Guest opinion by Carlo Gualandri
Figures show that company insolvencies in the UK soared last year, reaching the highest number in three decades. Furthermore, to this doom and gloom, economists have now warned that its set to get worse.
In challenging economic times like these, organisations can often go one of two ways – severe cost cutting mode, or they can find new opportunities to gain competitive advantage.
In cost-cutting scenarios, long-tail spend (LTS) is often an area that unfortunately suffers. This is the money that organisations spend on things that are critical to agility and ultimately growth but are sometimes not seen as important as they can be low in value and sit outside traditional procurement.
For many years LTS has been seen as a cost-drain and admin headache, and when managed incorrectly this is understandable. However, approached differently it provides an opportunity to unlock real value growth. Here’s why:
Long-tail spend is vital to the running of an organisation because it includes everyday activity. For example, the , something incredibly important and valuable to the organisation but not one that would necessarily require a purchase order to be raised. However, if managed incorrectly, these costs could soon add up, be unaccounted for, and have a big impact on the bottom line.
The reason that many organisations find it difficult to manage these costs progressively and proactively is because it’s often unplanned spend that needs to be paid in advance quickly or paid on the go by many different employees.
But with the right technology in place organisations can be agile to manage such spend and empower employees to make proactive finance decisions – avoiding blockers and missed opportunities (…like an employee without a working laptop!).
Without a real-time view of what the entire organisation is spending, long-tail spend can quickly get out of control, lead to a waste of money, possible abuse and ultimately a distorted view of what is being spent.
With the ability to monitor spend in real time and track transactions as they occur, the finance team can also immediately identify unusual activity or missing information
The default mechanism to deal with this for many organisations has been to fall into the trap of cutting spend completely or putting restrictive processes in place. But this only has a negative impact on opportunities for growth, as it can block bigger organisational activity.
For example, consider the scenario of a production director on a filmset realising critical props are missing – the studio is booked for one day only and actors are already in hair and make-up. The situation requires them to pay for emergency transport and the buying of new props.
If the company was to insist going through a procurement process to purchase, a much larger cost could occur – rescheduling the shoot etc. A different scenario would see an employee or a contractor footing the bill upfront, which could lead to employees left out-of-pocket at month-end, disgruntled at a lengthy reimbursement process, or losing receipts and not being able to claim back at all.
With the right technology organisations can empower employees to spend within a framework that maintains control. By taking a proactive approach to LTS, they can make sure employees stay within budget and the right workflows are in place for approval when the need arises.
With the ability to monitor spend in real time and track transactions as they occur, the finance team can also immediately identify unusual activity or missing information. In addition to this, budget owners can accurately evaluate spend and spot any patterns to plan for in the future. This is ever more important as the organisation looks to the finance team to offer strategic insights for growth opportunities.
These types of frameworks ease the burden on teams through automations, live dashboards, and in-platform workflows that make managing spending less time consuming. Without convoluted processes and inefficient systems getting in the way, teams have more time for strategic and fulfilling work.
It’s important for organisations to understand that cutting long-tail spend costs in challenging economic times can negatively impact growth opportunities. Finding new, proactive ways of managing it will open new streams of value creation and productivity – and with the right technology they can do that and help employees spend the right money, in the right places while retaining control.
Carlo Gualandri is CEO at Soldo
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