Spend Management – A Holistic Approach To Impact Bottom Line Margins

Spend Management A Holistic Approach To Impact Bottom Line Margins

Companies divide funds into two main sections. One, that drives funds "in", becomes revenue, while the other that drifts them out becomes expenses. In hard times, revenues are hard to come, often leading to lower bottom lines. testing times are just a by-product of today's economic conditions. Resulting from rising globalization and immense competition from peers from the same industry, companies need to apply various techniques that increase revenue and reduce expenses. As a holistic approach to combat these pressures, spend management is emerging as a great means to manage and optimize their expenses.

Whether it is finances diverted to procure direct inputs (like raw materials for production), indirect inputs (money spent for office supplies & utilities), or services (employee wages, print services etc.), companies need to find new ways to cut costs in order to fund business growth and enhance profitability and cash flow.

Senior management of every company is under immense pressure to improve procurement and sourcing effectiveness. It involves various approaches to cut operational and other costs associated with a business that typically arise as material procurement, general and administrative costs.

It is mainly mid-size organizations that are not organized to successfully control expenditure through indirect material and services cost cuttings. In fact, there are only a few mid-size companies which really know how much funds they actually divert to products and services procurement. This lack of information marginally affects company's bottom line, often reducing it to lower levels.

Spend management helps these companies to first analyze their actual fund flow and then suggest means to increase earnings per share to protect operating profits. Strategic sourcing initiatives and supplier management are key elements of spend management.

Strategic sourcing initiatives are aimed at increasing procurement efficiency and applying the best practices to procure products and services to drive significant savings. It emphasizes on consolidating the full life-cycle costs of product procurement and industry best practices for better supplier management to achieve better standardization and improvements in costs, quality and delivery schedules. Strategic sourcing initiatives result from teamwork and purchasing skills through sharing information on various products and markets.

However, it is time for next wave solutions for effective spend management that ensures overall success of a company's spend management program by helping sourcing professionals analyze their expenditures deeper and wider, plan strategic sourcing and source easily and completely.

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