By Joe Fox
COVID-19 has brought the longest bull market in our history to a crashing halt. The virus – which the WHO now considers a global pandemic – is clouding the economic outlook for millions of organizations around the world.
Is a recession around the corner? Or are we in one right now? We’re already seeing a downturn signaled through business spend. Business sourcing events and international business travel bookings are both down more than 30 percent, and overall business transactions are slowing.
There’s a 100 percent certainty that our economy will also be affected.
While we could never have predicted the specifics of the coronavirus pandemic, we knew the market would eventually turn and economic growth would stall. In fact, this past summer, I wrote about the need to increase profits and efficiencies to guard against the coming decline. My view at the time was this: It wasn’t a matter of if the downturn was coming, but when. That message rings very loud today.
Here’s the reality: It should always ring loud – in good times, the bad and the uncertain. When the outlook is cloudy, organizations with sound spend management and procurement strategies are always best positioned to weather the storm.
Based on my experience, surviving – and thriving – in every economic cycle starts with increasing financial visibility, controlling your spend, reducing costs and becoming more efficient with the little things.
To accomplish this, financial and procurement leaders need to refocus on what’s core: elevating and digitizing their approach to procurement and AP, both as a strategy to defend against a downturn and as a means to spark growth.
For organizations looking to do this, there are many proven steps for getting there. Here are five I consider essential:
- Invest in spend visibility: If you don’t know how much money you’re spending, with what suppliers and for what, it’s impossible to strategically manage your budget. You may think you know where all the money is going – but if your purchasing process is manual, it’s an almost certainty that purchases and savings are slipping through the cracks.
- Modernize, digitize and automate the procure-to-pay process: This includes purchase requisitions and approvals, supplier catalogs, vendor invoice management, accounts payable, expense management and more. Automating these key functions eliminates labor costs associated with manual management and paper-based processes and enables you to track purchase, budget and supplier data in a single platform. This positions you to analyze everything holistically and make smarter financial decisions. It also makes life easier for your team. This makes them more apt to purchase within the confines of your procurement and financial strategy, unlike hard-to-use systems that lead to rogue purchases, maverick buying and higher costs.
- Leverage financial transparency to ask and answer profit-driven questions: Once you can see what’s happening, you can start to make big decisions. Are there areas to cut costs? What about consolidating spend and negotiating volume discounts? How much money are we wasting writing checks? Are we overpaying specific vendors? Are we on-budget or over, and can we really afford that? You won’t know until you look and digitize.
- Lower your total landed cost through digitization: Procurement digitization has proven effective in reducing costs for both buyers and suppliers. The labor and tactical savings – which can be immense – go right to the bottom line or can be reinvested for growth and innovation.
- Take advantage of your most important asset: We’re talking about your people. How would you rather have your team spend its time: manually writing checks and processing invoices, or looking strategically at your budget and P&L? By automating tactical procurement and finance functions, your employees are free to add more value, think creatively and push your company forward.
Here’s another way of looking at it: Modernizing and digitizing your approach to procurement increases profits today and makes your company resilient for the future. Given the current state of the market, that’s a win for every business.
Interested in learning more? Check out our newest report – Rethinking Procurement in the Mid-Market – to get started.
A version of this article was originally posted on LinkedIn.