Taking Back Purchase Control as Inflation Soars

Max Kent – VP of Global Procurement at Compleat Software, the purchase to pay software house

Already exceeding 9% in the UK, inflation is set to hit an eye-watering 11% before the end of the year, according to the Bank of England. That’s due to the huge hike in fuel, energy, food and raw material costs, in the wake of the pandemic, Brexit and the war in Ukraine. 

Producer output prices, which measure the cost of goods leaving factories, were up nearly 16% over the year to May – the steepest rise in 45 years, ONS notes.

As economic volatility increases, even the smallest economies by businesses can make a big difference in containing costs and protecting profits. And it isn’t hard to get employees on board if their experience is made easy enough. 

Knowledge is power

Influencing where teams and employees make work-related purchases can have a significant bearing on the bottom line. 

Good purchasing practice starts with visibility. Until an organisation can see, measure, break down and compare its spending, the scope to identify overspending and actively chase savings will be limited. Once spending data is automatically captured and recorded centrally, it’s easier to understand and curb waste and point teams to better deals.

Why pay more?

It wasn’t until one educational trust digitised its purchasing and invoicing that it realised two of its schools had been paying different prices for canteen food supplies. 

By consolidating all of its purchasing information so that it could analyse it more closely, the trust took back control of its spending and was able to flex new buying power to negotiate volume-based discounts. It saved around £500,000 in the first year alone, rising to £1 million annual savings now as it has become smarter in its purchasing. 

In the current climate, this scale of savings just through more strategic spending could have a powerful impact in offsetting sharp price rises.

From ad-hoc spending to smart tendering

Even without a formal procurement team, finance teams can set parameters around business purchasing that allow everyone to take advantage of preferential pricing - so that employees can still buy what they need quickly and effortlessly, but without the worries of overspending. 

Ad-hoc purchasing is common among small and mid-sized organisations, especially today with the easy availability of mainstream online marketplaces. Placing ad-hoc stationery orders via Amazon Business or Lyreco based on what appears to be a good deal is common practice. 

Yet this could turn out to be a false economy next to opportunities to consolidate spending with fewer sources.

However small an organisation might be, there is a chance to benefit from consolidated purchasing by tapping into the right tools online. 

Through our own digital procurement service, for instance, companies could easily save 20-30% on, say, IT-related costs. That’s due to our visibility of what other, peer businesses are paying in specific sourcing categories. Our automated tender process, meanwhile, invites leading suppliers to bid for each requirement with their most competitive offers. 

Alongside the cost savings that are possible with this approach, buyers automatically benefit from detailed spend analysis and reporting – not to mention carbon tracking data linked to their purchases.

Passing spending power & responsibility to departmental heads

This isn’t about making it harder for staff to buy what they need to do their jobs. 

It’s actually about making business purchasing easier and less stressful - by guiding departmental buyers to pre-approved sources and demonstrably better deals. 

In the all-digital procurement scenario, processing transactions is just as quick and efficient as if purchasers were consumers buying from Amazon or eBay. And, because rich purchasing data is fed straight back to Finance, they don’t need to do any follow-up admin.

There’s another big advantage to all of this, too. 

As organisations strive to be greener in their consumption of energy and goods, more controlled purchasing allows employers to encourage greener choices by specifying the sources that teams can buy from. (Research suggests that it is supply chains rather than fuel/energy consumption that account for the largest proportion of a company’s carbon footprint.)

Finally, by empowering individual departments to purchase in a more mindful and compliant way, without the need to seek approval each time, Finance teams can extend greater ownership to the business of their own budgets. 

This will help to free up their own time so that they are able to play a more analytical, consultative and business-supporting role.