MISSING THE BASICS

It never ceases to amaze me how difficult it can be to get hold of simple, valuable information which – when put to good use – will create a dramatic improvement in the performance of a business. 

The first step in most JMCL engagements is to obtain and review information on what a company is spending and with which suppliers.  Over the years we’ve learned to simplify and streamline what we need – but the request almost inevitably leads to delays whilst the client struggles to compile the information.   We offer to extract the information for them as it so often causes delay.

I acknowledge that there are any number of reasons why there might be a delay – not least a busy finance team have a lot of other things they need to be doing.  However, whatever the reason the longer the stronger the indicator of missed opportunities.

The Finance function’s core competency is – by its nature – measurement and reporting.  Where the money is going, how the money is performing.   One big numbers factory with production lines governed by month-ends packs and quarterly / annual planning cycles.

Even in those departments where disconnected systems and manual processes make this difficult, most management reports are available within a couple of mouse clicks.

Information that isn’t compiled into a regular report – that requires a special request for somebody to gather data, consolidate it, check it and publish it – is a massive indicator that it is not being worked upon.

All too often firms are missing the opportunities that exist through mapping and analysing supplier spend.  First and foremost, it will lead to cost-reduction that will improve the bottom-line. It will also reveal opportunities for process simplification, product / service improvement or risks to your business model.

A clear view of spend by category, by supplier is of enormous value.  Regular review of this information provides valuable insights – including:

• Who’s spending what and why?
• Which vendors supply multiple business units?
• Which business units buy the same or similar goods and services?
• What’s the administrative cost of buying the goods and services your organisation consumes?

An inability to access this information – or just not reviewing it – increases the chances that money is being left on the table, that commercial decisions are being made in isolation and opportunities to drive improved performance are being missed.

A finance leader may not need to be a procurement expert.  However, as a driver of business performance they should be able to provide that information to procurement experts and hold the organisation to account.  This involves engaging the wider business to understand what’s underneath their costs and helping them to make better use of the organisation’s cash and resources.

When did you last take a look?  If you needed to look now is there already a report that gives you the information you need?  If getting the information requires work – it’s very possible that there’s an opportunity that’s being missed.