Enacting any transformational change in an organisation’s spend processes is a good deal more involved than simply installing a piece of software that automates away manual processes currently done by finance personnel. That said, achieving a reduction in the cost associated with every spend item is a genuine win, but doing so falls short of the potential benefits that can be won by a fuller overhaul of spend management. That involves a reappraisal of the people, systems and processes involved, a reappraisal that marks the difference between an improvement and a transformation.

The top performers who are able, consistently, to verify and track spending right across a large business are those that set the standard, and these organisations are the ones appearing in the top quartile of the Coupa Business Spend Management Benchmark Report [pdf]. Unlike many business-focused survey papers, the report is based on real-world data and metrics from companies and organisations undergoing a process of transformation involving continuous monitoring and iterative improvement.

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We spoke to Michael Odom, Value Consultant, at Coupa Software, about the report and its implications. The published findings give organisations that need to overhaul their spend processes useful guidance on “what a spend management program should be delivering, regardless of the technology you’re using,” Michael explained. “We see the Coupa Community achieving the amazing results in the benchmark report, and we feel it really sets the bar for finance and procurement teams to see what the right combination of people, process, and platform can bring to their company.”

“When you look at a transformation, you need to make sure that you have the right people in place with the right mindsets to action, and a process that fits in and is right for the business. And the technology ultimately supports both of those areas, it really is a three part equation that you need to get right,” he said.

When a business seeks to change, the technology part of the potential solution is often wrongly thought to provide both the catalyst for and the means to change a company, a misconception that’s common across business functions and not one specifically confined to finance and accounting. Just deploying technology often produces a faster version of the existing undesirable results.

The Coupa report presents 20 KPIs against which CFOs can measure performance in groupings such as ESG, source-to-contract, procurement, supplier management, invoicing, expenses, and payments. By analysing each area and ensuring the resilience of the three P’s (process, people, platform), companies can improve their spend performance. The best performers constantly strive to improve each metric, and thanks to data-based spend management systems, they have empirical information against which they can track progress.

At their most basic, spend management platforms can help prevent mistakes and flag potentially fraudulent spending thanks to rules baked into the software. But traditional algorithms’ yes/no basis for rules may not be appropriate.

“One set of patterns we see as potentially suspicious may be fraudulent activity for one [business] and for another, maybe it’s okay for them. Another great example would be split purchase orders. If I have approval up to $10,000, and I need to go and spend $30,000, it would probably be wrong if I went and raised three requisitions for $9999. Technically, I’m below my limit, […] maybe following the letter of the rules and the policies in place within the system, but I’m definitely violating the spirit of it,” Michael said.

The way to solve for particular use cases is to use cognitive software that learns from and adapts to each company’s patterns of spend, a dedicated AI that trains on day-to-day practice. That’s the premise of Spend Guard, a feature of the Coupa platform that’s helping the best-performing businesses who feature in the Benchmark Report.

“It basically acts as several FTEs (full time employees), when it comes to actually doing audit processes. It’s very difficult for a human to go through and look at all of the activity and all the data that’s flowing through a system – some organisations’ spend could be billions of dollars on an annual basis. It’s just impossible to go through and look at tens of thousands of orders unless you hire a lot of people. And even then, it’s a manual and imperfect solution to a problem that can instead be addressed with AI-based pattern recognition and automation. Spend Guard provides that type of audit capability.”

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Spending doesn’t have to be fraudulent for it to cost an organization. An issue as simple as clerical errors requires staff to manually check records and occasionally chase around the company asking colleagues for clarification. Michael recounted a story of a company in Australia interested in the Coupa platform to reduce costs of that nature. “They identified $800,000 of duplicate invoices. No one was doing anything wrong, per se. It’s just that invoices had been unknowingly raised multiple times. Staff went to enter the invoice and the platform said ‘these invoices are in the system already.’ So they added characters at the end of the invoice filename. Those invoices went through and were paid, and so [the company] had to claw that back. No one was actively trying to commit fraud, but a mistake happened and wasn’t caught until Spend Guard was turned on and detected it. And that’s just one example of where it had been going wrong.”

By resolving inefficiencies in processes and directly saving wasted spend, companies not only see immediate benefits, but the business at large can also improve its performance at a deeper level. “CFOs see activities that are taking place across operations and supply chain, even into areas like HR and IT. Being able to provide information back to those lines of business is important. There’s so much data available through procurement and finance […] for other parts of the business, it’s critical information whether you’re looking at sustainability, or operational efficiency.”

In our next article on spend management, we’ll look at aspects of spending like procurement and ESG and how tying together all the threads of spending can help organisations of any size achieve the type of efficiency metrics exhibited by the best performers listed in the Coupa Business Spend Management Benchmark Report. In the meantime, you can access the (non-gated) report here and learn more about the Coupa spend management platform here. Watch this space.