Spend Management and Spending Cuts...
Reading about the Debt ceiling
debate in the US Congress over the past few weeks, the one statement that
consistently stands out is "Spending Cuts". The US sovereign credit rating has
just been downgraded, the US debt is too high and suddenly everyone is looking
at "Spending Cuts" as the silver bullet that can set everything all right once
again.
Another example of what I find
disappointingly commonplace: Organizations (a government in this case) cutting
spending randomly as a last ditch effort to get out of difficult situation
because of not planning and implementing a long term spend management program
which would have:
- Helped avoid reaching a stage where organizations are forced to make unplanned decisions around cutting spend
- Ensured that spending cuts happen as a planned exercise rather than ad hoc, desperate measures.
What organizations (and
governments) need is to be more planned and proactive towards the Spend Management
function. Here are some pointers which could help avoid the last minute
"Spending Cut" issues:
- Provide continuous focus towards Spend Management: It is very important for organizations to continuously invest in spend management programs in times of growth so that slow growth or recession periods can be successfully negotiated. Oversight, control and compliance towards Spend in good times helps avoid getting stuck with overbearing and unmanageable spending commitments in times of economic stress
- Clearly identify Spend Categories: A lot of organizations do not even have a comprehensive view of their spend categories. Classifying spend into categories provides great spend visibility which generates actionable data and decision making easy.
- Analyze the Spend Categories: The analysis helps channelize the organizations resources towards the most promising categories
- Picking the low hanging fruits: There will always be categories with a high rewards to effort ratio. Implementing these quick spend solutions will also make the senior management pay more attention to the spend management function. In my opinion spend management is not given its due attention by most senior managements as compared to the revenue generating functions.
- Identify Process changes that produce immediate results: Sometimes simple process changes have the potential to bring about a lot of savings. Closely looking at spend management processes which span across the promising categories identified can help bring out savings
- Enforce Control and Compliance: It is very important to enforce control and compliance for spend which will not only prevent wasteful/ad hoc spending, but will also generate useful data which can be used to continuously refine processes.
- Leverage Technology: Over the last few years Spend Management technology solutions have advanced to a high level of maturity. Implementing these technologies tools can provide an advanced level of spend visibility and spend control.
Spend Management is a continuous improvement and strategic function for an organization and should not be a last ditch cost cutting initiative. It is imperative that the management of spending organizations understand the benefits that a well-defined Spend Management program can bring during the times of economic turmoil.
