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Effective management of financial resources is vital for the sustainability and growth of any organisation. The Financial Planning and Analysis (FP&A) manager plays a pivotal role in making that happen through their critical support for the major corporate decisions of the CFO, CEO, and Board.
The FP&A’s core contribution is their expertise in budgeting, forecasting, and analysing financial data to drive intelligent, strategic decisions. These decisions can not only enhance efficiencies and cut costs but also help the company grow.
Right now, FP&A managers have a unique opportunity to amplify their contribution even more. It lies in leveraging automation across the organisation’s overall spending management model to drive better business outcomes. Doing so will also increase their own impact and influence.
Focus on Your Indirect Spending
We’ve all been taught that the only practical way to reduce overhead is to look at things like squeezing the supply chain or trimming people costs. However, in today’s uncertain economic environment, a better option is to optimise your indirect spending. This strategy has historically been less favoured as a vector for significant cost rationalisation, but it should be a priority. After all, most companies spend a lot of money on items that aren’t supply chain-related - their technology, marketing, people and facilities costs, and so on.
P&L statements place indirect spending between 20 and 40% of revenue1. When you think about it, that’s a suspiciously broad spread. The finance team struggles to get genuine numbers in this area due to the complexity and bespoke nature of many indirect expenses, such as legal services or consulting.
Finally, new technology has given us the tools to solve this challenge. Provided you have the right tools, your company’s indirect spending is the perfect area for radical automation and, therefore, equally radical cost optimisation. So, how would it be best to automate your company’s spending model?
Be Bold and Embrace Automation
Standard Change Management thinking would complement starting small with pilot projects to test and refine before scaling up. It will allow you to embrace this new way of working across your finance and procurement functions and mandate the use of user-friendly, consumer-like sourcing technology for all purchases over a certain amount.
Leading UK-based telecom provider British Telecom did just this. As a result, they have enjoyed double-digit cost savings across more than £3 billion of indirect spending over the past 12 months, driving new efficiencies across their purchasing model while avoiding overbuying and reducing speed-to-market2.
Automating your company’s spending management model will enable the FP&A manager to:
Drive better company decision-making
Automation means finance teams have greater insight into how and where an organisation spends its money. It not only aids short-term planning but also helps you guide CFOs and leadership teams to make more informed, long-term strategic decisions.
Increase overall organisational productivity and efficiency
Time-consuming manual sourcing processes eat up too much time that could be devoted to spending management work that moves the needle. Automation will also enable you to help your procurement colleagues do more with less.
Add more value
With those time and resource savings, FP&A managers can focus on more strategic activities such as Scenario Planning, financial modelling, and providing intelligent insights to the CFO.
Introduce significant bottom-line savings
Automating the spending management process means FP&A managers can easily track spending patterns and identify cost-saving opportunities. It will allow FP&A professionals to deliver 10-20% cost savings of all indirect spending from day one and increase ROI up to 20x.
Automated spending management platforms include built-in compliance checks and guardrails, which ensure that all purchases align with corporate policies and regulatory requirements. Consequently, it reduces the risk of non-compliance financial penalties.
Stand Out from the Crowd
According to McKinsey3, next-level FP&A managers stand out from the crowd by identifying the critical factors that will have a material effect on the business. They explicitly link those factors to financial performance with data and participate in decision-making. If you champion spending management automation, you will likely be marked out as a finance leader with strategic vision and leadership skills.
The path ahead is now clearly lit for the FP&A manager. Seize this huge opportunity to make a huge impact within the finance function by learning more about the potential of spending management automation. You can build a business case to take to your CFO, highlighting the ROI of 15-20% cost savings on your company’s indirect spending.
Engage with your colleagues in procurement to discover how much indirect spending they manage annually. It is crucial to ask them what percentage is ‘unmanaged’, meaning not competitively sourced. This will give you an instant idea of the savings you could offer up to your CFO as a result of automating the indirect spending management model.
Armed with these figures, take the lead on the program to digitise and transform the business’ buying process through AI-powered automation. Expect to enjoy the appreciation and recognition when it delivers substantial returns from day one.
- CORTESE, Fabrizio. “Indirect Spend: Do You Care of Your 15 to 30% Company Total Revenue?”. LinkedIn. July 22, 2015. https://www.linkedin.com/pulse/indirect-spend-do-you-care-your-15-30-company-total-revenue-cortese
- Globality. Customers. Globality.com. https://www.globality.com/customers
- EKLUND, Steven, KANG, Samuel, TAM, Michele, XIAO, Leon. “Putting the “A” back in FP&A”. McKinsey. March 17, 2022. https://www.mckinsey.com/capabilities/operations/our-insights/putting-the-a-back-in-f-p-and-a