“But if the budget is balanced, what does it matter?” I say to my patient new husband who has found my hidden stash of lattes. Let’s back up a bit.
There are cost savings to be found when a company knows exactly what they are spending their money on, spend analytics is the tool that allow us to find these opportunities.
I very responsibly make my coffee at home every day, but I LIVE for my Starbucks run on Fridays. It gets me out the door early, the promise of the foamy latte awaiting me (along with my will to live*), and I’m empowered to finish out the week strong. As responsible consumers, we work hard at the budget (#adulting) and are disciplined with our spending in a number of categories (thank you, Mint), but some months come with unforeseen expenses. We hosted friends for dinner, and I had obligations to a non-profit committee meeting that happened to take place in a restaurant, so the food and dining budget was about to enter the “red” zone. And now it’s the last Friday of the month, what’s a girl to do? This latte no longer falls under food and dining, this drink is a “business expense.” Do we really need strategic sourcing for my caffeine habit?
Companies make investments in spend analytic tools and services, and people, to give them insight into procurement opportunities and develop smarter budgets. But we have previously learned that just because you build it, doesn’t mean they will use it. Business units and coffee junkies alike have different reasons for reclassifying expenses to force a budget to balance. When your compliance team (procurement police) runs an audit and they find a vacuum cleaner purchase in the IT supplies spend category they’re going to ask a few questions. Enter the power struggle between the procurement department and the business unit who have conflicting goals.
They tell you marriage is about compromise, and we’re new at this, so it’s going to take some time for us to understand the big picture of our spending. It’s easy for me to justify how getting creative with the micro budget helps me keep things running smoothly, well caffeinated, and I still end each month on budget. We’ve created a new category “I just needed it” aka “Tail Spend” and for now it’s a safe space for us (for me, it’s me, I’ll own up to it) to stash some spending that doesn’t have a great category to go in right now. And the end of the year, we’ll take a closer look to see how many latte’s I need to buy (yes need) to capitalize on the rewards program.
The point is, we can all live harmoniously under the 80/20 rule of spending. Give business units a safe space to house a small amount of spending to be sorted out later. Tell the procurement police to scrub that data hard to look for future category savings that can be strategically sourced in the future. We’ve all got to live a little, so let’s raise our warm and foamy mugs and cheers to working together. Side note, I’m 15 stars away from a freebie!
So, as you embark on your spend analytics journey, we hope that this information will help you. Please reach out to us if you would like to further discuss this article. We’d love to hear about your experience.
*In my new role with Velocity Procurement I no longer require a latte to preserve my will to live. But you better believe I’m getting one anyway.