"When recession looms the first course of action for most FDs is to review how staff are spending money on goods with no direct link to profitability, such as office supplies, print and travel, for the best opportunities to improve their bottom line.
"But how can a finance director hope to save money in a department when they don’t actually have a clear picture of how the money is being spent in the first place? This can often be the biggest challenge for FDs managing a number of distributed offices where staff have varying levels of skill at negotiating prices from site to site, and differing requirements for commodity goods depending on their operational needs.
"As soon as the economy starts affecting business spend, suppliers become fearful and it is at this time that purchasers are in their strongest position. Most companies spend large amounts of money on commodity goods but are unaware of how they could easily save at least 10 per cent and upwards on these areas.
"Our figures show that for a typical company with 1,000 people, by simply reviewing commodity goods such as office supplies on an ongoing basis it is possible to save up to £25k. This poses the question to FDs – are you prepared to lose a member of staff or simply reign in your commodity spend?
"When faced with a homogenous bill for ‘stationery’, it is impossible to differentiate in terms of spend between the essential, the excessive, the wasteful and the downright dishonest. While it is not uncommon in companies for the odd biro to go missing from the stationery cupboard, the cost of petty pilfering can escalate if it goes unchecked and becomes a ‘gateway’ to more expensive thefts such as batteries or printer cartridges, which staff can tend to view with the same lack of significance.
"So how can FDs really get a grip on this kind of spending? The key has to be the level of visibility at the point of purchase, rather than in terms of inventory or stock control. Managers need to know who’s buying what, from where, when, how often, how much, and for what reason. Unfortunately, this information is not readily available in any sort of analysable format from traditional commodity suppliers and, when purchases are normally made from multiple sources, it would be impossible to collate this data efficiently anyway.
"Software solutions, such as the web-procurement hub that’s part of our offering, can help as they assist in implementing standardised commodity purchasing policy and practise, which gives the FD a complete picture of the commodity spend for the business.
"Technology is not just a remedy for times of crises, but should be viewed as an essential application easily integrated into the working life of any busy UK company at any time. With the gloom of impending recession drifting in from the US, it just so happens that now has never been a better time to start thinking about using it."
*Richard Ingram is FD of OCG
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