Are you still facing these procurement problems? We’ve got the answers

Procurement B2B Solutions | AirPlus UK

Managing procurement at a corporate scale is a big task at the best of times.

And when you add into the mix the challenges of increasingly remote workforces, the shift to card-only online services, and the persistent presence of our old friend long-tail spend, that big task can easily turn into an even bigger headache.

If this all sounds familiar, you’re not alone.

AirPlus ran a survey* of key industry B2B procurement professionals in 2022, asking them what was at the top of their wishlist to help them do a better job – and make their lives easier. These were the top four priorities:

1. Automated processes
2. Better control and monitoring
3. Cost reduction
4. Better cash flow

What’s interesting is how interlinked these priorities are when you look at the big picture. You can easily see how solutions could flow from one into the next, for example:

Automated processes = better control and monitoring = cost reduction

It sounds so simple when expressed that way, but the big question for a lot of companies is: where do we even start?

The best place to start is by identifying the key areas that need addressing.

We’ve taken stock of where it’s all at for procurement in 2023. We’ve researched and highlighted the key issues and how you can go about solving them.

So let’s find out what the current common pain points are for procurement teams – and what solutions are available to help them take back control. 

Managing long-tail spend is a challenge

But unfortunately, a big surprise is usually what follows when (or - more likely - if) you get the chance to add up all of those small, one-off, non-preferred, unauthorised, and non-compliant purchases that plague large corporations.

By strategically managing the tail, businesses can save up to 15% of their tail spend¹ .

This is long-tail spend; and it comes at a scale that requires a huge amount of work to manage, while its impact on the overall budget can be relatively low. So you’re probably spending more on managing long-tail spend than it’s actually costing the company.
Companies have a lot to gain from long-tail spend management.

For a lot of organisations, calling their long-tail spend disorganised is an understatement.

Managing long-tail spend allows you to:

1. Collect, catalogue, and simplify your long-tail spend
2. Extract meaningful data

Visibility is the name of the game. Instead of leaving 20% of your budget in the dark, companies that utilise long-tail spend management solutions increase their capacity to know, think, and act in equal proportion.

THE PROBLEM: 

There are three key reasons that long-tail spend is particularly hard for large corporations to manage:

1. The sheer volume of transactions – often around 80% of a business’s total transactions – is far greater than its budgetary impact.
2. Spend can fall under multiple complex or highly specific categories, making purchases difficult to categorise and plan for.
3. It typically consists of purchases made from one-off or infrequent suppliers.

And the common threads that weave through all of these reasons are a lack of data visibility and a lack of resources to even gather it, let alone deal with it. With potentially thousands of invoices to process and the fragmented, decentralised nature of data in an increasingly online, remote world, procurement teams can be easily overwhelmed – finding they don’t have the time, energy, or tools to tackle the problem.

THE SOLUTION:

How do you manage long-tail spend effectively?

The answer lies in finding the balance between strategic leadership and automation.

A productive automated payment solution will help you increase visibility, gain insight into your long-tail spend, and take care of procurement processing for you.

Here are the three steps to getting control of your long-tail spend:

1. Identify the invisible

What does your long-tail spend consist of?

To manage long-tail spend, you must first know the answer to this question. Identify your ad-hoc purchases, recurring payments to non-preferred suppliers, and the requisitioners that may contribute to your long tail.

2. Streamline your processes

Centralise all invoices, contract data, and supplier data with an automated solution that can handle all processing, reconciliation, and data collection. Ensure all payments are processed through this solution.

3. Optimise your operations

With more data visibility and more time to take action, you’re well positioned to make better decisions, negotiate better terms with suppliers, and increase cost savings.

Remember, your goal is to turn an invisible aspect of your budget accounting for around 80% of your administrative burden into an advantage for your business.

The key, then, is a combination of centralised payment information and efficient process management. Long-tail spend is complicated by nature, and emphasising both of these will help to simplify procurement from end to end.

Lacking the methods to make online payments

That new software platform your IT team needs to buy licences for. It only accepts credit cards. Or paying for several digital marketing ad campaigns simultaneously on multiple platforms? That’s a card-only purchase too. And let’s not forget the replacement keyboard a remote worker needs to buy online at short notice? You guessed it, that's a card-only purchase too.

The fact is, traditional corporate payment methods are finding it hard to keep up with the realities of modern purchase requirements. Online platforms, online retailers and online suppliers more often than not now require – not just prefer – the use of credit cards for payment.

THE PROBLEM:

Companies are often simply not equipped for the challenges that modern purchase requirements bring with it. With no centralised or digitalised corporate payment system, they aren’t able to quickly provide employees with the right method to pay there and then.

Which brings us to the equally problematic world of ‘workarounds’. That’s where you’re forced to go well off-piste and find ad-hoc ways to pay for things online.

Some companies ask employees to use their own private credit card and then submit an expense form, or purchase a prepaid card, or even (and this is where fraud teams collectively shudder) borrow a manager’s corporate card.

For remote workers, that could mean sharing card details over communications channels. A massive no for both security and procurement admin.

This is obviously a problem on several levels.

Aside from the fact that these purchases are likely to be outside of policy and compliance requirements, they’re also incredibly hard to keep track of, as they are being made through different channels, by different employees, and with different payment methods.

THE SOLUTION:

This is where virtual cards come into play and change the game.

According to Coupa, pre-approval of PO-backed virtual cards reduced daily transactions by 80% ².

Here are their benefits:

• Virtual cards are able to answer the common issues plaguing the modern procurement scene: the inability to handle quick and secure online payments from multiple requesters and multiple providers.

• They bring a high level of security to the table, especially surrounding online payments. New, unique card numbers with corresponding card information are generated within a few seconds. These can then be locked down for highly specific uses. For example, the purpose, exact invoice amount, currency and period of use can be limited to the exact needs of each payment. They also become invalid after they are used, reducing the risk of misuse further.
• Virtual solutions play an important role in supply chain finance.
  
  

  Unlike other supply chain finance solutions such as dynamic discounting, factoring, and reverse factoring, virtual payments come without additional costs, transaction fees, and third-party intermediaries. They enable an extension in DPO as well as a decrease in the DSO of your suppliers. Superior data quality also greatly improves the reconciliation process, a classic way to save time and money.

  Introducing digital solutions comes with significant benefits for savings, capital, and convenience – but only if harnessed with the right payment methods.

  Solutions like AirPlus Virtual Cards Procurement centralise all diverse payments and bill your company with a single statement, maximising flexibility and putting you back in control of the digital procurement process.

  The richer transaction data of AirPlus Virtual Cards Procurement enable the best of both ends of the payment spectrum – from flexibility and convenience when buying to visibility and control at billing.

Manual data processing no longer cuts it

THE PROBLEM:

In the world of corporate and B2B payments, digitalisation of traditional systems has fed into this growth – opening up vast swathes of transaction information.

In fact, according to the The Hackett Group, 74% of organisations report having a current initiative underway to enhance and further develop data³, insight, and analytics capabilities.

There’s also been an upward trend in the actual number of suppliers – especially one-off and specialised service and product providers – which large companies are engaging with, further adding to the volume of information flowing into already time-poor procurement departments.

And finally, the shift to remote and hybrid working further fragments the sources and types of data – with thousands of transactions being made in thousands of different ways, all in different locations.

And while all of this extra data has the potential to give you greater insight into what’s going on, the sheer volume means that manual ways of processing and analysing that data are simply no longer up to the task.

THE SOLUTION:

This is where centralised and automated Corporate Payment systems can play a role.

Simplified payment can make a significant contribution to streamlining processes in the company which in turn creates efficiencies and reduces costs.

Here’s how to make the shift to better automation:

• Assess your indirect products and services and make sure that you switch to digital purchasing for them all.
• Review your payment methods in use. What are they? Are they effective in optimising your process, control, data and working capital?
• Ask yourself the question: what do you want your payment solution to achieve for you? How can virtual cards enhance your B2B purchasing digitalisation process?
• Identify the data you need in the procure-to-pay process (cost centre, department, merchant details) and which payment method will help best with that.
  
  

Key takeaways

• Centralised and automated corporate payment systems and processes are absolutely vital for taking back control of long-tail spend, which often accounts for up to 80% of the admin workload in procurement.
• Digitalisation of payment methods, most notably virtual cards will immediately solve a whole host of problems encountered with online purchases and one-off payments.
• Having the right tools to manage vast amounts of data will massively reduce the administrative burden increasingly placed on procurement teams.
  
  

Would you like to help your procurement team solve these problems once and for all? Get in touch with us today to find out how we can make it happen. 

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* A total of 238 professionals from different corporations in France, Germany, Switzerland, Italy, Belgium, the Netherlands and Nordics participated in our survey in November 2020.

Sources

1. Long tail, big savings: Digital unlocks hidden value in procurement | McKinsey – McKinsey & Company – Long tail, big savings: Digital unlocks hidden value in procurement, June 2018.

2. Use Virtual Cards To Contain Costs & Control Spend | Coupa - How Virtual Cards for B2B Payments Improve Cash Flow, Capture Efficiencies, and Reduce Fraud, Aug 2022

3. 2021-Key-Issues-Study-VIP.pdf (jaggaer.com) – The Hackett Group – The CPO Agenda Complimentary Research, January 2021