Lyle Del Vecchio, Author at Planergy Software

The Future of FP&A: How The Role Is Evolving With The Use Of Real-Time Data

Lyle Del Vecchio — Mon, 25 Dec 2023 16:17:12 +0000

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Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
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The Future of FP&A: How The Role Is Evolving With The Use Of Real-Time Data

Category

Finance

Written by Lyle Del Vecchio
17 min read

Tags

Financial Planning & Analysis (FP&A)Financial Reporting Technology & Software

Last edited

December 29, 2023

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KEY TAKEAWAYS

The FP&A function has always been vital to business success – and advancements in the field have made it easier for operations to grow without disruptions.
Gone are the days when you must rely on historical data and make reactive decisions. Thanks to AI and other tools, you can now make better decisions with real-time data.
Staying up-to-date with current industry trends will help you remain relevant and valuable as a team member, no matter your organization.

Financial Planning & Analysis (FP&A) is critical in every organization.

It is the driving force behind financial decision-making, providing essential insights that guide strategic planning and budgeting.

But what exactly is FP&A, and how is it evolving with the advent of real-time data? Let’s delve into the details.

Understanding FP&A

It’s a role within the finance department that involves budgeting, forecasting, and analyzing a company’s financial reports and metrics.

Often accounting ratios and formulas are used to measure performance of finance KPIs over time.

FP&A helps create a data-driven culture in a company. Research shows that data-driven organizations outperform their competitors.

FP&A professionals are responsible for understanding the financial implications of business decisions and providing strategic recommendations.

The role of FP&A includes:

Preparing Budgets and Forecasts
One of the primary responsibilities of FP&A professionals is preparing budgets and forecasts.
They work closely with various departments to understand their financial needs and project future expenses and revenue.
This process involves analyzing historical data, understanding market trends, and making informed assumptions about future performance.
Analyzing Financial Performance
FP&A analysts play a critical role in reviewing and interpreting financial results.
They scrutinize the company’s income statement, balance sheet, and cash flow statement to understand its financial health.
This analysis aids in identifying patterns, understanding variances between actual and projected figures, and highlighting areas of concern or opportunity.
Evaluating Business Performance
This includes tracking key performance indicators (KPIs), conducting variance analysis, and providing regular financial reports to management.
By doing so, FP&A professionals help ensure the company is on track to meet its financial objectives and can quickly identify and address any issues hindering progress.
Providing Actionable Insights
FP&A professionals don’t just crunch numbers; they provide actionable insights influencing strategic decision-making.
They use their understanding of finance and business operations to interpret complex data and make recommendations on cost savings, profitability improvement, and strategic investments.
Using finance business intelligence data, their insights can directly impact a company’s bottom line and drive its strategic direction.

So, is FP&A a good career?

Absolutely. It offers a unique blend of strategic thinking, data analysis, and communication skills.

While challenging, it offers immense job satisfaction and career growth.

Pros and Cons of FP&A

Benefits of Working in FP&A

High Demand for Skilled Professionals
One of the major advantages of pursuing a career in FP&A is the high demand for skilled professionals in this area.
According to the U.S. Bureau of Labor Statistics (BLS), the estimated growth in the field from 2021-2031 is 9%, which is faster than average.
As businesses increasingly recognize the importance of strategic financial planning and analysis, the need for knowledgeable FP&A practitioners continues to grow.
Flexibility and Autonomy
Working as an FP&A contractor or consultant can offer great flexibility and autonomy.
This can be an attractive prospect for those who value independence and prefer to have control over their work schedules and projects.
Growth and Learning Opportunities
FP&A roles provide ample opportunities for growth and learning.
Professionals in this field are constantly exposed to various aspects of the business, allowing them to broaden their understanding and hone their skills.
Stability
FP&A is one of the most stable job fields due to the constant need for financial planning and analysis, regardless of whether a business is struggling or thriving.

Challenges of Working in FP&A

Accessing Real-Time, Accurate Data
A significant challenge facing FP&A teams today is accessing real-time, accurate data.
Without this crucial information, finance teams may struggle to make informed decisions, leading to inefficiencies and missed opportunities.
Uncertainty
Working as an FP&A contractor or consultant can also come with a degree of uncertainty.
The nature of contract work can mean periods without assignments and a lack of job security.
You can counteract this uncertainty by aiming to work directly with a specific company as an employee rather than as a contractor.
However, doing so also means a potential loss of schedule flexibility.
Pressure and Stress
The FP&A role can be stressful, given the responsibility of forecasting and budgeting.
These tasks require dealing with multiple data sources, assumptions, scenarios, and stakeholders, all while facing tight deadlines, changing expectations, and market volatility.

How Working in FP&A Used to Be

Before technology made it possible to process massive amounts of data in minutes, FP&A required manual data processing, which was labor-intensive, time-consuming, and riddled with error potential.

Limited Software
As great as they are for many things, spreadsheets were the only thing finance teams had to track crucial financial data and performance over time.
Sure, adding, subtracting, multiplying, and performing fairly complex math equations was easy, but inputs could only be edited by one person at a time – and you never knew if you had access to the most up-to-date information.
Using the best business budgeting software and procure-to-pay software with powerful reporting and analytics functionality, like Planergy, gives FP&A the tools they need to give actionable insights.
If you were working with an older file version, your work could be wasted. Spreadsheets lack advanced capabilities to deliver critical insights for strategic and operational planning.
Reliance on Historical Data
Finance professionals had no choice but to rely on past data and performance to find trends and patterns on which to base the path forward.
While looking in the rearview was certainly better than having no data at all to support any decisions, that left many companies blindsided by sudden changes in the business landscape or industry trends.
Can you imagine trying to predict tomorrow’s weather based on what happened yesterday? That’s pretty much what it was like.
Siloed Decision-Making
Without the ability to share information in real-time, with a cloud-based platform like we have today, the planning process was often handled in isolation.
With minimal cross-functional collaboration across departments, finance leaders were stuck making decisions based on the information at hand, regardless of what other information may be available.
Imagine only having a few pieces of the puzzle but trying to make sense of the full picture.
Reactive Analysis
Making decisions based on past data meant companies couldn’t quickly adapt to changes and properly seize new opportunities. This meant companies were always one step behind.

The finance transformation is one of many industries affected by the advent of new technology.

The Digital Transformation of FP&A

Today FP&A, and finance more generally, is undergoing a significant transformation driven by digital technology and the availability of real-time data.

Traditionally, FP&A relied on historical data and manual processes.

However, the digital revolution has ushered in a new era where real-time data and advanced analytics tools are reshaping the field.

Real-time data allows FP&A professionals to monitor business performance in real-time, carry out trend analysis to identify trends early, and make proactive decisions.

For example, real-time spend analytics like those available in Planergy provides instant visibility into expenditure, enabling better spend control and strategic decision-making.

However, the digital transformation of FP&A is not without its challenges.

The need for accurate, real-time data for strategic decisions is paramount, but achieving this can be difficult given data silos, data quality issues, and the complexity of integrating various data sources.

The Future of FP&A

The future of FP&A lies in its ability to harness the power of technology and data.

As artificial intelligence and machine learning become more prevalent, they will further automate the FP&A process, allowing for even more precise and timely insights.

Automated Data Analysis
Imagine if FP&A teams could harness the power of automation to turbocharge their data analysis of big data.
No more tedious data collection and processing – just pure, high-quality insights and strategic recommendations.
This isn’t some far-off fantasy; it’s the future of FP&A. Utilizing big data in finance efficiently to draw good insights is possible and getting easier with improvements in technology.
Brace yourself for an efficiency-boosting, quality-enhancing automation revolution.
Leveraging AI and Advanced Software
Cutting-edge software solutions will power the FP&A of tomorrow.
These pioneering technologies promise a new era where FP&A teams can easily sift through massive datasets, spot patterns, and generate predictive analytics.
AI in Procurement, AI in Accounts Payable, automated spend analysis, and even spend forecasting are now becoming a reality for even smaller businesses.
We’re already witnessing the dawn of this transformation, with FP&A teams mastering tools like ChatGPT for Excel and Microsoft’s Copilot.
As these pros continue to exploit advanced software and AI, they’ll unlock unprecedented accuracy and detail in their analysis, arming organizations to make data-driven decisions with renewed confidence.
Real-Time Data Insights
In the fast-paced world of business, having up-to-the-minute information is crucial. That’s why the FP&A teams of the future will embrace real-time data insights.
This shift promises faster, better-informed decision-making. With a constant stream of real-time data, FP&A professionals can monitor performance and adjust forecasts on the fly.
The result? A nimbler, more proactive FP&A team that fuels strategic growth and sharpens competitive edges.
Collaboration Across Multiple Teams and Departments
The FP&A role of the future will pivot on collaboration and cross-functional teamwork.
By dismantling the silos that once hindered knowledge-sharing, FP&A teams can align strategies more effectively and ensure stakeholders have the critical intel they need.
This collaborative approach promises a more unified, agile organization, ready to seize opportunities and tackle challenges head-on.
With strong cross-functional team leadership the future is bright for FP&A.
Proactive and Strategic Planning
The future of FP&A is about shifting from reactive to proactive and strategic planning.
Armed with advanced tools, automation, and real-time data insights and dashboards, FP&A teams will be able to:
- Anticipate changes in the business landscape
- Identify opportunities
- Develop contingency plans
This forward-thinking approach will empower organizations to make strategic decisions, giving them the upper hand in a fiercely competitive market.

The Future of FP&A Has Already Started

The future of FP&A is here, and it’s nothing short of revolutionary.

Working with this FP&A transformation is a much different beast compared to what it was just a few years ago.

Automation and technology have opened up endless possibilities and potential for businesses.

Now, businesses can quickly process data, anticipate trends, and make informed decisions around finances that can ensure long-term security.

And, when combined with the skill sets of knowledgeable finance professionals and leaders, there are almost no limits to what can be accomplished today through FP&A.

For those looking to become experts in the field of FP&A or for those who already are critical members of financially thriving companies – the power of modern technology should not go understated as it has revolutionized an entire industry virtually overnight.

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The post The Future of FP&A: How The Role Is Evolving With The Use Of Real-Time Data appeared first on Planergy Software.

Corporate Travel Program: How To Create a Program for Employer and Employee Needs

Lyle Del Vecchio — Wed, 18 Oct 2023 12:12:58 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

Corporate Travel Program: How To Create a Program for Employer and Employee Needs

Category

Travel & Expense

Written by Lyle Del Vecchio
17 min read

Tags

Expense Management Expense Reporting Process & Procedures

Last edited

July 2, 2024

Download PDF

KEY TAKEAWAYS

A corporate travel program helps balance expenses while also taking care of employees.
Developing a clear and concise travel policy streamlines everything.
Partnering with a travel management company (TMC) can help you access travel experts to make the most of your program.

Corporate travel has become essential to many companies’ operations in today’s fast-paced business world.

Employees are frequently on the move, whether it’s attending conferences, meeting clients, or visiting other branches.

This is where a well-designed corporate travel program comes into play.

In this blog post, we’ll discuss the basics of a corporate travel program, why it’s important, and how to implement one successfully.

We’ll also dive deeper into the differences between leisure and corporate trips, explain the benefits of corporate travel, and provide real-world examples.

Implementing a successful corporate travel program can significantly improve employee satisfaction, drive cost savings, and enhance overall business performance.

What Is a Corporate Travel Program?

A corporate travel program is a comprehensive set of policies and procedures governing business-related travel for employees.

It outlines the rules and guidelines for booking flights, accommodation, transportation, and other travel-related expenses.

A well-structured corporate travel program helps businesses manage costs, ensure employee safety, and maintain a consistent travel experience.

Businesses can reduce administrative burdens, improve policy compliance, and optimize their travel spend by offering a centralized, streamlined approach to managing travel arrangements.

Why Is a Corporate Travel Program Important?

There are several reasons why having a corporate travel program is essential for businesses:

Cost Management

A well-defined travel policy helps companies control travel costs and optimize spending.

By establishing clear guidelines and budgetary limits, businesses can effectively manage their travel expenses and avoid unnecessary costs.

Additionally, partnering with preferred suppliers and negotiating volume discounts can lead to substantial realized cost savings.
Employee Safety and Security

The program ensures that employees travel with reputable providers and have access to support services during their trips.

A well-designed corporate travel program prioritizes employee safety by vetting travel suppliers, providing travel risk management resources, and offering 24/7 support for travelers in case of emergencies.
Compliance and Accountability

A corporate travel program enforces adherence to company policies and regulatory requirements.

Businesses can ensure that employees comply with internal and external regulations by centralizing the travel booking process and establishing clear procedures.

This reduces the risk of non-compliance penalties and enhances the overall company reputation.
Efficiency

Streamlining the travel booking process saves time and resources for both employees and the company.

Employees can quickly and efficiently make travel arrangements that align with company policy by implementing a user-friendly booking platform and offering personalized travel options.

How to Implement a Successful Corporate Travel Program

Creating your business travel program requires careful planning, and input from multiple departments. Follow these steps to help.

Assess your Company’s Business Travel Needs

Before developing a travel program, it’s essential to determine the frequency and types of trips your employees take, as well as their preferences and priorities.

Conduct surveys, analyze past travel data, and consult with key stakeholders to gain insight into your organization’s unique travel needs.
Develop a Travel Policy

Your travel and expense policy should include a clear breakdown of booking procedures, travel expenses allowed, and reimbursement methods.

Explain the reasons behind each rule and how it fits into the company’s compliance standards, and why it matters for traveler safety.

Creating your policy document is a crucial step in setting up a successful business travel program, as it will help ensure that all employees understand the expectations and guidelines related to their travels.

Furthermore, having a comprehensive travel policy can minimize confusion and potential violations of company standards, while making travel and expense management easier.

Your policy should include information such as:
- Requirements for pre-trip approval and notifications
- Per diem guidelines, including rules about meals, snacks, and entertainment expenses
- Rules around lodging and transportation (e.g., preferred vendors or travel agencies or allowed methods of travel, maximum airfare allowance)
- Restrictions on the use of personal funds or credit cards to cover business costs
- Reimbursement process and timeline
Include Duty of Care in Your Corporate Travel Policy

Duty of Care is an employer’s legal and moral obligation to ensure their employees’ safety, security, and well-being while traveling for business purposes.

In a corporate travel policy context, Duty of Care encompasses various measures companies take to protect their employees from potential risks and hazards during their trips.

Why is Duty of Care Important in a Corporate Travel Policy?

There are several reasons why Duty of Care is a crucial aspect of a corporate travel policy:
1. Legal Responsibility
  
  Employers must take reasonable steps to protect employees from foreseeable harm while traveling for work.
  
  Failure to fulfill this responsibility can result in lawsuits, financial penalties, and company reputation damage.
2. Employee Safety and Security
  
  By prioritizing Duty of Care, employers can help minimize the risks associated with business travel, such as accidents, illnesses, or security threats.
  
  This not only protects employees but also reduces potential disruptions to business operations.
3. Employee Satisfaction and Retention
  
  Demonstrating a genuine concern for employee safety and well-being can increase job satisfaction, loyalty, and retention.
  
  Employees are more likely to remain with a company that takes their safety seriously and provides appropriate support during business trips.
4. Risk Management
  
  A robust program enables companies to proactively identify, assess, and mitigate travel-related risks. This helps prevent incidents from escalating into crises and ensures that employees receive timely assistance in case of emergencies.
To effectively integrate Duty of Care into a corporate travel policy, companies should consider the following measures:
- Establish clear guidelines and procedures for assessing and mitigating travel risks, including health, safety, and security concerns.
- Implement a travel approval process that considers the potential risks associated with each trip and ensures employees have the necessary resources and information to travel safely.
- Provide employees access to a 24/7 support service, such as an emergency hotline or assistance app, to address any concerns or issues during their trip, such as flight cancellation or illness.
- Offer pre-travel training and resources to educate employees on safe travel practices, personal security measures, and health precautions.
- Regularly review and update your Duty of Care program to ensure it remains effective and responsive to changing travel conditions and employee needs.
Choose a Travel Management Company

Partner with a TMC to help manage your travel program, negotiate supplier contracts, and provide support services for travelers.

A TMC can offer valuable industry expertise, access to discounted rates, and advanced technology solutions to streamline the travel process.

Your TMC can also access up-to-date information on travel advisories, local laws, and cultural norms.
Communicate the Policy

Ensure all employees know the travel policy and understand their roles and responsibilities.

Provide training sessions, distribute written materials, and maintain open lines of communication to encourage policy adherence.
Monitor and Review

Regularly evaluate the effectiveness of your travel program and make adjustments as needed.

Collect employee feedback, analyze travel data, and stay informed about industry trends to continuously improve your program.

Leisure vs. Corporate Travel

While leisure travel focuses on relaxation and enjoyment, corporate travel serves a business purpose.

Corporate trips often involve tight schedules, meetings, and specific goals, while leisure trips prioritize personal interests and activities.

Corporate travel policies must address unique challenges, such as managing costs, ensuring employee safety, and providing efficient booking processes.

Moreover, corporate travel programs must balance the needs of the business with the comfort and well-being of employees, creating a positive travel experience that supports productivity and engagement.

Companies of all sizes can benefit from a travel management solution.

Benefits of Corporate Travel

Corporate travel offers several benefits for businesses:

Networking Opportunities

Attending conferences and events lets employees network with industry peers and potential clients.

These connections can lead to new partnerships, collaborations, and business opportunities that drive growth and innovation.
Cost Savings and Productivity Gains

Using corporate travel programs can help reduce costs, as companies can negotiate discounts on airfare, hotel stays, and car rentals.

Additionally, employees who can book their travel through an easy-to-use online booking tool or mobile app save time compared to manual booking processes and get a better overall user experience.

Companies also benefit from productivity gains when employees avoid long lines at the airport or stress from last-minute travel plans.
Professional Development

Business trips provide opportunities for training, skill development, and staying up-to-date with industry trends.

Employees can gain valuable insights, knowledge, and expertise that translate into improved job performance and increased value to the company.
Improved Collaboration

Face-to-face meetings can help strengthen relationships and facilitate better communication among team members.

By bringing employees together in person, companies can foster teamwork, enhance collaboration, and ultimately improve overall business performance.
Increased Sales

Meeting clients in person can lead to stronger relationships and increased sales opportunities.

Face-to-face interactions allow for a deeper understanding of client needs, more effective presentations, and, ultimately, more successful business deals.

Roles and Responsibilities of a Corporate Travel Consultant

A corporate travel consultant is responsible for managing a company’s travel program.

Their duties include:

Negotiating Rates and Contracts with Travel Suppliers

An experienced corporate travel consultant will leverage their industry knowledge and relationships to secure your organization’s best possible rates and terms.
Assisting Employees with Travel Bookings and Arrangements

A corporate travel consultant acts as a liaison between employees and travel suppliers, helping to coordinate itineraries, manage changes, and ensure a smooth travel process.
Providing Support Services for Travelers, such as Itinerary Changes and Emergency Assistance

In the event of unforeseen circumstances or emergencies, a corporate travel consultant can provide critical support to employees, such as rebooking flights, arranging alternative accommodations, and offering guidance on local resources.
Analyzing Travel Data to Identify Cost-Saving Opportunities and Policy Improvements

By examining travel data and trends, a corporate travel consultant can recommend strategies for reducing costs, improving compliance, and enhancing the overall travel experience.

Tips to Create an Effective Managed Travel Program

To create a comprehensive corporate travel policy, consider the following tips:

Involve Key Stakeholders

Involve key stakeholders, such as HR, finance, and department heads, in developing your travel policy.

This ensures that the policy aligns with company objectives and addresses the needs of various departments.
Set Clear and Realistic Expectations

Set clear and realistic expectations for employees regarding travel expenses and reimbursement procedures.

Provide guidelines on acceptable expenditures, preferred payment methods, and required documentation to streamline expense reimbursement.
Regularly Review and Update your Travel Policy

Regularly review and update your travel policy to ensure it remains relevant and effective.

Stay informed about industry trends, regulatory changes, and evolving employee needs to make appropriate adjustments.
Encourage Employees to Provide Feedback

Encourage employees to provide feedback on their travel experiences to help identify areas for improvement.

By listening to and addressing employee concerns, you can create a corporate travel program that supports both business objectives and employee satisfaction.

Final Thoughts

By following these steps and tips, you can create a corporate travel program that benefits your company and employees alike.

Using the right business travel management tools, like Planergy’s travel and expense management software, can help greatly.

With a well-implemented travel policy in place, you’ll be better equipped to manage costs, ensure employee safety, and optimize your business travel experience.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Spend Analysis Software page to see how Planergy can empower you to get more value from your spend.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Corporate Travel Program: How To Create a Program for Employer and Employee Needs appeared first on Planergy Software.

The Top 8 Business Travel Management Tools

Lyle Del Vecchio — Wed, 20 Sep 2023 10:11:16 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

The Top 8 Business Travel Management Tools

Category

Travel & Expense

Written by Lyle Del Vecchio
18 min read

Tags

Expense Management Expense Reporting Technology & Software

Last edited

April 16, 2024

Download PDF

KEY TAKEAWAYS

Business travel management involves planning, booking, and managing all aspects of corporate travel, including flights, accommodations, ground transportation, and expenses.
Corporate travel management software streamlines business travel processes by automating tasks such as booking flights, tracking expenses, and providing insights into travel spending patterns.
Effective business travel management can lead to cost savings, increased employee satisfaction, and improved productivity.
The right travel management solution can help ensure compliance with company policies, provide valuable insights into travel spending, and streamline the entire travel process.

Business travel can be both exciting and exhausting. Between booking flights, finding accommodations, and managing expenses, it’s easy to feel overwhelmed. But fear not, weary traveler!

The right business travel management tools can save you time, money, and countless headaches.

In this article, we’ll explore the top 10 tools every business traveler should have in their arsenal and answer some common questions about business travel management.

What Is Business Travel Management?

Business travel management refers to planning, booking, and managing all aspects of corporate travel. This includes arranging flights, accommodations, ground transportation, and managing expenses related to business trips.

A well-managed business travel program ensures employees have a seamless travel experience while controlling costs.

How Do You Manage a Company’s Travel?

Managing company travel involves setting clear travel policies, selecting preferred vendors, implementing a centralized booking system, and using a robust expense management tool.

Regularly reviewing and analyzing travel data can also help identify areas for improvement and cost savings.

This brings us to the question, should you allow your employees to handle their own travel arrangements?

Allowing employees to handle their own corporate travel booking can have several advantages:

Flexibility and Autonomy
Allowing employees to book their own business travel gives them the flexibility and autonomy to choose travel arrangements that suit their preferences and needs. This can lead to higher employee satisfaction and a sense of ownership over their travel plans.
Time and Cost Efficiency
Employees may better understand their travel requirements and preferences, which can result in quicker decision-making and efficient bookings. Allowing employees to take charge of their travel arrangements reduces the burden on travel managers or administrative staff, freeing them up to focus on other important tasks.
Cost Control
When employees are responsible for booking their own travel, they tend to be more mindful of costs. They can search for the best deals, compare prices, and choose options aligned with budget guidelines. This level of cost-consciousness can contribute to overall travel cost savings for the company.
Empowerment and Trust
Allowing employees to book their own business travel demonstrates trust and empowers them to make decisions in line with company policies. It promotes a sense of responsibility and accountability, fostering a positive work environment.
Personalized Preferences
Employees may have specific preferences regarding travel arrangements, such as seat preferences, hotel amenities, or airline loyalty programs. Allowing them to book their own travel enables them to customize their travel experience and may contribute to their overall comfort and productivity during business trips.

However, it is essential to establish clear guidelines and policies to ensure travel policy compliance and manage potential risks.

Travel Policy
Have a well-defined travel and expense policy that outlines guidelines for bookings, preferred vendors, budget limits, and reimbursement procedures.
Communicate the policy clearly to employees to ensure they understand the expectations and limitations. It should clearly outline what expenses are reimbursable, whether or not they can use their personal credit card or will be required to use a company card, etc.
Approval Process
Implement an approval process to ensure that travel bookings meet company requirements and align with the travel policy.
This allows managers to review and authorize travel requests, ensuring consistency and control over travel arrangements.
Expense Reporting
Set up a standardized expense reporting process to ensure accurate and timely expense reimbursements.
Provide employees with clear instructions on submitting expense claims and the necessary supporting documentation. You should also consider introducing a dedicated app for travel and expense management to automate expense management.
Communication and Support
Maintain open lines of communication with employees to address any questions or concerns they may have about booking their own travel.
Offer support and assistance when needed, such as providing resources for finding the best deals or offering guidance on travel-related matters.

What Is Corporate Travel Management Software?

Corporate travel management software is designed to streamline and automate various aspects of business travel management.

These tools can help book flights and accommodations, track expenses, and provide insights into travel spending patterns.

They can also integrate with other systems, such as accounting or HR software, for seamless data transfer and workflow management.

What Is the Difference Between Business Travel and Leisure Travel?

Business travel refers to trips taken for work-related purposes, such as attending meetings, conferences, or visiting clients.

On the other hand, leisure travel is taken for personal enjoyment and relaxation.

While both types of travel involve similar activities (booking flights, accommodations, etc.), business travel typically has additional requirements, such as expense tracking and adherence to corporate travel program policies.

There is no one-size-fits-all approach to the best travel management software. Consider how often people travel, the types of travel, etc., when making your choice.

What Are the Benefits of Business Travel Management?

Effective business travel management can lead to cost savings, increased employee satisfaction, and improved productivity.

By streamlining the booking process, enforcing travel policies, and automating expense reporting, companies can reduce travel-related stress for employees and ensure they have a positive travel experience.

How Do You Find a Corporate Travel Management App?

When searching for a corporate travel management app, consider factors such as ease of use, integration capabilities, customization options, pricing, and customer support.

Researching online reviews and seeking recommendations from colleagues or industry peers can also help identify the best app for your needs.

Additionally, many corporate travel management apps offer free trials that can provide an opportunity to explore the features and determine if it is a good fit.

Once you’ve identified a travel management app, ensuring all stakeholders are on board with its implementation is important.

Create usage guidelines for employees and ensure everyone understands the policies for booking flights, hotels, etc.

This helps with risk management to ensure employees aren’t booking personal travel on your dime or spending excess on car rentals, meals, and entertainment.

How Do You Book Flights for Business Travel?

Booking flights for business travel can be done through a corporate travel management tool, which centralizes bookings and approvals while providing personalized recommendations based on traveler preferences.

Alternatively, flights can be booked directly through airlines or third-party platforms, though this may not offer the same level of control and oversight as a dedicated tool.

What Is a Corporate Travel App?

A mobile corporate travel app is designed to streamline and simplify booking and managing business travel.

These apps often provide features such as real-time flight alerts, itinerary organization, and expense tracking, making them an essential tool for busy professionals on the go.

The Top 8 Business Travel Management Tools: In-Depth

Planergy for Business Travel and Expense Management
Of course, this list wouldn’t be complete without us mentioning our own tool.
With our business travel and expense management software, you can easily track and manage employee travel, allowable expenses for reimbursement, create expense reports, and more.
Our travel and expense management system works hand-in-hand with our procurement software to give finance teams a comprehensive control and oversight on all spend management.
TripIt: Your Personal Itinerary Wizard
TripIt is a comprehensive itinerary organizer that consolidates all your travel plans in one place, making it easy to access and share with colleagues.
The app also sends real-time flight alerts to keep you informed about any changes to your flights.
Additionally, TripIt offers helpful features such as maps and directions, ensuring you can easily navigate your destination. With its user-friendly interface and seamless integration with your email, TripIt makes managing your travel plans a breeze.
TravelPerk: One-Stop-Shop for Travel Bookings and Approvals
TravelPerk is a comprehensive solution for booking and managing corporate travel. The platform centralizes bookings and approvals, streamlining the process and saving time.
With transparent pricing and flexible options, TravelPerk ensures you get the best value for your travel budget.
The robust reporting dashboard provides insights into travel spending patterns, enabling you to identify areas for improvement and cost savings.
TravelPerk’s user-friendly interface makes managing all aspects of your business travel easy.
Airbnb for Work: Unconventional Accommodations for Business Travelers
Airbnb for Work offers unique accommodations tailored for business travel, providing a more comfortable and personalized experience than traditional hotels.
The platform simplifies group bookings, making coordinating travel arrangements for your team easy.
Additionally, Airbnb for Work offers convenient workspaces and meeting rooms that can be booked on demand. The platform also features experiences and team-building activities, enhancing your trip and promoting team bonding.
PackPoint: Handy Tool To Ensure You Pack Everything You Need
Packpoint is a handy packing app that can simplify preparations for your business travel by ensuring you have all the items you need for your trip.
By avoiding forgetting essential items, devices, or documents you can avoid any last-minute panic, cost incurred, or time wasted trying to replace them during your trip before your presentation or meeting.
Not having to worry about missing items will avoid disruption to your schedule and ensure you can perform your tasks effectively.
Packpoint will even make suggestions based on your destination, the weather forecast, and the activities you have planned.
Egencia: Comprehensive Corporate Travel Management
Egencia is a complete corporate travel management platform that offers a user-friendly mobile app for booking and managing trips.
The tool provides 24/7 customer support and travel assistance, ensuring you have access to help whenever you need it.
With its robust features and comprehensive approach to travel management, Egencia makes it easy to stay organized and in control of your business travel.
SAP Concur: Integrated Travel, Expense, and Invoice Management
SAP Concur is a powerful platform that combines travel, expense, and invoice management in one centralized solution.
The tool allows for seamless data transfer and workflow management, ensuring all aspects of your travel process are integrated and efficient.
Customizable policy enforcement and approval workflows help ensure compliance with company policies, while detailed analytics and insights into travel spending enable you to make informed decisions about your travel program.
Google Travel: Plan and Track Trips Easily
Google Travel, previously known as Google Trips, helps you plan trips and will centralize all your travel information by linking it to your Google account.
By guiding you through the process and identifying the most useful information and best offers it simplifies the planning process and keeps everything in one place.
Not just for business travel, Google Travel is equally useful for leisure and family trips.

Frequently Asked Questions (FAQs)

What Are Business Travel Management Tools?

Business travel management tools are software applications and platforms that help organizations and individuals streamline and optimize their travel planning, booking, and expense management processes.

How Can Business Travel Management Tools Benefit My Organization?

These tools can save time, enhance productivity, improve cost control, and ensure compliance with travel policies. They provide a centralized platform for managing travel-related tasks, such as booking flights, tracking expenses, and creating itineraries.

Are These Tools Suitable for Small Businesses As Well?

Absolutely! Many of these tools cater to businesses of all sizes, including small and medium enterprises. They offer scalable solutions that can be tailored to your organization’s specific needs.

Can I Integrate These Tools With Our Existing Systems?

Most business travel management tools offer integration capabilities with popular travel booking platforms, accounting software, ERPs, and other relevant software. This ensures seamless data flow and minimizes manual effort.

Are These Tools Secure?

Reputable travel management tools employ robust security measures to protect your data. They utilize encryption, secure connections, and adhere to industry standards to safeguard sensitive information.

How Do I Choose the Right Tool for My Organization?

Consider your specific travel management needs, budget, scalability, integration capabilities, and user-friendliness. It’s also beneficial to read reviews, request demos, and evaluate multiple options before deciding.

Simplify Your Corporate Travel Expense Management With These Tools

Efficiently managing business travel is crucial for organizations of all sizes. From itinerary creation and business expense tracking to policy compliance and analytics, you have everything you need to stay on top of business travel.

By leveraging these tools, you can optimize your travel planning, save time, reduce costs, and ensure a seamless travel experience for your team.

Embrace the power of technology and make your business travel management a breeze with these innovative tools.

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1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

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Strategic Budgeting: What Is It, Process, and Best Practices

Lyle Del Vecchio — Wed, 06 Sep 2023 11:53:31 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

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Strategic Budgeting: What Is It, Process, and Best Practices

Category

Business Budgeting

Written by Lyle Del Vecchio
17 min read

Tags

Best Practices & Tips Budget Management Process & Procedures

Last edited

December 15, 2023

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KEY TAKEAWAYS

Strategic budgeting combines long-term budgeting with an organization’s strategic priorities.
For the greatest chance of success, senior leadership should be involved in setting goals and determining success metrics that are aligned to budgets.
Being agile enough to make adjustments as circumstances change is key.

Budgeting is a critical financial planning and management aspect for individuals, businesses, and organizations.

Among the various types of budgeting, strategic budgeting stands out as a powerful tool for achieving long-term financial goals.

This comprehensive guide will delve into strategic budgeting, its importance, the steps involved in creating a strategic budget, benefits, challenges, best practices, and help identify differences between forecasting and budgeting.

What is Strategic Budgeting?

Strategic budgeting is a process that combines budgeting with strategic planning, aligning an organization’s financial resources with its long-term objectives.

It focuses on allocating resources effectively, prioritizing investments, and ensuring financial stability while pursuing growth and innovation.

Different Types of Budgeting Methods

There are various different types of budgets and budgeting models in accounting.

Incremental Budgeting
Incremental budgeting is a traditional approach to budget planning that involves taking the previous year’s annual budget and adjusting it based on factors such as inflation, cash flow, or other changes in the organization’s financial landscape.
This method is simple to implement and maintain, relying on historical data and relatively minor adjustments.
However, incremental budgeting may not account for changing priorities, short-term expenditures, or new opportunities, limiting its effectiveness in some situations.
Zero-Based Budgeting
Zero-based budgeting is a more rigorous approach that requires every expense to be justified each budgeting period, starting from zero.
This method encourages efficiency and reduces unnecessary spending by forcing organizations to evaluate each expenditure and its contribution to its goals carefully.
While zero-based budgeting can lead to more effective resource allocation, it can be time-consuming and challenging to implement, as it requires a comprehensive review of all expenses during each budgeting cycle.
Activity-Based Budgeting
Activity-based budgeting focuses on the cost of activities and processes required to achieve specific objectives.
By examining the relationship between costs and outcomes, activity-based budgeting helps organizations identify inefficiencies, allocate resources more effectively, and improve overall financial performance.
This type of budgeting can be complex and require significant data analysis, making it more suitable for organizations with well-defined processes and the ability to gather detailed cost information.
Strategic Budgeting
Strategic budgeting, as previously mentioned, is a method that combines strategy and budget planning, emphasizing long-term objectives and resource allocation.
This approach ensures that an organization’s financial resources are aligned with its overarching goals, promoting growth, innovation, and financial stability.
By focusing on long-term priorities and investments, strategic budgeting helps organizations make informed decisions about resource allocation and adapt to changing market conditions.

Why are Budgeting Strategies Important?

Budgeting strategies like strategic budgeting help organizations make informed decisions about resource allocation, prioritize investments, and ensure financial stability.

They provide a roadmap for achieving long-term goals, promoting growth and innovation while managing risks and uncertainties.

The Strategic Budgeting Process

Creating a strategic budget involves the following steps:

Set Long-Term Goals and Objectives
Begin the strategic budgeting process by defining your organization’s long-term goals.
These goals can include market expansion, new product development, revenue growth, or other objectives that drive your organization’s success. Setting clear and measurable goals will provide the foundation for the rest of the budgeting process.
Identify Key Initiatives
With your long-term objectives, determine the strategic initiatives required to achieve these goals.
Such initiatives may include marketing campaigns, research and development projects, or hiring new talent. Identifying key initiatives helps ensure that your budget is focused on activities that contribute directly to your organization’s long-term success.
Develop Financial Projections
Next, develop financial projections for each identified initiative. Estimate the costs associated with each initiative and project revenues based on market trends, historical data, and growth expectations.
Accurate financial projections are essential for allocating resources effectively and setting realistic expectations for the outcome of each initiative.
Allocate Resources
With financial projections in hand, allocate financial resources to each initiative. Prioritize initiatives with the highest potential impact on your long-term objectives, ensuring that your budget is aligned with your organization’s goals.
Resource allocation is a critical step in the strategic budgeting process, as it determines where your organization will invest its time, effort, and money.
Monitor Progress
Finally, regularly review your strategic budget versus actual expenditure and monitor progress towards your long-term objectives. Compare actual results with your projections and adjust as needed to stay on track.
Monitoring progress is crucial for maintaining accountability, identifying areas for improvement, and ensuring that your strategic budget remains aligned with your organization’s goals. You can make data-driven decisions that drive your organization forward by consistently evaluating your budget’s performance.

Benefits of Strategic Budgeting

Aligning Resources with Long-Term Strategic Goals
Strategic budgeting allows organizations to focus on their most important initiatives, ensuring that resources are allocated effectively and efficiently.
By aligning financial resources with long-term goals, organizations can prioritize investments that contribute directly to their success, making the most of their available resources.
Encouraging Innovation and Growth
One of the key benefits of strategic budgeting is its ability to promote investment in new opportunities and support long-term growth.
Organizations can continually evolve, adapt, and stay competitive in their respective industries by identifying and prioritizing initiatives that drive innovation and expansion. An agile business can be ready to seize opportunities.
Improving Decision-Making
Strategic budgeting provides a clear roadmap for achieving an organization’s objectives, which helps improve decision-making at all levels.
With a well-defined budget, organizations can make informed decisions about investments and resource allocation, ensuring that every financial decision supports their long-term goals and overall strategic vision.
Enhancing Financial Stability
Strategic budgeting contributes to an organization’s financial health and stability by prioritizing investments and managing business risks.
Organizations can identify areas where resources may be better allocated, reduce unnecessary spending through strong budgetary control and spend control, and ensure they are prepared to weather any financial challenges that may arise.
This proactive approach to financial management helps organizations maintain a strong financial position and achieve their long-term objectives.

Challenges of Strategic Budgeting

Ensuring Accurate Projections
One of the main challenges of strategic budgeting is developing accurate financial projections, which can be difficult in uncertain or rapidly changing markets.
Organizations must carefully analyze historical data, market trends, and other relevant factors to create realistic budget forecasting projections that accurately reflect their long-term goals and objectives.
When planning your projections you should also ensure you are budgeting for variable expenses, if not planned for these can easily blow your budget.
Inaccurate projections can lead to poor decision-making and resource allocation, ultimately undermining the effectiveness of the strategic budget.
Fostering Collaboration
Creating a strategic budget requires input and cooperation from various organizational departments and stakeholders. This involves other departments collaborating effectively with finance.
This collaboration can be challenging, as different departments may have competing priorities, differing opinions on resource allocation, or varying levels of understanding about the organization’s overall strategy.
To overcome this challenge, organizations must foster a culture of open communication, shared goals, and commitment to the strategic budgeting process.
Maintaining Ongoing Monitoring
Effective strategic budgeting demands regular reviews and adjustments, which require time and effort from all involved parties.
Organizations must continually monitor their progress, compare actual results with projections, and make necessary adjustments to stay on track.
Having real-time spend visibility, carrying out budget variance analysis, reviewing spend analysis on procurement activities, and following budget reporting best practices by using a dedicated spend management software that incorporates business budgeting software, like Planergy, can help.
This ongoing monitoring can be time-consuming, especially if managed manually, but it is crucial for ensuring that the strategic budget remains aligned with the organization’s long-term goals and objectives.
Implementing tools and processes to streamline budget monitoring and reporting can help mitigate this challenge and promote a more efficient approach to strategic budgeting.

Regardless of business size, the right budgeting strategy can be the difference between success and failure.

Best Practices for Strategic Budgeting

Involving the Leadership Team and All Stakeholders
One of the most important best practices for strategic budgeting is to engage key stakeholders in the business budget planning process.
This ensures buy-in and commitment from all parties involved, fostering collaboration and effective decision-making.
Encourage open communication, solicit input and feedback, and ensure that all stakeholders understand the organization’s long-term goals and the role of the strategic budget in achieving those objectives.
Leveraging Historical Data and Market Research
Leveraging historical data and market research to create accurate financial projections and assumptions is crucial.
Analyze past performance, market trends, and industry insights to make informed decisions about resource allocation and expected outcomes.
You can increase your strategic budget’s accuracy and effectiveness by grounding your strategic budget in data-driven insights.
Using the Right Tools
It’s important to use the right budgeting tools, as they play a crucial role in ensuring the accuracy and efficacy of the budgeting process.
Effective tools streamline data management, facilitate stakeholder collaboration, and allow organizations to monitor their financial performance easily.
While Excel might be an excellent option initially for smaller companies, its limitations become apparent in larger and more complex organizations.
As organizations grow, they require more advanced budgeting solutions and controls to handle increased data volume, automate repetitive tasks, and provide real-time insights into financial performance.
By investing in the right budgeting tools, organizations can significantly improve the efficiency and effectiveness of their budgeting process, ultimately leading to better decision-making, resource allocation, and financial success.
Being Realistic and Conservative
When developing financial projections and assumptions, it’s essential to be realistic and conservative.
Avoid overly optimistic projections that may be difficult to achieve, and instead, focus on attainable goals that align with your organization’s goals for the coming year and long-term objectives.
Additionally, build contingencies into your budget to account for unforeseen events or challenges, ensuring your organization is prepared to adapt and respond to changing circumstances.
Implementing a Rolling Budget
Instead of relying on a traditional annual budget, consider implementing a rolling budget combined with rolling forecasts that is continually updated and extended as new information becomes available.
A rolling budget allows organizations to respond more quickly to changes in the market or their financial situation, promoting agility and adaptability.
Regularly updating and revising your strategic budget ensures it remains aligned with your organization’s evolving goals and priorities.

Budgeting vs. Forecasting: Key Differences

Budgeting: Creating a Financial Plan
Budgeting is the process of creating a detailed financial plan for a specific period, usually a fiscal year, and allocating resources to achieve specific organizational goals.
The budget serves as a roadmap for financial decision-making, guiding how funds should be spent and outlining expected income and expenditures.
Budgets are typically fixed, meaning they remain relatively unchanged throughout the budget period, and are used to assess performance by comparing actual results against the planned figures.
Key aspects of budgeting include:
- Setting financial goals and objectives
- Allocating resources to meet those objectives
- Establishing spending limits and guidelines
- Monitoring progress and comparing actual results against the budget
Forecasting: Estimating Future Financial Outcomes
In contrast, forecasting involves estimating future financial outcomes based on historical data, market trends, and various assumptions. Spend forecasting helps inform budget planning.
Forecasts are more flexible than budgets, as they are continually updated and revised as new information becomes available or circumstances change.
Forecasting helps organizations anticipate future performance, identify potential risks and opportunities, and make proactive decisions to maximize success.
Key aspects of forecasting include:
- Analyzing historical data and trends
- Identifying potential risks and opportunities
- Estimating future revenues and expenses
- Adjusting forecasts as new information becomes available

Embrace Strategic Budgeting for Long-Term Success

Strategic budgeting is a powerful tool for aligning an organization’s financial resources with its long-term objectives.

By following the steps outlined in this guide and implementing best practices, businesses and organizations can effectively create and manage their operating budgets, achieving growth, innovation, and financial stability.

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What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Spend Analysis Software page to see how Planergy can empower you to get more value from your spend.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Strategic Budgeting: What Is It, Process, and Best Practices appeared first on Planergy Software.

Procurement Methods: How To Source and Evaluate The Best Suppliers To Work With

Lyle Del Vecchio — Tue, 08 Aug 2023 10:50:09 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

Procurement Methods: How To Source and Evaluate The Best Suppliers To Work With

Category

Spend Management

Written by Lyle Del Vecchio
16 min read

Tags

Process & Procedures Procurement Purchasing

Last edited

July 2, 2024

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6 Types Of Procurement Methods

There are six commonly used procurement methods used when sourcing and evaluating suppliers for procurement.

They may be referred to by other names depending on your industry and your company, but regardless, the process remains similar.

They include:

Open tendering
Single-source procurement
Two-stage tendering
Restricted tendering
Request for proposal (RFP)
Request for quotation (RFQ)

Your procurement team will determine which method to source goods and services based on what you need, when you need it, your budget, and other factors.

When signing on a new supply customer, you must consider more than just a good-sounding product and price.

Open Tendering
Open tendering is a procurement method that allows companies to bid on goods in an open competition or solicitation. Open tendering requires a company to advertise locally and have unbiased and coherent technical specifications for the goods sought.
It also requires objective evaluation measures to ensure accurate bids. Open tendering encourages effective competition to obtain goods, emphasizing value for money.
Open tendering is preferable as it allows companies to apply for multiple contracts at once, resulting in more efficient use of resources and reduced cost-over-runs from multiple procurement processes.
Allowing companies to compete with bids can create better value for the organization, so open tendering is generally considered the best procurement method.
Single Source
Single-source procurement, sometimes called sole-source procurement, is the non-competitive procurement method of acquiring goods and services from a single vendor.
This method is used in highly specific circumstances, such as when there is:
- Only one vendor is qualified to fulfill company needs.
- A continuation of previous work
- A clear advantage of using this method over other competitive methods
Non-competitive procurement may also be used when supplies or services are only available from one responsible source, and no other supplies or services will satisfy its requirements.
Single-source procurement can save time and money while ensuring accountability and quality of service. It allows you to ensure you get exactly what you need, when you need it, at a price you can afford.
However, you must use care and consistency to ensure that single-source procurement improves organizational efficiency and outcomes.
Two-Stage Tendering
Two-stage tendering is a procurement method where the buyer invites tender in two stages. The first stage involves bidders submitting their proposals without prices, while the second stage includes price specifications from the selected bidders.
It’s commonly used in construction procurement projects to help streamline the bidding process.
At the prequalification stage, potential vendors are assessed on their financial stability, previous experience, and capacity to carry out the work. Suppliers who pass this initial stage may be invited to submit a detailed technical bid at the second stage.
This will include cost breakdowns and further details on how they plan to deliver the project within budget and time constraints.
In both stages of two-stage tendering, all bids are evaluated against certain criteria set by either public or private bodies before contract award decisions are made.
Restricted Tendering
Restricted tendering, sometimes also called selective tendering, is a competitive procurement method that limits the number of requests for tenders sent out to suppliers or service providers. It ensures that the best-suited and most qualified entities are chosen to acquire supplies or services.
Restricted tendering is commonly used with limited resources and when the procurement process must be streamlined. Shortlisting only the best-suited entities for procurement can save time and money.
By limiting the vendor pool, restricted tendering allows for better selection and reduces the possibility of waste or overpaying.
This selective process helps ensure effective and successful acquisition while saving time and money in the procurement process.
RFPs
RFPs, or request for proposals, are a standard document in the sourcing process. Commonly used to solicit bids from potential vendors. An RFP outlines your requirements, expectations, and all other necessary information so potential suppliers can submit a proposal.
An effective RFP typically includes a detailed description of the project’s purpose, timeline, budget constraints; key deliverables; selection criteria; expectations on how vendors should submit their proposals; and contact information for questions or clarifications.
In addition, if there is expected follow-up service involved, it is important to include details about ongoing support requirements you may have.
By issuing RFPs, you can quickly receive competitive bids to ensure you receive the best goods and services at the most affordable price while meeting your specific requirements.
You should use RFPs when many potential solutions are available but find none fitting perfectly with your needs.
RFQs
RFQs, or request for quotations, are similar to RFPs in that you can use them to get bids from potential vendors. A key difference is that the RFQ should include a pricing quotation.
You generally issue a document to potential suppliers with detailed instructions and specifications. Suppliers then submit their best offer.
These offers typically include pricing information, lead time, and other factors based on your specific needs. You can compare the responses to determine which is best for your company.
You should use an RFQ when you know exactly what you want and need to compare pricing better. Because of this, RFQs are most commonly used when purchasing standard products or raw materials that don’t need customization.

Effective procurement management lies in knowing which procurement method to use and when.

Best Practices for Selecting Vendors

Choosing a vendor is one of the most important decisions you can make for your supply chain. A good vendor should provide quality products and services on time and be reliable and trustworthy.

Understand Your Needs
Take time to understand what exactly your business needs before beginning the search for a vendor.
Make sure that any potential vendors meet all of your requirements, including price points and terms of delivery. Also, consider any specific features or qualifications they may need to fulfill your needs (e.g., certifications or experience).
This step is critical because it helps narrow down potential vendors quickly so that you don’t waste time pursuing those who won’t be able to meet all of your needs.
Research Vendors Thoroughly
Before you start to narrow down your list of potential vendors, it’s important to do thorough research into each candidate.
Look at each vendor’s track record, customer reviews, and ratings on websites like Yelp or Google to get an idea of their reputation in the market. Also, look into their financial stability to know they’ll be able to handle any orders you place with them.
References from past clients can be a valuable source of information when selecting a vendor.
References provide an opportunity to hear first-hand experiences and reviews from those who have used the services of a specific vendor. Asking vendors for references is one way to assess the quality of their services before committing to any agreement.
When speaking with a vendor’s reference, ask meaningful questions that accurately reflect the vendor’s performance.
Ask about the vendor’s customer service and how efficiently they deliver promised goods or services. Inquire about any potential challenges experienced in working with the vendor and if they are easy to communicate with and respond quickly to questions or concerns.
Evaluate Their Capabilities
Once you have narrowed your list of vendors, it’s time to evaluate their capabilities.
Make sure they have the capacity and experience to meet your requirements. Ask them questions about their production process, delivery times, product quality standards, etc., to determine if they can provide what you need from them.
It’s a good idea to have some ideal metrics to help the vendor know more about what you expect and whether or not they can meet your needs. You can use these metrics to see how well they perform later, should you hire them.
Spend Time on Contract Negotiations
Negotiating with suppliers is a critical part of any procurement process. It’s important to get the best deal possible, but it’s also important that the supplier feels like they are getting a fair deal.
A win-win for your company and the supplier will help start the supplier relationship on the right footing. When both sides feel like they are getting what they want, it can result in an outcome that both parties can be happy with.
Before you start negotiating with suppliers, it’s important to understand your end goals.
Do you want to get the best price possible? Are you more concerned with quality? Are there certain features or services that you need from the supplier? Once you understand your needs and wants, it will be easier to communicate them during negotiations.
Know your limits. Don’t be too aggressive in trying to get a better deal or making demands on the supplier; if they feel like they aren’t getting anything out of the deal, they won’t want to work with you in the future.
You should also make sure that you are aware of any laws or regulations related to purchasing from a particular supplier so that you don’t run into any legal issues down the line.
Periodically Evaluate Supplier Performance Across Your Supply Chain
Evaluating vendor performance is an important part of any successful supplier relationship, as it allows your procurement department to ensure that its vendors meet the standards.
Evaluating a vendor’s performance can help you make informed decisions about your partnerships and address any improvement areas. Tracking KPIs in vendor management will help with this.
Three key areas should be assessed when evaluating vendor performance: quality and reliability, responsiveness to customer needs, and cost-effectiveness.
Quality and reliability refer to the degree of accuracy, timeliness, and consistency with which the vendor provides its services or products.
Responsiveness refers to how quickly the vendor responds to customer queries or requests.
Cost-effectiveness looks at whether the prices charged by vendors represent good value for money compared with other providers in the market.

Use E-Procurement to Streamline the Entire Process

With an e-procurement platform, like Planergy, you can track all your vendors, contracts, purchase orders, and purchase requisitions in one place.

Spend analytics can be used to better inform procurement decisions and enable better strategic sourcing.

You can automate purchase order approval, track department budgets and spend to report to stakeholders, and more.

You’ll save time, allowing your team to focus efforts on more value-added activities, increasing revenue and productivity.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Procurement Solutions page to see how Planergy can digitize and automate your procurement processes saving you time and money.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Procurement Methods: How To Source and Evaluate The Best Suppliers To Work With appeared first on Planergy Software.

Working Capital: What Is It, How To Calculate, and Why It’s Important

Lyle Del Vecchio — Tue, 18 Jul 2023 12:39:36 +0000

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Working Capital: What Is It, How To Calculate, and Why It’s Important

Category

Finance

Written by Lyle Del Vecchio
17 min read

Tags

Cash Flow Financial Planning & Analysis (FP&A)Profitability

Last edited

July 2, 2024

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KEY TAKEAWAYS

All businesses have revenue fluctuations. A company’s working capital can keep things running smoothly during periods of slower revenue generation.
Small businesses need proper working capital management to finance day-to-day operations.
If your working capital isn’t where it should be, there are steps you can take to improve it.

Working capital is a fundamental component of any thriving business.

One of the most important aspects of procurement is understanding and utilizing working capital in the best way possible to ensure you are making the most of your resources.

Let’s dig into what working capital is, how it can be calculated, and why it’s important.

What is Working Capital?

Working capital, sometimes referred to as net working capital, is a company’s current assets minus its current liabilities.

Assets are items a company owns that can be sold or converted into cash quickly; these include inventory, accounts receivable, and short-term investments.

Liabilities are obligations that must be paid off within one year; they include accounts payable, taxes payable, and short-term debt.

Working Capital Example

For example, if a company has $2 million in cash on hand (current asset) and $1 million in accounts payable (current liability), then its amount of working capital would be $1 million ($2 million – $1 million).

Working capital measures how efficiently a business uses its resources to generate sales and profits.

In other words, it indicates how well the company manages its short-term financial obligations.

Positive working capital indicates that a company has enough liquid assets (cash flow) to cover its current debts.

In contrast, negative working capital suggests it may not have enough liquid assets to cover its current liabilities. It’s an important metric to monitor your company’s financial health.

How to Calculate Working Capital

The net working capital formula is:

Current assets – Current liabilities = working capital

To calculate working capital, you’ll need the balance sheet.

Add up the values of your company’s current assets (cash on hand and cash equivalents, accounts receivable, inventory, etc.).
Subtract your total current liabilities (accounts payable, short-term debt payments due within one year).

The resulting number will be your working capital. Remember that this number should always be positive; if it isn’t, you may need to adjust your budget or restructure some of your debt payments to ensure adequate business liquidity.

Current Assets

This includes cash and liquid assets that can be converted to cash within 12 months of the balance sheet, such as:

Cash – money in bank accounts and any deposited customer checks
Marketable securities – money market funds, U.S. treasury bills, etc.
Prepaid expenses – rent, insurance premiums, utilities, etc.
Short-term investments the company plans to sell within 12 months.
Inventory – raw materials, finished goods, and works in progress
Accounts receivable, minus allowances for any payments expected to be written off as bad debts.
Notes receivable – short term loans to suppliers or customers that will mature within 12 months
Any other receivables – cash advances to employees, tax refunds, insurance claims, etc.

Current Liabilities

This refers to any liability due within 12 months of the balance sheet, including:

Loan principle that must be paid within a year
Deferred revenue – advanced payment from customers for goods or services not yet rendered
Wages payable
Taxes payable
Accounts payable
Notes payable due within 12 months
Interest payable on any loans
Any other accrued expenses payable

Why Working Capital is Important to Your Organization

Regardless of industry, chances are you have some seasonal fluctuations in revenue.

The hospitality industry, for instance, tends to earn more in the summer when everyone’s on vacation. Retailers tend to earn more toward the end of the year when everyone is focused on holiday shopping.

However, those businesses have to cover expenses, such as rent/mortgage, payroll, and utilities year-round.

With adequate spend forecasting and working capital management, those businesses can make sure they have enough cash to build a supply stock before the busy season and hire temporary employees while also ensuring they can support the permanent staff.

What is a Good Working Capital Ratio?

The working capital ratio, also known as working capital ratio, is your current assets divided by your current liabilities.

If your ratio is less than one – the business isn’t generating the revenue it needs to meet the company’s short-term obligations.
If the ratio falls between 1.2 and 2.0, your company is using its assets well.
A ratio of 2.0 or higher indicates maintenance of a lot of short-term assets, and the money could be put to better use by reinvesting the funds to generate more revenue.

In the example above, $2 million in assets and $1 million in liabilities creates a ratio of 2.0, so the volume of short-term assets hampers the company’s ability to generate revenue.

As an alternative to the current ratio, you can also use the quick ratio, which only includes the company’s most liquid assets – the ones that have a short cash conversion cycle.

Improving your working capital ratio means taking action to improve cash flow.

Tips for Improving Working Capital

If you find your company needs to improve working capital, there are several things you can do.

Avoid Financing Fixed Assets with Working Capital

Fixed assets cannot be easily converted to cash, so they’re not included in the current assets. This means you should avoid using your working capital to finance equipment, facilities, real estate, trademarks, and patents.

Selling fixed assets can boost your working capital and cash flow, but financing them with working capital isn’t smart because they tend to be expensive.

It depletes working capital reserves and increases your risk profile with lenders and other credits. You’re better off using long-term liabilities to address these needs.
Run Credit Checks on New Customers

Researching a new client’s or prospect’s creditworthiness is essential to determine if they are a sound candidate for extending credit. Credit reports can offer valuable insight, aiding you in understanding their payment history and public records.

However, as this data can become obsolete quickly, you must also consider the industry in which the company operates and any local market nuances that could be of significance before approving them for credit.

By considering all of this, you can make an educated decision about whether or not offering a line of credit is worthwhile and appropriate.
Reduce Risk of Bad Debt

Bad debt can quickly snowball and erode a company’s working capital, leaving it with limited resources to meet current financial commitments.

Businesses looking to reduce the impact of such debt need to be proactive in tackling the issue – by selling higher-margin products or increasing their margins across offerings, introducing tighter credit management processes, speeding up payment collections, and utilizing just-in-time logistics to recalibrate stock levels.

Although this may require an investment of time and resources upfront, protecting your business from expensive losses will pay off in the long run.
Improve Cash Flow Cycle Time

Increasing cash flow is a key component for driving working capital, and there are multiple ways to turn money tied up in the production or sales cycle into cash.

Options worth exploring include: asking for upfront payments on orders, reducing credit terms, billing customers immediately upon sale, or getting a better grip on sales forecasting/demand planning.

It’s important to accurately understand what demand is likely to be to ensure that you can properly manage cash flow while accommodating customer needs.

Flexibility in your operating cycle is necessary to remain competitive and make the most of your working capital. It is especially important to manage working capital well when you are experiencing an increase in business operations.
Seek Additional Long-Term Bank Financing

You can add to the company’s available cash by taking on more long-term debt without overly increasing your short-term liabilities.

You may also wish to consider refinancing some short-term debts into long-term ones. Since the debts are no longer due within 12 months, you’ll decrease your current liabilities.
Reduce Unnecessary Spend and Expenses

Regularly analyze your business expenses, especially the variable ones. With analysis, you can gain insight into how you may be able to restructure your costs and pricing to increase working capital or cut overall costs.

You can accomplish this by negotiating discounts with the most important suppliers in your supply chain, or finding suppliers who offer better pricing.

Regular analysis also helps you find other cost savings opportunities without sacrificing product or service quality.
Invest in Trade Credit Insurance

Trade credit insurance is a valuable tool for businesses seeking to protect their capital from late or non-existent payments. It acts as a financial safety net by insuring accounts receivable and helping to offset the costs of bad debt reserves.

Not only that, banks recognize this insurance and may offer businesses lower interest rates on loans because their accounts receivable are secured collateral.

Trade credit insurance provides the security of protection while freeing up capital in the long run and allowing companies to expand growth opportunities.
Optimize Inventory Management

You’ll spend less overall by reducing overstock and the chance that you’ll have to write off bad inventory. This frees up revenue to reinvest in other areas of the business. Good inventory management processes can help improve cash flow.

Working Capital Management

This is managing managing a company’s current assets and liabilities to ensure adequate liquidity to meet its short-term obligations and remain profitable over time.

Proper management allows your business to maintain sufficient liquidity to cover its short-term debt obligations without taking on additional debt or selling off assets.

This helps you remain competitive in the marketplace while also preserving your ability to take advantage of potential opportunities that may arise in the future.

By keeping an eye on current assets and liabilities, businesses can better anticipate potential cash flow problems before they become critical issues.

Forecast, Analyze Risk and Plan Properly

This includes forecasting cash flow needs, setting aside necessary funds for future investments, and creating a budget with realistic goals and objectives.

Having a plan will help you anticipate potential problems before they arise and identify areas where your business can make cost savings or increase revenues.

It will also give you an idea of how much money you need to keep on hand for contingencies or unexpected expenses.
Maintain Adequate Cash Reserves

It’s important to maintain adequate cash reserves to ensure that your business always has access to the funds it needs when it needs them.

This means setting aside enough monthly money so your business can weather any unexpected expenses or slow periods without having to borrow from outside sources or dip into other accounts.

You should also consider investing in short-term investments like CDs or Treasury bills to grow your cash reserves while taking advantage of higher interest rates than traditional savings accounts offer.
Manage Debt Wisely

Make sure you don’t take on too much debt at once and ensure that any loans are at reasonable interest rates with set repayment schedules that fit within your budget.

It also means avoiding high-risk investments or speculative ventures, as these can quickly strain your finances if things don’t pan out as expected. Pay off any existing debt as soon as possible so that more money is available for other endeavors.

Understanding and managing working capital is essential for any successful procurement professional who wishes to optimize their company’s resource utilization while maximizing profits.

Being mindful of liquidity enables you to make informed decisions about your purchases while negotiating better payment terms with suppliers when necessary.

By being aware of how much debt you can handle without compromising future operations or profits, you can help ensure the business remains afloat in any economic landscape—now more than ever!

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Travel and Expense Management: What Is It, Challenges and Best Practices

Lyle Del Vecchio — Tue, 30 May 2023 12:42:42 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

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Travel and Expense Management: What Is It, Challenges and Best Practices

Category

Travel & Expense

Written by Lyle Del Vecchio
16 min read

Tags

Expense Management Expense Reporting Process & Procedures

Last edited

December 15, 2023

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What Is Travel and Expense Management?

Travel and expense management (TEM) is the process of streamlining an organization’s travel spending.

TEM encompasses everything from booking airfare and hotels to managing ground transportation and expenses.

An effective TEM solution will help an organization save money, time, and resources while providing visibility into spending patterns.

The goal of T&E management is to ensure that employees only spend money on essential expenses while on business trips.

There are many different aspects of T&E management, but some of the most important include the following:

Approving or denying employee travel requests;
Pricing and booking flights, hotels, and rental cars;
Managing corporate credit cards;
Submitting and approving expense claims;
Handling expense reimbursement;
Auditing expenses for compliance; and
Providing employees with guidance on company travel policies.

As you can see, a lot goes into managing business travel. But by implementing T&E management best practices, you can make the process simpler and more efficient.

Challenges of Travel and Expense Management

Employee Resistance to Change

One of the most common challenges businesses face when implementing a new T&E management strategy is employee resistance to change.

Let’s face it—most people don’t like change, and when it comes to something as personal as travel plans, that resistance can be even greater.

The key to overcoming this challenge is communication.

When introducing a new T&E management system, take the time to explain why the change is necessary and how it will benefit both the employee and the company as a whole.

If possible, allow employees to test the new system before it’s fully implemented.

This will allow them to get comfortable with it and provide feedback that can be used to improve the system before it goes live.
Lack of Visibility Into Spend

Another big challenge businesses face when it comes to travel expense management is a lack of visibility into spend.

This can happen for many reasons, but the most common is simply not having an effective system to track employee spending.

Without visibility into spend, it’s very difficult to control costs.

You may be able to save some money here and there, but you’ll never get a true picture of where your money is going and how you can save more.

Implementing an automated travel and expense management solution is the best way to overcome this challenge.

With such a solution, you’ll always have visibility into employee spending, no matter where they are in the world, for more efficient spend management.
Manual Processes

Many small businesses have a limited technology budget, many rely on manual processes, specifically spreadsheets, to track their data.

In the beginning, spreadsheets may seem like an efficient way for finance teams to track employee spending, but they quickly become unmanageable as your business grows.

Not only that, but manually inputting data into spreadsheets is time-consuming and error prone.

The best way to overcome this challenge is to automate as much of the process as possible.

By implementing an automated travel and expense management solution with approval workflows, you’ll be able to eliminate manual processes and free up your employees’ time so they can focus on more important tasks.
Lack of Policy Enforcement

Another common challenge businesses face when managing travel and expenses is a lack of policy enforcement.

This can happen for several reasons, but the most common one is that businesses don’t have clear policies around expenses.

Without clear policies, employees are free to spend whatever they want, whenever they want, with no consequences.

This can quickly lead to uncontrolled spending, which can strain your business’s budget.

The best way to overcome this challenge is to create clear policies around travel and business expenses, including details about expense approval and the reimbursement process, and enforce them strictly.

Defining what can be an expense and what requires pre-approval as a purchase order will be an important part of any policy.

A separate purchase order policy can be defined for those scenarios.

By defining your policies, you’ll be able to control costs and keep your budget healthy.
Filing Expense Reports

Filing expense reports can be time-consuming and tedious—but it doesn’t have to be! With the right tools, you can automate the process so that all you have to do is snap a picture of your receipts, and they’ll be filed away automatically.

Using this approach creates a better user experience for everyone in the company.
Dealing with Reimbursements

If your company reimburses employees for their travel expenses, you’ll need a system to process those reimbursements quickly and efficiently.

Otherwise, employees may be left waiting weeks (or even months!) for their reimbursement check to arrive in the mail.
Fraud and Misuse

Fraud and misuse of travel and expense management systems can be a major issue for your company, and it can result in significant financial losses.

Employees can misuse company funds by submitting false expenses or using company funds fraudulently for personal trips.

To prevent fraud and misuse, organizations need to implement measures to detect and prevent fraudulent activities.

This includes audits, expense policy enforcement, employee training, and automated systems to flag potentially fraudulent expenses.

It is also important to have clear policies regarding the use of company funds and to communicate them effectively to all employees.
Integration with Other Systems

Travel and expense management systems must integrate with other systems, such as your ERP, accounting and payroll, to ensure accurate and timely expense reporting and reimbursement.

Integration with other systems can help reduce errors and increase efficiency by automating data transfer between systems.

This can include automatically generating invoices, updating accounting records, and processing payroll.

Integrating travel and expense management systems with other systems can also provide real-time insights into expense data, allowing organizations to identify trends and optimize spending.
Employee Satisfaction

While managing travel and expenses, it is essential to ensure that employees are satisfied and engaged with the process.

Lengthy approval processes, delayed reimbursement, and unclear policies can lead to employee frustration and dissatisfaction.

This can ultimately impact employee productivity and engagement.

You must ensure that the travel and expense management process is user-friendly and easy to use.

This can include providing employees with clear policies and guidelines, using mobile apps for expense reporting, and streamlining the approval process.

Providing employees with real-time access to expense data can also help increase their satisfaction by giving them more control over their expenses and reducing delays in reimbursement.

Start by developing processes, then evaluate solutions to help support those processes. Ask for employee feedback during the entire process.

Benefits of Effective Corporate Travel Management

Cost Savings

Cost savings is one of the most significant benefits of travel and expense management.

By managing travel expenses effectively, organizations can reduce expenses, identify areas for cost-cutting, and optimize their travel spend.

Effective travel and expense management can help organizations negotiate better rates with travel vendors and reduce the incidence of fraudulent expenses, leading to substantial savings over time.
Improved Compliance

Travel and expense management systems can help organizations ensure compliance with company policies and regulatory requirements.

By automating expense policies, organizations can ensure that expenses align with company guidelines and that all necessary approvals and receipts are obtained.

This can help minimize the risk of non-compliance and reduce the likelihood of legal or financial penalties.
Increased Efficiency

Travel and expense management systems can automate manual processes, such as data entry and approvals, leading to increased operational efficiency and productivity.

This can free up employees’ time to focus on other tasks and reduce the risk of errors and delays in processing expenses.

Automated systems can also provide real-time insights into expense data, allowing organizations to identify trends and optimize spending quickly.
Improved Visibility

Effective travel and expense management can give organizations greater visibility into their expenses.

This can help identify areas for cost-cutting and optimize spending.

Greater visibility can also help organizations negotiate better rates with travel vendors and ensure they get the best value for their money.
Better Employee Experience

A well-managed travel and expense management process can help improve the employee experience by reducing the administrative burden of managing expenses and providing timely reimbursement.

This can lead to greater employee satisfaction and engagement, ultimately benefiting the organization.

Best Practices for Travel and Expense Management

Create a Central Repository

Having all your travel and expense information in one place will make it much easier to keep track of.

Expense management software generally includes document storage to make it easier to manage all aspects of your travel program.

Use it to store travel booking confirmations, corporate card statements, transaction receipts, and more.
Establish Policies and Procedures

Before employees start booking travel, ensure they’re aware of your company’s policies regarding travel expenses.

Will you reimburse for airfare, hotels, meals, etc.? What types of expenses need to be pre-approved? Will you require the use of a corporate card or can they use a personal card? Will you issue virtual cards for them to use?

Having clear guidelines in place can avoid any confusion or misunderstandings down the road.
Encourage Employees to Use Company Cards

If your company offers corporate credit cards, encourage employees to use them for all business-related travel expenses.

This will not only help keep track of expenses but can also help earn rewards like points or cash back.
Review Expenses Regularly

Set aside time each week or month to review submitted expense reports. This will ensure that all employee expenses are accounted for and that there are no discrepancies.

If you catch an error or discrepancy, be sure to follow up with the employee right away.

Manage Your Travel and Expense Program with Planergy

Overall, travel and expense management is fundamental to any successful business.

It requires hard work and dedication to maintain visibility into spending and keep costs under control.

While there is no ‘one size fits all’ approach to travel and expense management, businesses should look to select a strategy that best meets their organization’s needs.

A dedicated travel and expense software, like Planergy, will have flexibility and control to match your needs.

Regardless of the approach taken, travel spends should be closely monitored throughout the year in order to remain compliant with internal and external policies while ensuring that more money remains in the bank.

When it comes to travel and expense management, planning ahead is key.

Adopting best practices can help reduce overhead costs quickly — setting the groundwork for long-term fiscal success.

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1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Purchase Order Software page to see how Planergy can digitize and automate your purchase order process saving you time and money.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

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The post Travel and Expense Management: What Is It, Challenges and Best Practices appeared first on Planergy Software.

Tail Spend Analysis: What Is It, How To Perform It, and the Benefits

Lyle Del Vecchio — Thu, 02 Mar 2023 10:43:29 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

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Tail Spend Analysis: What Is It, How To Perform It, and the Benefits

Category

Spend Management

Written by Lyle Del Vecchio
17 min read

Tags

Big Data Business Intelligence (BI)Spend Analysis

Last edited

July 2, 2024

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Introduction To Tail Spend Analysis
Defining Tail Spend
Benefits of Tail Spend Analysis
Tail Spend Analysis Best Practices
Establishing Tail Spend Analysis Metrics
Developing a Tail Spend Analysis Plan
Analyzing Data and Identifying Trends
Leveraging Tail Spend Analysis To Improve Efficiency
How To Automate Tail Spend Analysis

Tail spend analysis is an important tool for businesses looking to optimize spending and ensure their supply chain runs efficiently.

Tail spend analysis helps companies identify areas of spend that are falling through the cracks, allowing them to make more informed decisions and achieve greater savings.

In this blog post, we’ll cover what tail spend analysis is, its benefits, how to develop a plan for it, how to analyze data and trends, and how to best leverage tail spend analysis to improve efficiency.

Introduction To Tail Spend Analysis

Tail spend analysis examines a company’s spending patterns and identifies opportunities to reduce costs and improve efficiency.

It’s an important part of any organization’s financial management, as it helps identify wasteful spending and uncover potential savings.

Tail spend analysis helps companies identify areas of spend that are falling through the cracks and gain visibility into their overall spending.

By understanding where their money is going, companies can make more informed decisions, reduce waste, and save money.

The process of tail spend analysis involves analyzing data from various sources, including supplier invoices, purchase orders, contracts, and other financial documents.

Having the right information and insights is important to make the most of tail spend analysis.

Defining Tail Spend

Tail spend is a term used to describe the small, often overlooked purchases made by an organization. It’s typically low-value, high-volume purchases made in areas such as office supplies, shipping, and travel.

While these purchases may seem insignificant when taken individually, they can make up a sizable portion of a company’s total spend.

Tail spend follows the Pareto principle – the idea that 80% of a company’s spending can be connected to 20% of the supplier base.

The long-tail is where the majority of purchases occur.

Tail spend should not be confused with maverick spending, which is non-strategic spending that occurs outside of an established internal process.

It’s also not the same as spot buying, which is the unplanned, one-time emergency purchase of a small, inexpensive, infrequently used item.

Tail spend is often unmanaged spend because it’s spread out across multiple departments and suppliers. This can make it difficult to track and manage.

However, this doesn’t mean it needs to be ignored. Tail spend can be an important source of savings and efficiency gains.

Benefits of Tail Spend Analysis

Tail spend analysis offers several benefits for businesses.

By understanding their spending patterns, companies can gain visibility into their overall spending and ensure they get the best value for their money.

Tail spend analysis also helps procurement professionals identify areas of wasteful spending and uncover potential savings.

This can lead to cost reductions and increased efficiency, helping businesses reduce their operational costs and increase their profits, which is good for the bottom line.

Tail spend analysis can also help companies identify opportunities for consolidation and standardization. This can lead to improved relationships with suppliers and greater savings.

Finally, tail spend analysis can help companies better understand their purchasing patterns and identify areas where they can make more informed decisions, leading to better supplier relationships and more efficient purchasing processes.

Tail Spend Analysis Best Practices

There are several best practices to keep in mind when conducting tail spend analysis. Companies should:

Set clear goals and objectives for the initiative
Define the scope of the analysis
Analyze data from multiple sources
Identify trends and opportunities for savings
Establish metrics to track progress
Leverage insights to improve efficiency in the procurement process.

By following these best practices, companies can ensure they get the most out of their tail spend analysis.

When left unmanaged, tail spend can cost an organization millions of dollars. Managing tail spend is a worthy investment of time and resources.

Establishing Tail Spend Analysis Metrics

Companies should establish metrics to measure their progress to ensure they get the most out of their tail spend analysis.

This will help them track their efficiency and identify areas of improvement.

Common metrics for tail spend management include:

Cost savings
Number of suppliers used
Number of contracts renegotiated (contract management)
Number of items consolidated
Number of items standardized

By tracking these metrics, procurement functions can get a clear picture of their progress and identify areas for improvement.

Developing a Tail Spend Analysis Plan

To make the most of tail spend analysis, it’s important to develop a plan.

Companies should identify the goals and objectives of their analysis, the data sources they will use, and the metrics they will measure.

It’s also important to define the scope of the analysis. Companies should decide which categories of spend they want to focus on, such as office supplies, travel, or shipping.

This will help them narrow down the data and focus their efforts.

Once a plan is in place, companies should develop a timeline to ensure they stay on track and meet their goals, to help them stay organized and continue making progress.

Analyzing Data and Identifying Trends

Spend analysis is the art of extracting useful information from your spending data. It can help your company make better business decisions and avoid unnecessary waste.

However, it is also very time-consuming. A proper plan should be implemented to make the process as efficient as possible.

Spend analytics involves classifying your spending data, identifying relevant trends, and implementing solutions that improve your purchasing power.

This can help you to understand your expenditures and budgets and identify cost reduction opportunities.

Spend analytics can be performed by hand or with the help of software. Using data visualization tools, you can explore spend data and discover hidden insights.

Tools often have an intuitive interface that allows non-technical users to build customized dashboards and explore data in real time.

Getting your spend data in order is a key first step in any spend analysis project. Clean spend data will enable you to analyze and improve your spending quickly.

Once a plan is in place, companies should begin analyzing their data. This involves looking at spending patterns and identifying areas of potential savings.

Companies should look for trends in spending, such as overspending on certain items or underutilizing certain suppliers.

Companies should also look for opportunities for consolidation and standardization. This can help them streamline their processes and reduce costs.

It’s important to remember that tail spend analysis is an ongoing process. Companies should regularly review their data and update their plan as needed.

Identify Your Supplier Base
When conducting a tail spend analysis, it’s important to understand your supplier base. Tail spend is often overlooked as a source of significant savings.
But when properly managed, it can save an organization up to 15 percent of its total procurement spending.
It can also help improve the employee experience. If your employees aren’t happy with the quality of products they receive from your suppliers, they’re likely to be less productive.
You’ll also be able to eliminate obstacles like delivery delays.
As many B2B businesses have learned, it pays to consolidate your supply base. Many suppliers are now working as aggregators. This means they’re expanding their business offerings to fulfill customer demands.
The best way to identify your supplier base is to conduct a comprehensive spending analysis. To do this, you’ll need to gather information on all spend data sources. Spend analysis includes grouping spending into standardized categories and cleaning data for errors.
After gathering all your data, you can categorize your expenditures and identify specific small purchases.
Categorizing your spending data by department or type of spend (direct vs. indirect spend) will help you achieve sustainable cost reduction with more strategic purchasing.
Segmenting “Major” Spend from “Tail Spend”
For most procurement teams, this can be a daunting task. However, it’s also an opportunity to create a competitive advantage. Companies often make a multitude of purchases, some of which may not be worth the time or cost.
While not a magic pill, many steps can be taken to improve the process and reduce costs.
Some key points to remember include the importance of data collection and establishing a process to follow. This can include a combination of technology and training.
A good way to start is by examining the various spend categories within your organization. This will give you an idea of where to focus your efforts.
Spend in areas such as direct purchasing and indirect purchasing can be especially beneficial.
Reducing the Number of Suppliers in the Tail-End
Companies can reduce the number of suppliers in the tail-end of their supply chain through digital tools and a well-established procurement framework.
This can help them save time and money while maintaining quality and compliance with business policies.
For instance, one manufacturing company found hundreds of duplicates in its supplier list. The team used an algorithm to identify these duplicates and eliminated them from their RFQ.
They found that their costs could be reduced by about 30%. Another example involves a global chemicals company. By bundling materials with strategic suppliers, they can get better prices, less lead times, and reduced quality issues, making stakeholders happy.
However, switching suppliers can be difficult. Suppliers often need approval from production, R&D, or quality control. When a new supplier is brought in, they must understand the product or service’s value to the company.

Leveraging Tail Spend Analysis To Improve Efficiency

Once companies have identified areas of potential savings through tail spend analysis, they can leverage these insights to improve their efficiency.

This can involve renegotiating contracts with suppliers, consolidating suppliers, standardizing processes, and streamlining operations.

For example, a company may renegotiate contracts with suppliers to get better pricing. Or, they may consolidate suppliers to reduce the number of vendors they manage.

By taking these steps, companies can reduce their costs and improve their efficiency. This can lead to increased profits and a more streamlined supply chain.

How To Automate Tail Spend Analysis

Tail spend analysis can be a time-consuming and labor-intensive process. To make it easier, companies can leverage technology to automate the process of spend analysis.

Automation tools can help companies quickly and easily analyze their data and identify areas of potential savings. They can also help automate supplier contract negotiation and data analysis processes.

Planergy’s procurement system helps you with tail spend analysis with our comprehensive spend management tools and spend analysis software. Our tools make it easy to track spending, analyze data, and identify opportunities for savings.

Our tool can be used to support strategic sourcing efforts and help the procurement department maximize budgets while reducing low-value transactions and one-off purchases.

Tail spend analysis is an important tool for businesses looking to optimize their spending and ensure their supply chain is running efficiently.

It can help companies identify areas of wasteful spending and uncover potential cost savings.

By developing a plan for tail spend analysis, analyzing data, and leveraging insights to improve efficiency, companies can reduce their costs and increase their profits.

Automation tools can also make the process easier and more efficient.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Spend Analysis Software page to see how Planergy can empower you to get more value from your spend.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Tail Spend Analysis: What Is It, How To Perform It, and the Benefits appeared first on Planergy Software.

Supply Chain Risks: Different Types and How To Mitigate Them

Lyle Del Vecchio — Thu, 26 Jan 2023 14:38:14 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

Supply Chain Risks: Different Types and How To Mitigate Them

Category

Spend Management

Written by Lyle Del Vecchio
16 min read

Tags

Governance Risk Management & Compliance (GRC)Supplier Risk Supply Chain Management

Last edited

July 2, 2024

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Financial Risks

Risks in this category range from an unexpected change in the exchange rate to supplier bankruptcy. They can include funding limitations, missed or late milestones, and cost overruns and may be linked to changes in the project scope.

This can also include economic instability. Hanjin Shipping, the 7th largest shipping company in South Korea, went bankrupt and caused a 3% capacity reduction in the global supply chain. While that doesn’t sound like much, nearly $14 billion in cargo couldn’t dock.

What to Do About It

Establish an emergency fund to account for changes in exchange rates and cost overruns. Always have another supplier for any mission-critical raw materials in case there are issues of any kind with your primary suppliers.

When working with countries where economic uncertainty is an issue, work on increasing employment in the area with apprenticeships and reaching out to college students about careers in the supply chain.

Legal Risks

These often come from disputes regarding interpretations of contractual obligations, or not meeting requirements in the terms and conditions. Other legal risks include intellectual property misuse, especially concerning patents, civil lawsuits, and law violations.

What to Do About It

Consult with your legal team if there’s any doubt about an action the company or a representative may take.

Environmental Risks

This one is especially important for businesses focused on environmental, social, and governance (ESG) issues. The procurement team must always evaluate environmental risks created by contractors and suppliers.

Environmental risks cover any negative impact on the air, soil, or water due to emissions, discharge, and other kinds of waste.

What to Do About it

Evaluate suppliers based on their practices – paying special attention to any green initiatives they claim to have. Work with suppliers who are just as committed to protecting the environment as you are.

Source what you can from reclamation centers and use recycling whenever possible.

Natural Disasters

Everything from hurricanes to tornados and tsunamis can cause issues for ocean freight. As global warming and climate change cause more frequent and severe issues with tropical storms, it s more crucial to develop alternate routes.

What to Do About It

Re-evaluate using ocean routes and determine the carriers that can increase shipping in anticipation of storms, so you can be flexible enough to scale back operations in uncertain times.

Catastrophes

These include human-made issues, as well as natural disasters that aren’t a result of the weather, such as famine and earthquakes.

What to Do About It

Develop a detailed and solid plan to ensure continuity after a catastrophe. This could include devoting more resources to maintaining operations, using cloud-based tools, automation, and more.

Scope of Schedule Risks

These are most commonly the result of a poorly defined original scope of work, but they can negatively affect project timelines and lead to cost overruns.

Schedule changes may also result from natural disasters, including fire, flood, and hurricane. They may also arise because of noncompliance issues on behalf of the supplier.

Scope risk may also happen because of changes when the original statement of work (SOW) is no longer workable.

What to Do About It

Start with a clearly defined scope of work that all parties agree on.

Meet with involved parties to ensure there is no ambiguity, and have a contingency fund available in case budget overages occur due to something out of your control.

Sociopolitical Risks

When politics and government change drastically, it has the potential to wreak havoc on your current supply chain.

Take, for instance, Brexit, and its adverse effect on trade. Ultimately, this weakened the British pound’s value and created market volatility.

What to Do About It

Even in situations where governments don’t require a strict approach, maintain a high level of compliance across all operations.

Doing so reduces the risk of compliance violations and protects you against the enforcement of new regulations.

Shipping companies should opt to partner with carriers operating outside of the affected governments to handle trades.

Project Organization Risk

Also considered a planning risk, this occurs because you don’t have the right staff or tools in the right place at the correct time.

What to Do About It

Take extra time during the project planning phase to ensure you have a complete list of all the resources you’ll need to be successful with the project.

Consider staffing and equipment needs and what it will take to get what you need where you need it when you need it.

Human Behavior Risk

This is one of the most difficult areas to assess because people can be unpredictable.

Sometimes, a project may be pushed back because of injury, illness, or a key staff member deciding to leave the company. Other times, it could be because of bad decisions or poor judgment.

Beyond this, an assessment should identify internal risks (related to company operations) or external ones (related to conditions outside of the organization that are out of your control).

External risks could be regulatory, market fluctuations, changes in the political environment, etc.

What to Do About It

There’s not much you can do about the external factors, except have a plan to adapt to any changes as they arise.

The best thing you can do is focus on a plan to tackle the internal factors – having others on the project who can step up in the event of someone’s unforeseen absence.

Do what you can to take care of your employees and foster a great workplace culture to reduce turnover rates, and work to fill vacancies as quickly as possible with qualified applicants.

Supplier risk is always there, but using various risk management strategies can help you minimize the impact.

Connectivity

Today’s world is always on, but connectivity between systems can break, causing issues. You can integrate systems in various ways, but the more you integrate and customize, the higher your risk.

Every customization or modification could mean spending more for upgrades, and systems that aren’t integrated well could cause bottlenecks.

What to Do About It

Make sure your system connectivity relies on a secure network. Create data backups and decentralize your data storage. Remove as many system vulnerabilities as possible by encrypting personnel devices.

When you choose to integrate systems, avoid medications and work with experts to maximize efficiency, as this will help boost profitability.

Cyber Attacks

Cybersecurity should be a top priority as hackers could easily bring down your entire supply chain network, if they so choose.

Data breaches are also costly, and could lead to reputational damage on top of the costs of recovering from the attack and securing your systems to avoid future cyber attacks.

What to Do About It

Invest in top-of-the-line encryption and cybersecurity software. Beyond investing in a basic antivirus program, invest in tools like endpoint detection and response.

If you have remote employees, your risk increases, especially if they use their personal devices to access company information. Consider investing in company devices for your remote team to use so you have more control over the information that is accessed and shared.

Invest in cybersecurity awareness training to educate your staff about things like phishing and malware. This way, they know what to do if they suspect they received a phishing email or may have downloaded a suspicious attachment.

If this happens, endpoint detection can isolate the problem before it spreads to the rest of your network.

Transport Loss

The risk of losing goods in transport, or for shippers, losing the ability to transport goods always exists. Though it’s possible for shippers to create stronger networks and back up plans, it’s crucial for organizations to have a plan if the goods they were expecting don’t arrive on time, or arrive at all.

What to Do About It

Always insure your shipments against loss, to give yourself a safety net. Find the carriers that you work with most often and learn more about their contingency plans, and look for carriers you can use should they become unavailable.

Data Quality and Integrity

You need strong quality data for supply chain management, as the wrong data could leave you with missed opportunities and lower profits.

While you should be cautious about a data breach, sharing it with the right partner providers can help you grow and improve your business.

What to Do About It

Always validate your data for accuracy and timeliness because old data is useless. Invest in a real-time data monitoring system, so you can always trust your data and spot issues as they come.

Supplier Consistency

Less than half of suppliers can remain operational after a disaster. Disruption in consistency could happen as a result of any risk becoming a reality.

What to Do About It

The procurement department is fully responsible for supplier consistency, which is possible through a strong yet diverse supplier network.

Supply Chain Risk Management is Essential

No matter how likely any of these scenarios may be, it’s critical to have contingency plans for all of them.

As the pandemic showed us, things happen to shake things up at the global level, and companies that were prepared and could pivot quickly were the most successful regarding supply chain resilience and business continuity.

To avoid shortages, conduct supply chain risk assessments regularly.

These will help you see the most vulnerable areas, so you can create and implement a plan to address the vulnerabilities and protect the organization.

By understanding these supply risks, your procurement team can take appropriate action to respond to these risks as they arise.

Risk management needs to be a part of your company’s plans, and there are a lot of tools that can help you identify the risks that are unique to your organization.

From process improvement to strategic alliances and buffer strategies, the more prepared you are for anything, the better off you’ll be.

Of course, not all potential risks are included on this list – but risk mitigation strategies are a crucial part of success for all businesses.

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The post Supply Chain Risks: Different Types and How To Mitigate Them appeared first on Planergy Software.

Lyle Del Vecchio, Author at Planergy Software

The Future of FP&A: How The Role Is Evolving With The Use Of Real-Time Data

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Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

The Future of FP&A: How The Role Is Evolving With The Use Of Real-Time Data

KEY TAKEAWAYS

Understanding FP&A

Preparing Budgets and Forecasts

Analyzing Financial Performance

Evaluating Business Performance

Providing Actionable Insights

Pros and Cons of FP&A

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High Demand for Skilled Professionals

Flexibility and Autonomy

Growth and Learning Opportunities

Stability

Challenges of Working in FP&A

Accessing Real-Time, Accurate Data

Uncertainty

Pressure and Stress

How Working in FP&A Used to Be

Limited Software

Reliance on Historical Data

Siloed Decision-Making

Reactive Analysis

The Digital Transformation of FP&A

The Future of FP&A

Automated Data Analysis

Leveraging AI and Advanced Software

Real-Time Data Insights

Collaboration Across Multiple Teams and Departments

Proactive and Strategic Planning

The Future of FP&A Has Already Started

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

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