Seth Catalli is chief revenue officer of Palo Alto, California-based Globality, which provides technology designed to help companies optimize how they spend their money. Views are the author’s own.
Financial planning and analysis managers are under heightened pressure to step up their contribution to the finance function and the larger organization in the midst of macroeconomic uncertainty.
Effective management of financial resources is vital for the sustainability and growth of any organization. FP&A managers play a pivotal role in making all that happen by their critical support of the major corporate decisions of the CFO, CEO, and Board.
Core to the FP&A contribution is their expertise in budgeting, forecasting, and analyzing financial data to drive intelligent, strategic decisions that not only enhance efficiencies and cut costs but also help enable company growth.
FP&A leaders looking to deliver increased results in the year ahead need to be open to exploring new tools and strategies.
We’ve all been schooled that the only practical way of reducing overhead is to look at things like squeezing the supply chain or trimming head count. The former doesn’t deliver that much value in a context of rising prices. On the people costs front, unless you put serious work into redesigning business processes you’ll end up outsourcing the work, so it’s not necessarily the most effective cost-cutting move ultimately.
A better option: optimizing your indirect spend. This is a strategy that has historically been less favored as a vector for significant cost rationalization, but actually it should be a priority. After all, most companies spend significant money on items that aren’t supply chain-related: technology, marketing, people and facilities costs, real estate, and so on. This spend falls into a category called “indirect spend.”
Corporate indirect spending grew 7% each year globally between 2011 and 2019, according to McKinsey. Yet, the details (and ways to manage it better) are sucked into a kind of amorphous accounting black hole. Luckily, technologies like AI have given us the ability to fix that problem.
Indirect spend is an area that is perfect for radical automation — the kind that can lend itself to huge cost cutting, when the right tools are applied. The introduction of smart sourcing technology that introduces machine learning into decision-making has made the leap forward possible.
Leaning in and embracing the push to indirect spend and sourcing optimization will enable the FP&A manager to automate company spend management, meaning finance teams have greater insight into how and where an organization spends its money. Patently, this not only aids short-term planning but also helps you guide CFOs and leaders to make more informed, long-term strategic decisions.
Automating the spend management process means that FP&A managers can easily track spending patterns, identify cost-saving opportunities, and implement cost control measures. For example, Globality’s AI-powered platform has been able to help customers automate outdated buying processes, delivering cost savings of 10% to 20% and efficiency gains of 70%, on average.
If you’re an FP&A manager at an organization where spend management automation has not been a priority, you have a unique opportunity to partner with your CFO and others to bring transformation this year. By becoming such a change agent, you can significantly boost your contribution to the finance team while helping the larger organization to achieve better business outcomes.