Business Spend Management belongs in the board room

"Business Spend Management, in a nutshell, concerns all the processes and activities required to control an organisation's outgoing cash flows except for personnel costs, which usually go through a payroll system. Expenses for temporary labour such as self-employed and flex workers, however, do belong with BSM rather than payroll. After all, they are seen as suppliers," says Tanate.

And indeed, digitising the Source-to-Pay process is a key activity of ISPnext, as reflected in the interview with Maarten de Ru, Director Partners & Alliances at the company. But Source-to-Pay is just one side of Business Spend Management. "Source-to-Pay is, especially in theory, a process. From the start, when a need for goods or services arises, to the payment after the goods or services have been delivered and invoiced. Source-to-Pay includes activities such as supplier selection, contract negotiation, purchase order management, invoice processing and payment.

Business Spend Management is a holistic approach to make supplier relationships, spending and risk management in the supply chain visible and manageable," says Tanate. BSM takes place using integrated software instead of the fragmented tools (so-called point solutions) which each cover only small parts of procurement processes and mostly operate independently of each other - some are used by lawyers to draft contracts, some by the procurement department and some by the finance department." As is the case for sales activities, CRM software was developed to streamline the entire commercial process as well as incoming cash flows. And on the supplier side, there is BSM software which provides integral control of transactions, from the source to payment of invoices (pay).

The importance of Business Spend Management has increased significantly over the last months, argues Tanate. “For years, risks on the supplier side were limited. As an organisation, you just assumed that what you wanted to order was available. If that supplier didn’t have it, another one would.” Supply problems occurred less frequently and did not yet play a critical role in the procurement process. Not even if procurement was approached strategically - and a distinction was made between suppliers that were vital to the business and those that were interchangeable: a supplier was, as a rule of thumb, ready for buyers.

"That is no longer the case. This was evident in recent years when huge disruptions started to occur in global supply chains. As a result, limited availability of goods and services as well as supply problems arose within all kinds of supply chains; shortages were never far away. And since the war in Ukraine, it has become painfully clear that having access to energy, raw materials, food and other goods is not as obvious as we were led to believe. With a huge commercial and inflationary impact as a result.”

Now that the geopolitical and macroeconomic tide has turned, prices of all kinds of goods may fluctuate more than ever (if they are available at all). Business Spend Management makes it possible to move quickly on the procurement side. After all - and here the comparison with CRM is especially illuminating - a company that has its BSM in order has clear insight into all kinds of suppliers, including those with which it has had little or no contact in the past. "Our platform offers valuable insights into all kinds of suppliers, as we enrich the rudimentary information from the ERP package about them: our customers share knowledge and their experiences with each other through the platform, and we also add information from all kinds of external sources such as the Dutch Chamber of Commerce registry and GraydonCreditsafe."

It enables ISPnext's platform customers to negotiate better on availability, quality and commercial terms and conditions, and it improves their agility. ISPnext customers can switch suppliers faster if a disruption occurs somewhere in the supply chain by having all the necessary information at their disposal. “Smart purchasing has always been important and the Dutch can certainly be trusted to negotiate contracts well. Being agile is more trendy and topical than ever. Nothing is certain, which means we should always be prepared for the worst case scenarios."

Another reason BSM is gaining importance is that Environmental, Social and Governemental rules are constantly being changed. All too often, this means that chain liability is given greater emphasis, and organisations can increasingly be held co-responsible for the behaviour of their suppliers. "And they can even be criminally prosecuted if a supplier is found to be non-compliant or less compliant. As a buyer, you’d be happy to know these things. With a good Business Spend Management system, with information on to what extent suppliers are compliant with ESG rules, this is possible.” Hence, the platform also provides supplier information so that customers can avoid being accused of engaging in questionable practices.

All in all, in Tanate's view, Business Spend Management is too important to be left to just the procurement department. "Procurement is often managed operationally and under daily pressure from the organisation."

"Given the strategic importance and complexity of BSM, it belongs in the portfolio of someone within the board. And since BSM focuses on financial management, outgoing cash flows and managing and controlling risks and support through an integrated system, the CFO seems to be the appropriate candidate to take on such responsibility."

This article was produced in collaboration with Financial Management.