Everything is bound to experience change at some point. This is a fact that as a business owner you cannot ignore. Business changes and you more often then not you need to adapt to these changes. The mode of operations for businesses has changed significantly with the introduction of the internet. Global presence, seemingly impossible before, is now a swift reality.
In spite of these positive impacts, we cannot help but notice that there are improvements to be made, particularly in the area of procurement cost savings. Most, if not every business is in need of services and products on a constant basis to meet their operational targets.
For this to happen, they need to formulate an appropriate process for purchasing these necessities to maximize every penny spent. More often than not, this has a significant impact on a business’s profitability, performance in the midst of competition, efficiency, and even longevity.
According to a report from Deloitte, 79% of Chief Procurement Officers insist that procurement saving is their major priority. But how true is this statement with regards to saving operational costs?
Post-Pandemic Procurement Savings
We can not deny the impact the global pandemic had on the commercial world. While some businesses struggled to stay afloat, others hit pause and waited for when the economy became favorable to start over again.
But as we navigate towards a post-pandemic world, you can not help but notice the slight hike in the cost of services and goods. Thus, the need to manage your expenses and financial stance is now more important than ever. A holistic approach towards procurement savings is essential to boost your short and long-term goals.
More often than not, there is always a slight discrepancy between what the procurement team announces that it has saved, and the figures displaying on your P&L. Finance and procurement numbers do not always match.
This is a problem for most procurement officers as their credibility is constantly questioned. More often than not procurement officers also believe they are receiving best pricing when in reality it is quite far off from ‘market pricing.’
This is why Expense To Profit was started. To help alleviate and make saving costs a reality for small and large businesses.
Why the Numbers Are Not Adding Up
Procurement and finances are two separate entities that are work hand-in-hand. While procurement savings deals with the reduction of the historical paid prices. Finances focus on the overhead, cost of goods sold, SG&A against budget made.
Then again, not all procurement savings can be calculated with historical prices. There are several reasons behind this:
- New commodity. When a new service or product is sourced and purchased, there is no background spend and information. The commodity has not been purchased before by the business. Of course, this is going to impact the expenses during cost evaluation. A lot of businesses do not realize this and this is why it is a constant problem.
- Specification changes. If your business, as a result of marketing, changes specifications for your services, this is bound to affect your procurement savings. No surprises there.
- Global prices. We need to pay attention to the fact that a shift in the global economy is going to affect local prices. For instance, oil prices are bound to affect oil derivatives such as plastic. As long as global prices of raw materials increase, you can be sure to notice these changes in costs.
How Can You Reconcile This?
The fact is your procurement team may be working around the clock to ensure expenses are reduced. But they may be neglecting a lot of areas that you can save upon.
Expense To Profit is here to help your business grow. We can be that extra pair of eyes you need to identify and review the areas that may be zapping your projected profits. As a company with a wealth of experience, we will review your procurement, expenses, and other financial records. Through our spend analysis process and our network of some of the most experienced professionals in their fields we will find your business unrealized savings.
We WILL show you how you can achieve actual ‘market pricing’ using data from over 25,000 audits and recoup your lost profits. After which, we will present the changes to be done and track them over the extent of our relationship. These changes may be equal or better to what you are already implementing. But the bottom line is that you are going to experience a significant profit margin.
Expense To Profit is here to help your business thrive as we have done for several businesses—helping them cut down their expenses and improve their profits.
Reach out to us today and start saving.
Published by Marc Freedman
Marc currently serves as our Chief Cost Evaluator, expertly advising our client management team on how to help you successfully achieve your business and financial growth goals. A respected mentor to all he consults with, he is an avid collaborator and contributor to the spend consultant community, guiding thought leaders to formulate, design, and install the best operational solutions available to their clients.