Are you hearing things like:
- The Board of Directors saying keep us off the front page of the news?
- The CEO saying manage business risk and reduce the reserve?
- The CFO saying spend less and maintain a fixed annual budget?
- The VP of EHS saying all the above while maintaining compliance?
Despite what you are hearing and regardless of the issues or challenges if it isn’t a bang-your-head-against-the-wall-gotta-solve-it type of problem, it isn’t happening. If it’s a “nice to have” it will never be important enough to change status quo.
Let me give you a couple of examples:
Almost every company I talk to says they could use help with invoicing. Okay, what specifically? “Well, it takes a long time to process invoices, so we don’t have an accurate picture of how our spend affects our reserve.” Why’s that important? “Well, when we do our quarterly reporting, it’s a manual process. We pull invoices out of accounting system, match them up to budgets in spreadsheets across all projects, and then we have to roll it up to see the whole program.” So how much time does that take? Who does it? What could they do instead? Why is this important for you to fix?
You get the picture.
Let’s say for example your spend is $10M/yr. What do you think is the potential savings around processing invoices? You’re getting this done today, but could it be better? Does “better” equal dollars? How much is your inability to quickly process invoices affecting your ability to capture additional value from your supply chain?
For instance, do any of your vendors offer quick pay discounts? They all probably do. I’ve seen anywhere from 2% to 10% for payment terms between 15-30 days. So in my above example, how fast are they paying their vendors? (The answer is 60 days.) What percentage of that $10M is available for quick pay? (Some vendors will only do it on labor costs.) So let’s say it’s 20%—that’s $2M. On the low end, you just found an extra $40,000 a year.
What about the “soft” dollars? They are harder to quantify, but still exist. So with the above example, how long does it take to manually do the reconcile of invoices out of the accounting system and true up against the spreadsheet budgets?. Let’s say it’s two weeks. So when you finally get your report, is the information accurate? No, because your spend information is at least two weeks stale. Is there value in having more accurate reporting? Could you make better decisions? And what could you do with that extra 2 weeks that someone on your team is heads down 4 times a year (300 hours)?
One of our most compelling case studies shows a customer that saved over $980,000 on the internal cost of processing work orders and invoices. Additionally, they captured another $600,000 from quick pay discounts with vendors. Combined with the overall reduction in project management costs, this customer saved $3,000,000 in three years.
Is losing $3M in 3 years a “bang-your-head-against-the-wall-gotta-solve-it” type of problem? If so, read and share this with your team.