Spend Management During a Recession: Planning for the Possible Future
While economists debate the definition of “recession” and go back and forth on whether the U.S. economy is in recession, there’s no denying that rising inflation is taking its toll on individuals and businesses alike. At the end of April, Forbes warned that slowing economic growth has economists worried about what the rest of 2023 might look like.
It’s challenging to project what will happen next for the economy as a whole or for specific markets. But you can take steps to be prepared for keeping your business afloat in a challenging economic climate.
Today, we’re going to focus on ways the procurement department can spearhead spend management and support the company in a tough economy. We’ll mostly be focusing on tips for medium-sized and larger businesses, but NextProcess software works just as well for small business needs (and scales to fit your company size) and you can adapt many of these strategies for small businesses as well.
What Does Your Spend Look Like Now?
If the CFO isn’t already working closely with other departments to understand and manage spend, now is a good time to start. Spending doesn’t just happen within the finance team. Departments across your company have expenses to manage. Getting them all working with the finance team is key to successful spend and cash flow management.
The better the CFO, procurement department, and accounts payable understand the spending needs across an organization, the more effectively they can manage the procure-to-pay cycle.
When was the last time your company audited its own spend management strategy? If it’s been a while, then chances are you might not have complete up-to-date information on who’s responsible for every aspect of spend management, where the money is going, and how it’s being used.
Taking a close look at the current state of your spend management will help you identify what works and what doesn’t. Audit your spend strategy, looking out for things like outdated policies, redundant purchases, complicated procedures, and other places where you could streamline the process.
Make Good Use of Slow Times
No one wants business to slow down, but if it does you can use the extra time to improve your processes. Do the type of spend management audit we just talked about in the previous section. Act on what you learn, using the audit results to strengthen communication and make spend management more efficient.
As you’re working on making your spend management process better, consider updating to a more efficient, cost-effective software system for managing the procure-to-pay cycle. While it might seem counter-intuitive to invest in a new software system when finances are a concern, if you have the money to do it now you’ll be setting yourself up for future savings.
Implementing cloud-based, software-as-a-service (SaaS) systems for procurement and accounts payable is simple and cost-effective. You’ll be able to immediately start expensing the software as an operational expense. The software automates routine tasks like data entry, cross-referencing invoices and purchase orders, and routing payments for approval. This cuts back on processing costs per invoice. Purchasing software centralizes spend management for you, making it easy to eliminate duplicate purchases and reduce maverick spending. You’ll be cutting down on both direct and indirect costs related to spend management.
Plus, the software scales up or down depending on your needs that month. Transactional pricing means you only pay for what you need. If you have a slow month, costs automatically go down in relation to that. If business picks up, the software scales to effortlessly meet your needs. In addition, your IT department won’t need to maintain servers or update software for the new BPA system, so you’ll be giving them time to focus on other tasks.
Align Accounts Payable and Procurement
Historically, procurement and accounts payable operated in silos even though they’re two halves of the procure-to-pay process. The benefits of linking AP and procurement include increased negotiating power when working with suppliers, more efficient sourcing, improved supplier relationships, and better spend analytics.
Automating both AP and procurement using NextProcess software makes aligning them much easier. The way that programs in our software suite work together means you can move seamlessly between the two software programs with just a few clicks. It also means that the software can automatically match purchase orders and invoices very easily. With our automation software, payments on PO invoices are usually processed and paid within 12 hours or less.
Our software also integrates seamlessly with your existing ERP software such as NetSuite, SAP, Oracle, MS Dynamics, QuickBooks, and many others. When you integrate AP, Procurement, and ERP software, you’ll have a robust business process system that enables you to more easily manage cash flow.
Create An Adaptable, Visible Workflow
Having a plan is one of the big things that’s going to help your business weather a tough economy or possible recession. In order to create budgets, forecasts, and business plans for best- and worst-case scenarios, you need to be able to get an accurate view of the current state of cash flow at the company.
More accurate data on past and current cash flow and spend management strategies enables more accurate planning and budgeting. Accounts payable and procurement automation software solutions keep track of every event and change from purchase to invoice intake to payment. The software also makes it very easy to look at this data in real-time and generate accurate reports. With automation software, you’ll have the tools needed to lean into the strategic potential of accounts payable and make a strategic procurement plan.
Are you curious about how NextProcess can help your company optimize spend management? Reach out and schedule a no-strings-attached software demo so you can see exactly how our AP and purchasing software could help your company manage cash flow, take control of spend, and plan for an uncertain economic future. Click here to reach out with any questions you have or to schedule that demo.