8 Tips on Cutting Wasted Spend

Let's be honest, 2020 was a tough year. Companies around the world were forced to cut expenditures and really focus on cost discipline because of the COVID-19 pandemic.

Unfortunately, spend efficiency and wasted spend can be notoriously hard to identify and control because of decentralized spending, disbursed ownership within the organization and long payment processes. Luckily, there are ways finance teams can step-up their games and more effectively cut wasted spend. Here are eight tips to help. 

8 tips to cut wasted spend

If cutting wasted spend is a top priority for your organization in 2021, you've come to the right place. Here are eight top tips to help you prioritize cost discipline this year:

1. Build relationships with vendors

Solid vendor relationships are worth their weight in gold. By partnering with the right suppliers and/or service professionals, you'll ensure your business has the means to serve your customers efficiently. The question is, how do you build these kinds of relationships? Here are a few suggestions:

• Prioritize Communication: It's nearly impossible to build a relationship without communication. Talk with your vendors regularly, know which people within the vendor organization to reach out to, share your goals with them, and be honest. By maintaining a solid communication channel, your business will benefit from a long-term partnership.
• Pay Your Invoices Promptly: Late payments can cause serious issues in vendor operations. Commit to paying your bills in full and on time. This will help establish trust and make them more receptive to discounted rates.
• Bring Them New Business: When possible, refer your vendor to other companies. This will help them grow their business. And when they realize who the referral came from, they're appreciation could lead to business benefits for your own company.

2. Leverage real-time reporting

Peter Drucker, a legendary management consultant, once said, "what gets measured, gets improved." By this, he meant that you can't get better if you don't know how.

Real-time reporting will allow you to see what's going on in your business as it's happening. With this knowledge, you can make important adjustments to help cut wasted spend before your finances get out of control.

You should consider dedicating a finance or accounting analyst to put together weekly cash reports that consolidate spend from various payment methods. This report can be shared within the finance team and overall company leadership to flag any unnecessary spend. This will help you catch things before month end reporting.

3. Maximize your software usage and watch out for renewals

Take a look at the software your organization pays for every month or year and how many seats or licenses you’re paying for. Do you use them all? If not, cut back and save money. If your team does use all of the apps it pays for, look for cheaper alternatives in an effort to cut wasted spend.

Software spend, and other contracts, will typically be on auto-renewal if you don’t renegotiate before the deadline. Make sure you are keeping track of key deadlines before it’s too late.

4. Negotiate contracts with vendors

We'll let you in on a little secret: the prices quoted by your vendors aren't set in stone. Unless you've already signed a contract, feel free to negotiate for lower rates.

This is easier to do if you plan to buy in bulk or can commit to a certain annual purchase amount. If your current vendor won't budge on price, consider shopping around. Who knows? Perhaps another supplier will be willing to offer you a better rate. At minimum you’ll be able to use that other offer in your negotiations.

5. Set up effective pre-approval policies

Another way to cut wasted spend is to set up light weight pre-approval policies, i.e. specific parameters that must be met before your company purchases any product or service.

The key is to develop policies that help your organization cut wasted spend, without disrupting team member productivity. In other words, your policy needs to give your finance team real-time visibility over spending and your employees an easy way to make quick purchases.

Our suggestion? Keep things simple and use automation.

For example, you could require teams members to fill out a quick form to request purchase approval. Once submitted, the form will automatically be delivered to the finance team who will use predetermined rules to approve or deny the request. Their answer will then immediately be sent back to the employee who made the original request.

6. Create budget estimates (and stick to them)

Your company's budget is incredibly important. How much money do you expect to earn this quarter? And how much will it cost to drive that revenue? If you can't answer these questions, you need to take time to create budget estimates. Ideally you can also break down the budget to departments so different leaders within your organization know the expectations.

But this is only half the battle. You need to do more than just create a budget... you need to actually stick to it or make reasonable updates once it's made.

Make sure that your estimates are as reflective of reality as possible. Over-budgeting can result in financial issues because it will allow you to think there is more money available than there is. To cut wasted spend, create (and stick to) an updated budget estimate.

7. Evaluate who is doing the work and how it is getting done.

There are many jobs that don’t necessarily require full time employees. Sometimes software or contracts who specialize in a task can do the job better, quicker, and more cost-effectively than full time employees. Evaluate if your team really needs a full time headcount to complete a certain set of tasks or if it can be accomplished with contractors or software. Try investing in tools and automate processes that can be more cost efficient for your company.

Adding contracts and software can help cut wasted spend, and it will also allow you and your team to focus more on what you do best, which is key in business.

8. Choose the right vendor management solution

As we've seen, technology can be a huge help when cutting wasted spend. With that in mind, look at investing in a vendor management solution.

If you're not familiar with this type of tool, a vendor management solution is a software that gives company leaders a bird's eye view of their vendor relationships. These apps often include communication, project, and payment features.

When all of your vendor details can be found in a single app, it will be much easier to judge your expenses in this area and eliminate the unnecessary ones.

Check out this list of top vendor management softwares for finance teams to see which tools would be best for your company.

Wrapping up

If you commit to effectively managing vendors, developing pre-approval policies, and following the other tips listed above, cutting wasted spend will be straightforward and simple — especially if you use a simple but powerful tool like Sudozi.

Sudozi is a spend optimization software that will help you visualize financial commitments, streamline spend requests, and collaborate with budget owners in one place.For a limited time, give Sudozi a try for free today by filling out this form.