The seven habits of highly effective BSM programs
- Vincent Toesca of Coupa drills down into data to explore seven ways that companies can measure and maximize business spend efforts.
In a world where business leaders are under ever-increasing pressure to maximize the value of every dollar their companies spend, more and more companies are prioritizing a comprehensive and strategic approach to business spend management (BSM).
But when it comes to BSM, we at Coupa believe that none of us is as smart as all of us. That’s why we built a next-generation community called Community.ai. By fostering person-to-person connections and adding insights derived from artificial intelligence, Community.ai helps BSM professionals discover deeper insights, exchange best practices, and ultimately make better decisions.
The more than $3 trillion of spend conducted on our platform provides us with a wealth of data. Each year we anonymize and analyze it to create key performance indicators – benchmarks against which any company can measure its own business spend efforts.
This isn’t a survey; it’s real data about how real businesses are improving back-office functions, offering meaningful and quantitative insight into what characteristics the best-performing companies share. This year, we’re highlighting 20 specific KPIs – and you can read about each one on our website – but let’s take a look at seven general areas where we’ve found that high-performers tend to shine.
- Purpose is built into procurement.
Achieving ESG (Environmental, Social, and Governance) goals has become a business imperative of growing importance – and companies are increasingly expected to be able to show measurable impact. Supplier diversity, in particular, is an emerging priority, and best-performing companies on our platform report devoting 24% of spend to suppliers classified as diverse across a range of categories established by governments around the world. These companies are building purpose into their daily operations – something every business is aiming to do.
- Source-to-contract processes are faster and more efficient.
Being able to quickly and efficiently create, access, and implement supplier contracts is a critical element to business spend. We found that, in addition to funneling more of their spend through contracts with trusted suppliers, high-performing companies are able to speed the pace of approval, going from requesting a contract to the contract being signed within an average of 8 business days. No longer do businesses have to choose between delaying the business benefits of new agreements or moving forward without the protections of a contract.
- Procurement processes save time and money.
Our highest performers have left inefficient manual purchase order (PO) processes in the 20th century where they belong, reporting 99% of electronic PO adoption. In the process, they’ve shortened requisition-to-order cycle time to 4.5 business hours. Procurement’s agenda is full of responsibilities that didn’t exist a few years ago, and digitizing the procurement process allows the team to work more efficiently even as they exert greater control over budgets and reduce unnecessary spend.
- Smarter supplier and third-party onboarding drives more successful risk management.
Successful programs are able to cut the time it takes for suppliers to respond to digital requests for updated information to 1.6 business hours, while increasing the completion rate of risk questionnaires to 83%. In all, the third-party risk assessment process is shortened to an average of 37.4 business hours. Bottom line: high-performing BSM programs are able to more quickly and effectively manage the critical risk involved in the relationship between buyers and sellers.
- Digital tools accelerate the invoicing and payment process.
One community member likened their old invoicing process to the scene from Harry Potter where envelopes come flying in through the door. There’s a better way, and it starts with processing more invoices electronically. Our community benchmark is 80% electronic invoice processing, with invoice approval cycle time reduced to 11 business hours. Digital invoices don’t just mean faster processing – they result in fewer mistakes, less fraud, and greater compliance effectiveness.
- Expense reports are approved more quickly.
How quickly? Try 6.5 business hours between an expense report entering the system and the time it’s approved for payment. This is a major time-saver (and, for employees, frustration-saver). Because the process is streamlined, high-performing companies report that 98% of expense report items fall within policy, reducing risk and the administrative burden of manual audits. Smarter expense management can reduce spend leakage, ensure compliance, and dramatically improve efficiency.
- Streamline payments for everyone’s benefit.
Companies still making manual payments are, according to our benchmark report, falling behind the curve. In our assessment, high-performing companies are able to pay 86% of invoices digitally. Streamlining the approval process digitally – to an average of 1.6 business hours – further increases efficiency. Especially as remote work becomes a more consistent element of the business landscape, there’s no excuse for relying on paper-based payments.
These benchmarks reflect the highest performers within our community. But that very community makes it possible for any company to use these insights. Whether it’s increasing supplier diversity, reducing contract management cycle time, digitizing invoices and payments, or creating a smoother process for expense reporting and procurement, the odds are that someone else in your position has faced and conquered that challenge before. Belonging to such a data-driven community offers you the unparalleled ability to learn from their experience.
If we could highlight one more habit of highly effective BSM professionals, it would be the willingness – really, the drive – to learn and improve from the work of their peers. That’s why Community.ai is designed to help you take advantage of unique combination of community insights and community connections. Community can be a powerful business advantage; the one we’re building is rich with insights that can drive value for your business.
To find out more about our Coupa community, join us at our upcoming Inspire Berlin conference.