Managing Direct Spend Risk Through Source-To-Pay Software
Direct Spend Procurement
Direct spend procurement comes with significant financial risk for business. Without comprehensive source-to-pay Softwaresolution, organizations can face significant short- and long-term expenses, waste inefficiency, and even legal and compliance issues. Despite the clear advantages of acquiring source-to-pay solution, many organizations choose to either delay the decision or prefer not to make an investment. For financial executives looking to ensure their organizations are adequately procuring goods and services, strong understanding of the risks of delayed adoption or non-adoption of the right Softwaresolution can prove invaluable.
First and foremost, organizations that lack source-to-pay software face significant financial risks. According to 2020 survey conducted by the National Association of Procurement Professionals, organizations using traditional manual processes for sourcing, contract approvals and payment cycles experience 25% or greater cost difference in their spend cycle when compared to their digitally enhanced counterparts. Further, not taking advantage of software may lead to missed savings resulting from strategic or bulk buys, or inconsistencies in payment which can disrupt vendor relationships. Therefore, without software, organizations are likely leaving money on the table in the form of missed savings opportunities and avoidable costs.
In addition to financial costs, lack of software for direct spend procurement can significantly affect efficacy and the quality of tracking data. In many cases, paper-based system often utilizes editable PDFs or Word documents, none of which allow for proactive tracking of any changes to document. This leads to inconsistencies in data and can result in missed deadlines, miscalculations, and out-of-date documents, thus creating gaps in data accuracy. Over time, those gaps become more costly, as smaller issues compound into significantly larger and more expensive problems, including errors in supplier performance management and payment delays.
Without source-to-pay software, organizations are also at risk of violating legal and compliance measures. ln 2020, 30% or organizations reported that their suppliers did not meet contractual obligations, compliance with government regulations or acceptable work conditions. Companies without comprehensive and efficient way of tracking and managing supplier performance management are likely to not meet standards, particularly when it comes to data storage and security, or reduced pricing for bulk orders. Further, with the increasing prevalence of data regulation and identity protection laws, organizations must be careful and deliberate with their storage, access, and sharing of data. Organizations that lack clear and concise way of procuring goods and services, including supply and bids evaluations, risk legal issues related to compliance.
Finally, without the proper software, organizations are putting themselves at risk of reputational damage, as issues in procurement can lead to customer dissatisfaction. Customers expect consistent performance, timely deliveries, and good understanding of their needs. Without source-to-pay software, organizations become more vulnerable to random errors and mismanaged level of expectations. Missing shipment arrivals, prolonged wait times, and poor customer response are all potential outcomes of stagnant and manual direct spend process.
In conclusion, direct spend procurement presents potential financial, efficiency, legal, and reputational risks. Fortunately, there is solution: source-to-pay software. By investing in and leveraging such solution, organizations can ensure they are procuring goods and services safely and efficiently, while also reducing costs, improving compliance and data accuracy, and avoiding reputational harm. For financial executives looking to protect their organizations bottom line, the value of direct spend procurement cannot be ignored.
