3 Easy Steps for Financial Institutions to Reduce Procurement Spend
Currently financial institutions are more inclined to rely heavily on outside entities even for overseeing core activities such as engaging with customers through contact centers. Although the current growth rate of financial institutions looks promising, several uncertainties can pose as threats. In this scenario, players in the financial space need to analyze ways in which […]
Currently financial institutions are more inclined to rely heavily on outside entities even for overseeing core activities such as engaging with customers through contact centers. Although the current growth rate of financial institutions looks promising, several uncertainties can pose as threats. In this scenario, players in the financial space need to analyze ways in which they can minimize risk and simultaneously maximize their revenues.
For several years financial institutions primarily viewed procurement as a source of savings. The outbreak of the outsourcing revolution further amplified savings opportunities as these companies shifted more work to third-party specialists. However, these moves raised new operational and strategic dangers, which called for the implementation of robust management for financial institutions. As a result, the procurement functions of several financial institutions focus on balancing the twin priorities of value and risk. Here, we unravel three critical steps that financial institutions should consider for streamlining its procurement process and reduce costs:
Step 1: Classify spend data
It is imperative for banks and other financial institutions to maintain an accurate, clean and unduplicated source of data before proceeding with analyzing the spend. As far as data management is concerned, companies face numerous challenges. Some of these challenges typically include lack of standardized data, too much data, and substandard quality of data. Having a clear record of data helps financial institutions to classify data accurately and get a better picture of their average spend.
Step 2: Collect and analyze data
Several financial institutions still rely on manual processes or basic excel sheets to tackle their data despite understanding the value of spend analysis. What these companies need is a classified structure to group and manage their spend data. An ideal spend analysis solution would automate the process of collating geographically disperse data and assigning them in a uniform scheme across the organization. The data classification should be combined with analytics tools that not only read the data but also gives a full picture to the financial institutions regarding their spend. It should also provide companies with suggestions on areas where savings opportunities can be utilized to their advantage. If done in a desired manner, spend analysis offers organizations with item-level visibility that would assist them to create a spend portfolio. The primary function of a spend portfolio is to identify the amount of money spent, in what category and with which suppliers; identify savings opportunities and devise future procurement strategies.
Step 3: Execute on the identified opportunities
Once financial institutions have analyzed their spend data and determined the categories to target for cost savings, they have to prioritize those opportunities and conduct procurement initiatives for each. It is highly recommended that financial companies start sorting their procurement issues with a category where achieving success is easier and has minimum risk. After the procurement department in financial institutions gets through the easy categories and identifies areas for savings, they can expand their efforts and look for new opportunities to employ procurement strategies to save money.