Spend management during a recession: the keys to success

In today’s uncertain economic climate, it’s more important than ever for businesses to be proactive in preparing for potential downturns. One way to do this is to manage expenditure effectively.

Pandemics, war, soaring commodity prices and ever-increasing energy prices, not to mention supply problems and lengthy deliveries, are just some of the problems that can prompt you to look for ways to control your spending.

Spend management is the process of controlling and optimising company expenditure, from purchasing to invoice management. By implementing a robust spend management strategy, businesses can not only reduce costs, but also increase efficiency and improve overall performance.

In this article, we’ll look at the key ways in which spend management can help protect your business from the recession and give you a competitive edge. You have the questions, Weproc has the answers!

What is an economic recession?

An economic recession is generally defined as a period of slowing economic growth characterised by a fall in production, employment and income. This is often linked to a fall in consumer and business demand for goods and services. Every link in the supply chain is affected, and this also has repercussions for the companies that depend on them: suppliers, transporters, etc.

In the context of corporate purchasing, the recession can lead to a drop in demand for products and services, which can have a negative impact on sales and company profits. Companies may also reduce their purchases to maintain or avoid a loss of purchasing power, which can have a negative impact on suppliers and manufacturers.

As the company’s growth rate declines, this has a direct impact on its suppliers and partners. As a result, companies often need to adopt purchasing and spend management strategies to navigate through a period of economic crisis.

What is spend management?

The fundamental aim of spend management is tocontinuously improve an organisation’s spending. Unlike cost-cutting – which often involves redundancies, downsizing and other drastic measures – spend management aims to mitigate financial risk while taking into account the wider priorities of the organisation.

What’s more, accurate forecasting of expenditure has a direct impact on your future profitability.

Companies often face obstacles to proper spend management, including complex processes, vulnerability to human error and lack of data visibility.

For these reasons, spend management is best executed with the help of spend management software. Weproc streamlines spend for many businesses, helping them make smarter purchasing management decisions, automate workflows, manage suppliers and more.

Because spend management is becoming increasingly technology-driven, organisations can automate invoicing, payment, contracts, procurement processes and obtain real-time data on opportunities. This contrasts with traditional processes, which typically involve quarterly or annual procurement analysis.

On the other hand, cost reduction is still a fairly manual approach, and is often short-term in the face of a drop in activity. For example, excessive cost cutting in the form of redundancies is risky, as it can lead to labour shortages in the future when the business rebounds and resumes strong growth.

Similarly, closing branches of an organisation in the name of cost reduction can leave it unable to manage production when the economic environment improves. Not to mention the fact that making employees redundant often entails other costs, such as severance pay, re-employment costs and unemployment benefits.

But faced with a possible period of recession, many of our customers have expressed concern about the profitability and overall financial strength of their organisation. In general, cutting costs in times of economic uncertainty is not necessarily the answer.

In fact, many of our customers have been surprised by the return on investment that comes from managing expenses.

Actions you can take to control your spending in a recession

In a period of economic recession, it is essential for businesses to control their spending in order to ensure their survival. To achieve this, specific actions can be put in place. We’re going to take a look at the main things you can do to better manage your spending during a recession. By following these practical tips, you’ll be able to better control your costs and improve your cash flow, helping you to get through this difficult period.

Negotiate better prices with suppliers

One of the most effective ways of reducing costs and improving cash flow is to negotiate better prices with suppliers. By leveraging your buying power and establishing a strong negotiating position, you can often obtain more favourable prices and terms.

To achieve this, businesses need to take a proactive approach to supplier management. This includes researching and identifying potential suppliers, assessing their capabilities and track record, and developing a strong working relationship with them.

By building a relationship with your suppliers based on mutual trust and respect, you can create a win-win situation where both parties benefit. As well as negotiating better prices, you can also obtain more favourable payment terms, such as extended payment terms or early payment discounts.

Streamline your purchasing process

Another key aspect of spend management is to streamline the purchasing process. By reducing the time and resources required to manage purchasing, companies can improve efficiency and cut costs.

One effective way to do this is to implement purchasing management software. This can help automate many of the manual processes involved in purchasing, such as creating requests for quotations,evaluating offers and managing contracts.

By automating these processes, companies can reduce the risk of errors and inconsistencies, improve data accuracy and increase transparency. This can help ensure that purchasing decisions are based on objective criteria and that suppliers are selected based on their ability to meet your specific needs and requirements.

Improve your invoice management process

In addition to purchasing, effective spend management also involves optimising the invoice management process. This includes processes such as invoice processing,invoice approval and payment processing.

To improve these processes, companies should consider implementing pre-accounting software that automatically processes invoices. These tools automate some of the manual procedures involved in invoice management, such asadding, storing, checking and confirming invoice and accounting information.

This can help ensure that invoices are processed quickly and accurately, and that payments are made on time and in accordance with contractual terms.

Monitor and control your expenses

Finally, one of the most important aspects of spend management is monitoring and controlling your spend. This involves tracking your spend in real time, analysing spending patterns and identifying areas for improvement.

To achieve this, businesses need to implement spend management software. This can be useful for gaining valuable insights into spending patterns,identifying areas where costs can be reduced and making more informed decisions about how to allocate your resources.

By monitoring your spend in real time, you can identify potential problems early on and take corrective action before they escalate. This can help ensure that your business remains agile and adaptable, and able to weather any economic storm.

Benefits of implementing a spend management system during a recession

Companies that succeed in controlling their costs are those most likely to weather the financial crisis successfully. This is especially true today, when businesses are facing increased economic uncertainty as a result of the COVID-19 pandemic. Our team has summarised the 4 main benefits of implementing expense management software:

Your cash flow is improved

Improved cash flow is one of the key benefits of effective spend management. By implementing an expense management strategy, businesses can better monitor and control their spending, ensuring that money is used effectively and efficiently.

For example, by negotiating better prices with suppliers, businesses can reduce their overall costs and improve their bottom line. In addition, by optimising payment processes and reducing invoice processing times, businesses can free up cash and improve their overall liquidity.

Efficient expense management

Another benefit of effective expense management is increased efficiency. By automating manual processes and streamlining workflows, companies can reduce the time and resources required to manage expenses.

Businesses can automate purchasing and invoicing processes using spend management software, reducing the need for manual data entry and reducing the risk of errors. This not only saves time, but alsoensures the accuracy and consistency of spend management.

Better decision-making

Effective spend management can also provide businesses with valuable information and data that can help them make better decisions. By tracking spend and analysing spending patterns, businesses can identify areas for improvement.

By analysing spend data, businesses can identify areas where they may be overspending and take steps to reduce costs. They can also identify areas where they may be under-investing and take steps to allocate resources more effectively.

Better relations with your suppliers

Finally, effective spend management can also help to improve relationships with suppliers. By negotiating better prices and establishing more efficient payment processes, businesses can build stronger relationships with their suppliers, which can ultimately lead to better service and more favourable terms.

Effective spend management is an essential lever for businesses looking to protect their operations from recession and achieve long-term success. By negotiating better prices with suppliers, streamlining your purchasing process, improving your invoice management process and monitoring and controlling your spend, you can maintain a competitive edge and position yourself for growth in any economic climate.

Weproc and spend management

At Weproc, we offer a range of spend management solutions that can help your business achieve these goals. Contact us today to find out more about how we can help you recession-proof your business and succeed in the long term.