Spend management is the practice of managing organisation expenditure through processes designed to keep costs under control and to make sure that necessary investments have the desired effect for a business. With a proper spend management policy in place, business owners gain a centralised point from which to manage supplier relationships and get the most out of each and every dollar the company spends.
In this sense, spend management is not simply about reducing spend but rather about optimising it. Of course, you need to invest funds in order to grow, but these investments cannot be allowed to take place unchecked and unaccounted for. Spend management ensures full transparency across every step in the process.
Whether you are an aged care provider looking to support home care teams in the field or a manufacturer seeking to develop increasingly effective supplier relationships, spend management is a critical aspect of modern business.
Spend management: a shift in focus
2020 was a tumultuous year for businesses as unprecedented factors such as the COVID-19 pandemic put spending under the microscope. Suddenly, businesses found themselves having to justify each dollar they spent, as organisations sought to secure their long-term existence while also tentatively targeting growth and development.
But, while it’s easy to blame external factors for increased focuses on spend management, this shift has actually been taking place for some time. Businesses now have the capability – thanks to a number of different digital solutions – to track spending and to optimise this spending in increasingly accurate ways.
Many business owners are actually NOT acutely aware of their dollar spend – either because they don’t have full visibility or control over the process, or there simply are too many components in-play to be able to track and analyse the data, manually. This is where the modern solutions (i.e. software) can provide the biggest assistance
Businesses need to be able to analyse, assess and manage different types of spend, to ensure that each dollar spent is positively contributing towards growth and development.
Because spend can be categorised into different ‘types’, a ‘multi-dimensional’ approach to approval is often necessary, several levels – or layers – of approval may need to be satisfied before the spend can be authorised. The approval process may also need to involve personnel from multiple departments.
This is what spend management looks like for 2021 and beyond.
Different types of spend approvals
Approving spend has become an increased focus for businesses, but (as mentioned) the nature of these approvals is not always straightforward or linear in its workflow. By implementing a multi-dimensional approach to approval, your organisation automatically gains full control over the purchasing process, with the flexibility to ensure the right people will be seeing and approving the right requests in a timely manner – whether they’re in or out of the office.
Some common dimensions of approvals include:
- The location of the spend – Approvers are often specific to a location. Purchasing managers in warehouse A may be completely different to the purchasing managers to warehouse B, and the process for approving a requisition may be unique for each. So while approval can be shared, it’s also important that approval can be configured specifically for each location with an organisation. Where are the funds being spend and who needs to approve purchases on behalf of that location? Does this location even have approval to purchase from a supplier, or are they restricted to only being able to transfer from an internal, central warehouse?
- The type of spend – Often it is necessary to configure a path of approval based on the type – or a ‘category’ – of the request. Is the requisition for stock or services? If the request is for IT equipment, will certain people need to be included in the approval process for authorising these specific kinds of expenses?
- The general ledger account code – Is the spend being recorded under the correct GL code to make cost allocation more accurate further down the line?
- The requisition value – The most common approval structure tends to be defined around the value of the requisition. The more valuable the request, typically the higher it will need to escalate before final approval can be given. In larger organisations, this may involve several people – each with their own respective ‘approval limits’.
In addition to the above, businesses may also to consider several other aspects of the spend:
- The requisition type – What type of requisition is being submitted, and will this make a difference to the approval process? For example, do CapEx purchases require additional information to be entered before the request can be submitted, and do these types of purchases require their own dedicated approval path?
- The project – Does the requisition need to follow a specific approval path if the expenditure is related to a specific project?
- Vendor group – Items of services requested from certain vendors may require their own approval path. For example, all maintenance requests involving any vendor who provides such a service may need to include your own internal maintenance manager as part of the approval process.
Ultimately, a powerful, digital solution with a high degree of automation becomes essential once an organisation’s requirements around approval become more advanced and finely-tuned.
Requisition Management Solutions
An Advanced Requisition Management (ARM) solution provides the answer to businesses seeking control over their spend and wanting to gain control over their approval processes. A good-quality enterprise ARM solution will connect business users with a range of different capabilities, and offer extended functionality:
- Automated features such as importing data directly into requisitions, creating and recalling templates as required, generating requisitions from purchase order (PO) suggestions, emailing users when certain tasks have not been completed within a given timeframe.
- Advanced approval capability, giving all team members a holistic view of different approval aspects and their statuses in near-real time, with instant email notification of status changes and updated within the system.
- An intuitive user interface which makes navigation simple, allows its users to find what they need quickly and easily, and makes snapshot information available at a glance, e.g. – whether stock is available on-site, or whether budget is allocated and available for the intended purchase.
- Web-based functionality to enable remote collaboration between distributed teams.
The aim of an ARM solution should not just be able to provide teams with a digital platform to record approvals and to manage the approval process. It is also about giving these teams the tool required to work more efficiently and effectively. The ideal solution will balance the right amount of automation and predictive functions to secure streamlined operations, with the right amount of agency and autonomy for team members. This way, teams can effortlessly and reliably handle the various approval flows, without being restricted by the very system that is intended to help them.
The Epicor ARM solution from Precise Business Solutions
Developed by Precise, our Advanced Requisition Management solution supports the developing needs of today’s companies. Integrating seamlessly with your Epicor ERP software, Advanced Requisition Management provides your organisation with the tools you need to gain visibility and control over your spending.
Contact one of our ERP specialists to discover what Epicor ARM can do for your business purchasing.