Against the backdrop of unprecedented economic pressures, CFOs across Australia are seeking to increase profitability and mitigate risk in order to weather the short-term, and fund their business for the long-term.
However, according to the International Monetary Fund’s latest global outlook, Australia’s economic growth is expected to slow as the global economy as the global economy enters a ‘perilous’ phase, headlined by persistently high inflation and risks of further financial turmoil.
This, therefore, creates a more urgent-than-ever need for CFOs to understand how to improve productivity and profitability, from procurement to payment. While toplines are under pressure, there are still significant opportunities for many organisations to optimise business spending and cost efficiency through technology, data and a renewed focus on KPIs and accelerating performance.
Based on data anonymised and aggregated across more than 3,000 companies and $4 trillion in spend, Coupa’s Business Spend Management Benchmark Report, answers reveals how CFO’s are accelerating performance across ESG, procurement, invoicing, payments and expenses.
Mark Innes, Senior Vice President of Sales, APJ at Coupa discusses some of the key themes.
How are leading CFO’s tackling economic uncertainty?
No two companies, no two CFOs, and no two strategies are the same. However, there are commonalities in the approaches of the organisations best placed to weather today’s economic storm without compromising their pursuit of longer-term growth goals. To establish an advantage, CFOs are prioritising platform investments that maximise the value and impact of every dollar their business spends.
Digital technology alone can’t manage escalating costs, high interest rates, and global market uncertainty. However, according to Coupa’s Business Spend Management Benchmark Report, harnessing digital technology, insights, AI, and operational capabilities, enable businesses to overcome challenges and pursue opportunities.
Based on data anonymised and aggregated across more than 3,000 companies and AUD$6 trillion in spend, the Business Spend Management Benchmark Report provides insights on how organisations can cut costs through savings, boost efficiencies and reduce risk between finance, procurement and supply chain departments.
For example, companies should strive to achieve a high proportion of pre-approved spend. Pre-approved spend increases scrutiny on every transaction before it’s committed. It enables businesses to recall and re-evaluate budgets mid-period, which is critical to maintaining agility. Furthermore, pre-approved spend is also more likely to go through negotiated contracts with lower prices and more favourable payment terms. Collectively, industry leaders have 95% of spend pre-approved.
Mitigating risk is essential. Companies are responsible for the actions of both their suppliers and their suppliers’ suppliers. In Australia, the government is currently consulting on a raft of ESG legislation which will introduce new requirements and challenges for compliance. CFOs can – and should – minimise risk through digital questionnaires for suppliers embedded into the vetting process. Doing so prior to the onboarding process, grants easy and immediate access to supplier risk data for audits and automated third-party risk management. Globally, we’re seeing industry leaders complete this process in 99.1% of instances.
To increase agility and remove silos, CFOs should integrate procurement and invoicing functions together. When suppliers can easily attach invoices to already approved POs in a single system, it leads to high match rates. The best in the business achieve a 97% first-time match rate. This also improves visibility into upcoming and planned payments, which helps CFOs better manage liquidity, and optimise cash flow and working capital.
How can all CFO’s follow the lead?
One of the most common problems CFOs encounter is limited visibility into company spend. Different departments use different systems, or worse, a plethora of spreadsheets. Silos form and a single version of truth becomes impossible to establish. They’re struggling to control and optimise their spend, and ensure every department spending from the same place.
It’s crucial to fully digitise spending processes through a common technology platform. To consolidate spend and financial information and establish a consistent and standardised source-to-settle process company-wide. The result is improved visibility into every dollar spent. Visibility into everything before, during, and after spending money – from sourcing events to negotiating contract terms, creating purchase orders, processing invoices and more. Once CFOs have complete visibility into spend, they can better control it, and then maximise the value of it.
There is no one-size-fits-all approach, but through Business Spend Management software, CFO’s are seeing consistent and significant savings business-wide. In fact, industry leaders are achieving a 6.6% savings rate; a surplus that can be used to improve operating margins, invest in employees or support R&D and M&A. The result of that is a business with the foundation to drive profitability, mitigate multiple risks, optimise cash and payments and operate more efficiently – whatever the economic environment.
