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How to overcome challenges, without compromising growth, in economic uncertainty

  • Written by Mark Innes, Senior Vice President, APJ at Coupa

Rarely, if ever, have CFOs faced a more uncertain economic climate than they do today. In fact, a recently-released Reserve Bank analysis predicts there is only a 50% chance the central bank would be able to bring inflation under control without triggering a recession.

Under such challenging economic conditions, CFOs and business leaders are seeking to mitigate short-term risks, but without compromising longer-term growth or goals. While that may sound like an unrealistic ambition against the backdrop of the most uncertain economic times since the GFC in 2008/9, it's actually not.

Coupa’s Business Spend Management Benchmark Report sought to understand how leading organisations are cutting costs through savings, boosting efficiencies and reducing risk between finance, procurement and supply chain departments. But what did it find? And how — as CFOs try to understand how to improve productivity and profitability, across all facets of their business — can this be achieved?

Boosting profitability and optimising long-term growth

Based on data anonymised and aggregated across more than 3,000 companies and AUD$6 trillion in spend, Coupa’s Benchmark Report revealed how CFOs at top-performing companies are boosting profitability and optimising long-term growth in their businesses. To establish an advantage and build safeguards and contingency into their businesses, CFOs are prioritising platform investments that maximise the value and impact of every dollar their business spends.

The report established 20 community-powered KPIs for best-in-class performance across procurement, invoicing, expenses, payments and ESG. Some of the most impactful takeouts relate to pre-approved spend, risk management evaluation and first-time match rate.

For example, organisations should strive to achieve a high proportion of pre-approved spend, which increases scrutiny on every transaction before it’s committed. It enables organisations to recall and re-evaluate budgets mid-period, which enables them to remain agile. What’s more, pre-approved spend is also more likely to have lower prices and more favourable payment terms. According to our Benchmark Report, industry leaders are achieving a pre-approved spend rate of 95%.

Alleviating risk is crucial, too. Companies, ultimately, are responsible not only for their actions but their suppliers and their suppliers’ suppliers actions too. In Australia, policymakers are consulting on numerous ESG legislations which will introduce new compliance requirements and challenges. Through digital questionnaires for suppliers embedded into the vetting process, CFOs can minimise risk. Doing so prior to onboarding, grants access to supplier risk data for audits and automated third-party risk management. Globally, industry leaders are carrying this out in 99.1% of instances.

To boost agility and eradicate silos, CFOs should combine procurement and invoicing functions. When suppliers can easily attach invoices to already-approved POs through one system, it leads to high match rates. Industry leaders are achieving a 97% first-time match rate. It also improves visibility into upcoming and planned payments, which helps CFOs manage liquidity, and optimise cash flow and working capital.

Visibility into spend

One of the most common problems CFOs come to us with is incomprehensive visibility into company spend. In fact, according to Coupa research, nearly half of surveyed CFOs said this was the case in their organisation. Rather than their business operating in unison, pursuing the same north star and measuring the same KPIs; different teams are using different systems, or worse, a multitude of spreadsheets. Ultimately, without a single version of truth, they’re struggling to transform their spend culture and get every department spending from the same place.

To establish an advantage, CFOs must prioritise platform investments that maximise the value and impact of every dollar spent. While digital technology alone cannot manage escalating costs, high interest rates, and global market uncertainty, the insights, AI and operational capabilities it provides enables businesses to overcome challenges and pursue opportunities. According to our Benchmark Report, organisations have significant opportunities to optimise business spending and cost efficiency through technology, data and a laser-sharp, business-wide focus on KPIs.

Once CFOs have complete visibility into spend — before, during and after the action — they can better control it, and then maximise the value of it. For example, if multiple departments are sourcing a good or service from the same supplier, they can consolidate the contracts and negotiate a discount.

While there is no one-size-fits-all playbook during economic uncertainty, through Business Spend Management software, CFOs are seeing consistent and significant savings. According to our Benchmark Report, industry leaders are achieving a 6.6% savings rate; a significant cost saving that they’re using to weather short-term challenges without compromising long-term growth.

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