Most companies have at least one eye on their spending but, all too often, they focus so much on the big purchases that their smaller purchases are overlooked. In this article, we’re sharing some pretty good reasons why it might be the right time to outsource your tail spend management.
What is Tail Spend Management?
Tail spend management refers to the
process of managing the smaller, low-value, or infrequent purchases that typically fall outside of a company’s core buying strategy. These purchases - often the final 20% of transactions - can include office supplies, ad hoc services, low-cost equipment, and so on.
It might seem minor, and even though each transaction is small, tail spend can quietly drain your resources and often makes up a
disproportionate share of inefficiencies, like:
- Lack of supplier oversight
- Maverick (unauthorized) spending
- Missed savings opportunities
- High administrative costs
It therefore focuses on
consolidating,
analyzing, and
controlling this area to improve efficiency and reduce costs.
As you can imagine, these small, scattered purchases often go unchecked, leading to hidden costs and inefficiencies. And when left unmanaged, they can grow into a serious issue.
Outsourcing management offers a smart way to regain control, improve visibility, and save both time and money. Continue reading to find out how it can benefit your business.
How tail spend can send your business into a tailspin
The main problem is that, by its very nature, it tends to be a little ad-hoc. This often means that there’s not much in the way of regulation and centralized oversight - simply because it lacks standard processes and transparent ownership.
For example, when you have multiple departments and teams all making supply purchases outside of any kind of protocols or oversight, it gets pretty hard to keep track of expenditure, ensure compliance and make sure that you’re getting the best prices. This, in turn, can result in fragmented data and / or data silos. To avoid waste through non-strategic purchases, many businesses are now choosing to
outsource their tail spend management for a more efficient and cost-effective solution.
What are the key benefits of outsourcing tail spend management?
There are some pretty compelling reasons for outsourcing, including improved cost efficiency and more streamlined processes.
So let’s look deeper into some of the key benefits:
Cracking your cost control
For most businesses,
keeping costs down is a major priority - and this is one of the most tangible benefits of outsourcing. Tail spend management agencies give you access to procurement professionals whose business it is to analyze low-value purchases to identify overpricing and duplicate spending. They are then able to negotiate better supplier deals and consolidate your tricky tail spending - meaning that you’ll be able to see cost savings almost overnight.
On top of all that, your procurement specialist will continue to monitor and analyze your purchasing patterns and identify trends in order to revitalize your budgeting and forecasting and, ultimately, optimize your expenditure across the entire organization.
Time-Saving and focus for your team
They say that time is money - and they’re not wrong. Second only to cold hard cash, time is one of your company’s most precious commodities - and one that you probably feel that you never have enough of. When your employees are constantly getting bogged down by multiple small transactions, this eats up time that could be put to much better use. Outsourcing frees up your procurement and finance teams for more important tasks thereby boosting productivity and efficiency. This will also improve workplace morale as employees are no longer being distracted by purchasing admin tasks which take them away from their core role in the business.
Managing suppliers through visibility
When was the last time you assessed the performance of all of your suppliers? Thought so. Most businesses simply don’t have the time or the resources to do this; meaning that cash is constantly falling through the cracks due to overspending. A third party tail spend manager has both the time and the technology to track and analyze data from your supplier performance to gain insights into where your cash is going and to identify possible risks.
By building a clear and concise supplier map, your agency will be able to consolidate your purchasing while building and maintaining strong supplier relationships for robust, long-term savings.
Processes, protocols and compliance
I’m sure we don’t need to remind you of the importance of compliance within the modern business - or of the consequences of not adhering to them. A company without standardized procurement policies can quickly become the wild wild west of commerce through rogue spending and broken and incomplete audit trails. A third party procurement provider can bring your procurement policies to heel through clear workflows and approval processes. This in turn improves control, saves you money and creates compliance and clear audit trails for rock solid accountability.
The right tools for the job
I’m guessing that, right now, your team isn’t kitted up with all the latest tech when it comes to purchasing and procurement - and you’re not alone. Many businesses - particularly SMEs - don’t have the budget for the type of digital procurement platforms that an agency will bring to the table. Rather than using up man hours, this clever technology whizzes through repetitive tasks and generates data-driven reports to help streamline your operations quickly and efficiently.
When is the best time to outsource tail spend?
Well, it’s really never too early to start thinking about it! If your team is spending a lot of time on ad hoc supplier requests, random purchases and / or invoice discrepancies, the time to outsource is now.
And deciding to outsourcing sooner rather than later can help you to make the most of limited procurement resources as well as managing a growing supplier base a whole lot better; particularly during periods of restructuring or rapid growth. Outsourcing ensures efficiency, control and compliance while your employees focus on more relevant tasks.
Busting the buying myths
I know what you’re thinking - if I use a third party, I lose control, right? Wrong. In reality, the opposite is true. You’re still in the driving seat when it comes to putting policies and objectives in place - the only difference is that these will be carried out by specialists with professional tools and processes. For you, this means a partnership leading to greater visibility and, ultimately, greater control when it comes to achieving your goals.
Time to pin down your tail spend
If you feel that your business is wasting money on expensive or unmanaged tail spend, there’s no better time to take control. Outsourcing this important operation will reduce costs, improve transparency and free up your existing resources for more important matters - all without needing to make any massive changes to your current procurement model.
Making The Right Choice For Your Business
As an extension of your business, an outsourced partner can help you by:
- Simplifying your operations
- Revealing hidden costs
- Reducing waste
- Gaining a clear picture of your expenditure
With the right tools for the job as well as valuable expertise, outsourcing your tail spend helps you to control big and small purchases and create a long-term plan to keep costs down for good.
And that can’t be a bad thing, can it?
