It’s been a crazy couple of years since the start of the COVID-19 pandemic, and businesses sent reeling are still assessing the impact. We’ve seen supply chain interruptions and spikes and valleys in the demand for goods and services. It’s impossible to tell when and if business as usual will resume. So, many procurement organizations are looking for ways to contain costs and eliminate unnecessary expenses. One way to balance the bottom line is to cut down on rogue spending.
What is Rogue Spending?
Rogue spending refers to when a company employee goes outside of their vendor contracts and purchases from someone else. Rogue spending is unpredictable and doesn’t follow established procurement and audit protocols. It can be one of the biggest drains on a company’s profitability, so it’s vital to bring it under control.
Rogue spending by employees is rarely deliberate or ill-intended. It may happen for a variety of reasons:
Perhaps employees don’t fully understand your company’s procurement process.
An approved vendor may not have requested items in stock.
Employees may not realize the full impact of bypassing approved vendors, especially if they think they can find a better deal elsewhere.
They fail to understand the internal costs of expense reimbursement and invoice and payment processing.
Fortunately, there are ways procurement teams can control rogue spending:
First, identify where and when the rogue spending is happening. Measure the extent of the problem and the reasons behind it. Procurement managers need visibility into spending activity.
Limit the ways employees can spend outside of acceptable channels. Restrict credit card and P-card usage to specific vendors, merchant categories, and dollar amounts. P-card use is challenging to measure and control, so many companies no longer use them.
Establish protocols on who can set up new vendors. Make sure the process for taking on new suppliers is established and understood. Even for a one-time purchase, all vendors must be thoroughly vetted and approved before anyone purchases from them.
Technology can simplify the procurement process. According to a procurement insight report, organizations integrating an eProcurement system with their ERP solution can expect to realize:
52% better visibility into company-wide spend data
50% improved control over spending and security
23% decrease in rogue spending
Visibility is the key to effective spend management. An automated eProcurement system will give you transparency into employee spending. An effective e-Procurement system is based on procure-to-pay software equipped with PunchOut catalogs and workflows for approving vendors and department spending.
Benefits of PunchOut Catalogs
PunchOut Catalog isan e-procurement solution that allows customers access to a vendor’s product catalog from the supplier’s website interface. It integrates with your procure-to-pay system and ERP to limit employee purchases to pre-approved vendors, goods, and services.
PunchOut catalog software will improve your business’s purchasing speed and efficiency and help control employee spending. The software is equipped with visibility, spend management processes, secure vendor approval controls, centralized purchasing, and more. The advantage of this software is that it helps your team:
eliminate redundancy and manual processes
improve inventory control
avoid invoice delays
prevent duplicate payments
leverage consolidated spending to reduce prices and purchasing costs
Also, employees can access a user-friendly platform to check on product availability, vendor discounts, and shipping costs. It’s in real-time, so you are always up to date. The modern, intuitive interface encourages employee adoption and results in cost savings.
Automate workflows with PunchOut Catalogs
Automation can bring real-time data to your business. It can reduce processing costs by up to 85% and provide effective data aggregation, enabling procurement organizations to:
Identify the source of rogue purchase orders and eliminate off-contract purchases
Conduct a thorough business-wide spend analysis
Ensure that employees buy sanctioned products at pre-negotiated rates from recognized and approved vendors
It is difficult to reckon the cost of process inefficiencies, but automation will enable significant savings that go straight to your company’s bottom line. Benefits include reducing PO handling, invoice capture, and invoice handling costs. Also, you can reduce AP and procurement administrative support instances and audit costs.
Integrated monitoring tools to control costs and reduce tedious manual tasks
Robust approval management rules based on your unique requirements
Data analytics for real-time insights
A single, comprehensive, intuitive dashboard for viewing KPIs and metrics
Make financial decisions with confidence and intelligence
Give yourself full visibility by implementing an automated e-procurement solution that will help you control costs, ensure you’re getting the best purchasing value, and help you quickly implement policy, approval, and routing changes.
Controlling employee spending is just one component of procurement efficiency that can positively affect your company’s bottom line. By leveraging technology like PairSoft’s procure-to-pay software, procurement departments can meet new challenges and solve legacy procurement issues.
Are you ready to reduce employee spending through automation? Empower your entire team with an innovative procure-to-pay solution that’s easy for employees, effective for management, and powerful for accounting. Contact our experts at PairSoft for a demo.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.