Controlled Performance - a Dream? November 22, 2007
Posted by Esa Tihilä in : Market trends , trackback
I have written about purchase-to-pay process management a few times and highlighted key aspects of it.
For me, controlled performance is the key when running international operations in a publicly listed company. No surprises from businesses means good news. Planned good news are good news, unplanned good news are bad news. Planned bad news are good news and unplanned bad news are obviously bad news.
When I talk to our customers they have increasingly started to analyze their spending and many have taken actions to improve the situation in selected product / services categories by using selected suppliers etc.
According to the latest discussions with our customers following pains still exist: They do not have full visibility on costs and thus results are not fully under the control. And if they are not under control then decisions of cutting costs or investing more may not be the right ones and control of money is lower which may have an impact on compliance.
If businesses want to control their performance, they need to have ways to manage their daily operations and steer them to the right direction in concrete ways, supported by systems. I’ll give you a few examples of controlled performance in purchasing.
Continuous visibility
If you have continuous visibility to your expenditure from an invoice automation system, it allows you to analyze it whenever and lead it to the desired direction. Too often spend analysis is “one off” project where information is gathered and analyzed from various sources and recommendation made but follow up of them requires another round of one off project to analyze data. This is
nowadays too slow and expensive exercise. You need to have a system where spend can be managed daily basis and reports from database frequently basis this is key step towards controlled performance.
Controlled process
Another key aspect to consider is to get budget vs. spend under the control. Following has happened in many corporations: First, people have analyzed their spend in categories, then they have selected certain categories where sourcing has played key role to improve situation by negotiating good agreements. Then how to implement good results of sourcing into action has been the issue. Even there are tools in place it is pretty much dependent on corporate culture how people execute guidance and regulations of procurement.
One aspect what I would like to propose is to use budget control mechanism in the systems where all purchasing updates budgeting system with actuals automatically and when you have reached the level for quarter or month budget then system do not allow purchase go further without more detailed investigation. And if there is a need to make rules stricter or give more budget procurement/finance may do it centrally and it will automatically implemented throughout the corporation.
These are two examples of implementing controlled performance within corporations and helping CPO’s and CFO’s to meet their targets set for them.