and the transaction Management system acting as the workflow system and data repository(single view of expense spend) this can offer great efficiencies reducing paper and time. The data obtained via Pcard solutions (from the payment bank) can educate and inform the Purchasing team, showing just where spend is being made – what supplier deals may be applicable and where maverick spend is taking place against agreed contracts.

Some of the benefits from a systemized approach include

• Better visibility
• Increased levels of compliance
• Systemised and mandoatory approvals processes

Processes & Policies

A common fault with many existing expenses systems is a “free-for-all” approach –where there is little in the way of rules regarding where spend can be directed and how. This is especially true for controlling generation of need and requirement.

Expenses can often be used to bypass a companies purchase order system and existing corporate policies with a key commodity (IT equipment for example). Within an existing paper based process this is often lost in the noise and is difficult (if not impossible) to track.

Through utilizing appropriate spend management systems – spend becomes visible and can be categorized utilizing supplier details. Policies can be established based on value / type of spend and routed via an appropriate workflow system.

Through increased attention tighter and more appropriate controls can be applied on spend. Often re-engineered expenses process can help eradicate bureaucracy – this is especially true of low value spend which requires complex and high levels of approvals through a paper based system.

Sourcing & Management

Often the missing link in expense systems is to understand what is being spent and why and then establishing appropriate deals for the commodity/product making these available to the corporate stakeholders.
Where paper based systems are used extensively and volume is high requirements can be difficult to extract but where the process can be systemized procurement professionals have better opportunity to interpret data and look for optimizing that spend through appropriate deals.

This can be key to leveraging spend and while there are the more obvious commodity categories that can be speedily implemented – e.g. fuel cards, hotel and travel arrangements closer inspection will undoubtedly reveal other spend areas that can be optimized.

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