Maverick spending is a problem. For some organisations, it accounts for up to 80% of total spend. To get on top of it, though, you need to get eyes on it.
Identifying KPIs is essential to growing your business. But simply knowing the targets you need to meet will get you nowhere if you don’t have a way to track them. Many organisations are finding it extremely difficult to oversee and enforce organisational compliance. They know that employees adhering to company policy around contract and PO spend is vital, but tracking it is often too complex and resource-intensive to do well. For smaller businesses, it’s impractical.
The solution is an eProcurement platform that tracks spend against POs and contracts, at a glance giving meaningful data that tells you:
- The percentage of spend under contract.
- The percentage of spend under POs.
- The number of retrospective POs.
- The rate of PO splitting.
- Where the non-compliance is occurring – broken down by department and with the capability to drill down into individual buyers.
This is a solution that most companies could only wish for. Even the larger organisations that have invested heavily in P2P don’t have the capability to track contract spend, let alone small businesses using ERP systems.
But our bespoke software not only sits alongside P2P and ERP systems; it’s also very cost effective. Tracking contract spend isn’t reserved only for the bigger corporations anymore. Our Contract and Compliance Suites are a low-cost solution for an industry-wide problem.
Get on top of your PO and contract spend with rigorous compliance reporting
Contracts rolling over, contracts expiring, PO splitting, retroaspective POs or no POs at all: these are the main culprits behind that figure of 80% quoted above. It’s not always the fault of renegade employees or maverick spending. Often, it’s simply ignorance, people not knowing their roles, or confusion surrounding company purchasing policies.
To address it, though, you need to know where and when it’s occurring – and this is why businesses approach us. They have their KPIs – for instance, 60% of their spend needs to be under POs – but they don’t have the capability to track it. This is when we introduce them to ProcureTRAK’s Compliance Reporting dashboards, a part of our data suite solution.
Tracking contract spend
The Compliance Reporting arm of ProcureTRAK involves multiple dashboards designed to track specific KPIs. For instance, the Executive Summary dashboard gives a clear overview of the status of all contracts, detailing:
- the number of open contracts;
- those pending approval;
- those due to expire in three, six and 12 months;
- the total value of open contracts.
This dashboard also breaks down contracts by category, region and the percentage invoiced, among other things.
Too many buyers are putting through orders on contracts that have either rolled over or simply expired. It’s a global scourge, touching all industries. The data presented here is exactly what businesses need to get on top of this problem. Drilling down even further with the Contract Overspend dashboard, businesses can see which contracts have invoices exceeding the total value of the contract, and even the originator and approver of the contract.
Tracking PO spend
In many organisations, non-compliance around purchase orders is rife. Retrospective POs are a problem, but it’s the split POs that businesses find most difficult to track. Our PO Splitting dashboard uses a combination of supplier commonality and differences in purchase order dates to flag possible splits and make them easy to track and monitor.
Retrospective POs are highlighted through discrepancies between PO dates and invoiced dates, with the capability to drill down into the region, entity, division, originator and improver.
While all of these dashboards are technically to do with compliance, don’t underestimate their ability to aid your strategy. Given that 80% figure we can’t stop mentioning, there’s huge scope here for big savings. Two sets of data are important here: PO spends, invoice volumes and supplier numbers compared year to year and month to month, and PO compliance tracking by individual business units within an organisation.
With this information at hand, users can easily identify the areas with the biggest opportunity for increasing spend on PO.
Get compliant with Purchasing Index
It’s not as sexy as some other strategic avenues the procurement team might pursue, but there’s no doubting how important internal compliance is to an organisation. With the right software, you can not only identify the most impactful KPIs to target, but you can track them too.
Get in touch with Purchasing Index today to learn more about our cost-effective Contract and Compliance Suites solution, and make you don’t miss our next Data Suites instalment where we take a deeper dive into Contract Compliance.