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How Much Does Spend Visibility Really Matter to Your Spend Capacity?

Budget cuts, program eliminations and spending reductions should be made to support policy goals, not because you don’t have good visibility into where you are spending taxpayer money.

GovTech – June 2017

Nearly every state and local government entity has found themselves trying to reconcile a gap between their budget and their actual spend. In fact, accurate budget planning is one of the most challenging tasks of government operations today.

The reality is that it can be quite easy to gain complete visibility into historical and current agency spend; the technology exists and is readily available to all public sector, non-profit and education entities. It’s easy to implement and even easier to use. It also integrates nicely with your ERP, as well as the multitude of other financial and operational systems running behind the scenes. That’s because the technology I am referring to is readily built into eProcurement platforms – at least the best ones.

eProcurement technologies aren’t just used for eSourcing or digital contract management. eProcurement solutions empower you to quickly extract spend data from multiple agency systems, because they capture ALL of your procurement activity. They also enable you to conduct a comprehensive spending analysis in real time. Government procurement, finance and planning professionals – along with any other government official with a stake in your agency’s fiscal performance – can have a direct line of sight into the details of every dollar allocated for goods, services, construction and other projects (even grant expenditures, in many cases!). As we like to say at Periscope Holdings: “When you can see, you can save.”

So, yes, your spend visibility does impact your spend capacity. In many cases, overspending could be avoided by leveraging frequent spend analyses during the budget and procurement processes.

Now, before you stop reading – thinking that your agency has a suitable spend tracking system in place and/or that you don’t have any spend management challenges – let me ask you this:

  • Do you know exactly how every penny has been spent within your organization in the last month, quarter or year? Or, could you find out in a matter of minutes or hours if needed?
  • Are you budgeting based on your “best guess” or on historical spend trends?
  • Are you tapping into rainy day funds to keep critical programs afloat and/or appease taxpayers?
  • Did you cut programs this year due to budget limitations? Would you reinstate them if possible?
It is hard to accurately forecast spending levels each fiscal year, or commit to spending cuts in the right areas (i.e., areas of excess/waste), if you have no real clue as to what you have been spending your money on – or why. On the flip side, it is easy to justify certain procurement actions, budget adjustments, resource re-allocations and IT investments once you have the data to demonstrate the potential return on investment (ROI) of each decision. Of course, improving spend visibility improves your transparency capacity as well, which is a top priority of every government agency given the increased accountability efforts launched by taxpayers.

Yet, the tracking systems offered by today’s ERP and homegrown procurement solutions are lacking the tools needed to maintain compliance with fiscal reporting requirements. They’re typically faulted for an inability to aggregate spending data in a way that allows for fast mining and analysis. That makes it hard to audit your fiscal performance and make meaningful budget and buying decisions. Of course, tracking systems can fail when data entry methods don’t support accuracy goals.

If you truly want to improve your spend analysis capabilities, then you don’t just need an easier way to access the data that’s been scattered amidst paper records and disparate departmental systems over the last several years. You need a way to ensure complete data inputs and improve data accuracy during the procurement process, which, subsequently, allows you to obtain actionable information relevant to all organizational functions.

Look for either a standalone eProcurement solution or a hybrid ERP-eProcurement option that delivers data from multiple sources quickly. But, confirm that your managers and decision-makers can manipulate the data just as quickly as they can retrieve it if you hope to extract relative insights and identify strategic sourcing opportunities. Specifically, look for a platform that can:

  • Deliver management reports directly to your decision-makers through a built-in scheduler
  • Get the right purchasing data in your hands fast with ad hoc capabilities for data transparency
  • Support self-service actions and advanced filtering capabilities like Top/Bottom filtering, chart formatting, dashboard exports and tree maps
Remember, eProcurement technologies aren’t just procure-to-pay management solutions. They are also your primary source of insight into what you are buying, from whom and where there are opportunities to save.

Key Takeaway: Budget cuts, program eliminations and spending reductions should be made to support policy goals, not because you don’t have good visibility into where you are spending taxpayer money.  Nor should we be having conversations about wasteful spending, duplicate purchases, overspending or other avoidable issues with such frequency given the availability of eProcurement technologies – which were designed solely to eliminate these issues in a very inexpensive and easy-to-implement manner. It is also unacceptable to “accept” that government agencies face a significant margin of error in their spend analysis given the inadequacy of legacy and current procurement systems to support a 100 percent data accuracy level. In my opinion, agencies that complain about a lack of visibility into their spend are simply using it as an excuse to avoid change. But, the fact is, change is required right now in government “business.” As my colleague Brian noted last month:

We “… need to stop spinning our wheels with ‘business’ processes that are not good for government business. We need to cut our losses on legacy technology systems, as well as some ‘new’ systems that just aren’t working.”

Every agency should be looking for an eProcurement platform that’s able to satisfy their budgeting, buying, cost management and transparency requirements without compromise. There is no excuse to claim a “lack of visibility” into budget and spending gaps as justification for inaction on the social and economic improvement promises made to taxpayers. Government agencies are obligated to enhance resource utilization and enact cost-saving measures as often as possible. With the right eProcurement system in place, you can do just that: eradicate waste and maximize the value of every dollar spent.

Wondering how you will justify such an eProcurement investment, especially if you have an ERP or homegrown system in place? These success stories will help prove your case. Plus, if you are still relying on a legacy technology solution or paper-based processes for your procurement function, it’s time to upgrade anyways.