Digging Into How To Effectively Leverage Direct Spend By Using A Source-To-Pay Solution
What Is Direct Spend
For business, particularly midsize and enterprise-level corporations, utilizing direct spend in the most efficient and powerful way possible is an essential part of boosting the overall bottom line. Incorporating Source-to-Pay solution is an ideal way to ensure direct spend is implemented in streamlined and controllable fashion, but digging into the setup and use of Source-to-Pay solution can be complicated. Here, we?ll explore the best practices for leveraging direct spend through adopting Source-to-Pay solution.
When it comes to direct spending, having proper system in place not only empowers business with the visibility and control to ensure every dollar is being used in the most strategic way possible, but it also provides the framework to empower departments to better audit themselves. Let?s take look at how developing Source-to-Pay solution can allow business to better utilize direct spend.
Before jumping into the details, it is essential to first evaluate the goals of the direct spend plan. Why is the organization looking for Source-to-Pay Software? What benefits does management and the company expect to see? All these initial questions need to be considered before looking into any type of software. With this knowledge in hand, the next step is understanding the needs of the organization. What does the organization need from the software to be successful? Will purchases need to be verified for accuracy? Will orders need to be tracked? What type of compliance regulations need to be met? Considering all these potential needs can help better estimate the software best suited for the organization.
Once the requirements are known and the software is selected, the next step is finding the ideal staff. Firstly, in order to ensure the proper setup, Source-to-Pay employee needs to be hired (or assigned) to act as liaison between the company purchasing staff and the software provider. This person will be responsible for properly configuring and customizing the software in order to create the optimal Source-to-Pay process within the organization. This can involve managing user roles and permissions, designing workflow rules, and connecting with suppliers.
Once the software is properly set up and configured, the next step is to put the Spend Strategy into action. This involves systematic review of the items being purchased, estimation of spending, and the effects this has on payment terms and price discounts. Knowing the profitable and unprofitable products and services being purchased will help decrease the cost while helping the company to make sure the most advantageous products and services are being used.
When implementing Source-to-Pay solution, business must also create Supplier Relationships and Quality Assurance procedures. Supplier Relationships can involve anything from approved supplier lists to data sharing to performance reviews to measure supplier effectiveness. Quality Assurance handles not only the quality of the orders being placed, but also internal use of processes and policies in place to ensure that all measures have been taken to ensure accuracy, as well as compliance with internal requirements.
From here, the company can move onto proper Purchasing and Requisitioning Strategy. Purchasing focuses on the actual purchase process from commodity classification, vendor selection and qualification, pricing and purchase agreement negotiation, to payment processing. Requisitioning is essentially the internal process for ordering something for the company. This part puts procedures and checks in place to ensure accuracy, prevent unauthorized orders, streamline the process, and enforce internal controls.
After the Purchasing and Requisitioning Strategies are in place, the monitoring of contracts and performance is necessary to ensure the Source-to-Pay process is being properly utilized. This includes things like tracking order status, monitoring contracts and vendor performance, and to check supplier performance against Service Level Agreements.
Finally, the last step is to properly intervene and act upon the data and trends gleaned from the Source-to-Pay solution. Utilizing the reporting feature of the software to learn the areas of strengths and weaknesses within purchasing, as well as take action and make improvement where necessary, is essential. From this data, trend analysis, as well as benchmark comparisons can be drawn to truly benefit from the Source-to-Pay solution.
By properly incorporating Source-to-Pay solution, business can benefit from greater control, visibility, and accuracy of their direct spend all while saving money and resources. Taking the necessary time to develop Source-to-Pay plan and putting the proper processes in place to incorporate the solution will ensures companies get the most from their spend. With the right implementation and use of the software, business can have the assurance of knowing their direct spend decisions are backed by the most efficient solution available.
