Future of B2B Payments

It’s challenging to always be on your toes, looking for ways to cut costs. Be it negotiation or automating manual, time-consuming processes, your main focus is always to optimize expenses and improve the bottom line. This comprises 36% of CPOs whose top priority is delivering bottom-line savings. 

Hence, in this post, we will discuss the top 5 procurement cost reduction strategies. We’ll also discuss the process of getting started and ways to improve the procure-to-pay process to ensure procurement cost savings

5 Cost-Saving Strategies in Procurement

Here are the top 5 cost reduction techniques in procurement that you can implement in the short and long run:

1. Reduction in Maverick Spending

Maverick spending refers to expenses beyond the established policy and procurement process. It involves unauthorized purchasing that is either not approved or doesn't adhere to the pre-approved vendors or negotiated contracts. 

Such expenses impact financial and operational efficiency, leading to budget overruns and supplier relationship strain. For instance, an employee purchases office supplies from a non-approved vendor. It can lead to higher costs due to a lack of negotiated discounts and impact the organization's ability to leverage consolidated spending for better terms and conditions.

To reduce maverick spending, you must actively communicate procurement policies to avoid such expenses. You must monitor all the transactions and address any such instances. This requires greater visibility into the spending at each stage and an analysis of how company resources are being used. You will also need to set spending controls based on the company policies to avoid constant monitoring. 

As a result, you gain better control over the procurement process, negotiate better contracts with preferred suppliers, and leverage volume discounts without disrupting the supply chain. This will help you maintain compliance with established procurement policies and save costs by avoiding unauthorized expenses. 

2. Contract Management

Contract management involves reassessing the existing contracts and negotiating supplier agreements. This includes negotiation, execution, and ongoing monitoring to ensure cost optimization.

To ensure strong contract management practices, regularly revisit contract terms, assess performance metrics, and proactively identify areas for improvement. Prioritize negotiation preparation by investing in training for procurement professionals, ensuring they possess the skills to secure favorable terms and adapt agreements to evolving business needs. 

Contract management aids in maximizing the value of agreements, minimizing risk, and ensuring that suppliers deliver as per the agreed terms. It also promotes better relationship management and identifies opportunities for cost optimization.

3. Request Specification

Request specification involves creating clear and detailed specifications for the goods or services that the organization intends to procure. This involves detailing purchase requests and understanding the needs of the teams to deliver what they need and not spend money on unnecessary features and misfit products. This helps ensure suppliers understand the exact requirements, leading to more accurate quotes and better value for money.

To ensure detailed request specifications, involve all the stakeholders in the approval process and get buy-in from each of them. Follow a standardized approval workflow to raise purchase requests. This ensures consistency and gets the maximum information possible. However, it is important to implement customized workflows to suit your business hierarchies.

This reduces the risk of feature overlap and better consolidates the purchases for negotiating more favorable deals. Moreover, the specificity of needs lowers the chances of cost overruns or disputes during the procurement process.

4. Spending Consolidation

Consolidating spending means automating procurement processes to achieve economies of scale. This includes consolidating purchases, standardizing suppliers, and leveraging bulk buying power. Doing so lets you negotiate better terms with suppliers, reduce administrative overhead, and achieve cost savings through volume discounts.

For instance, if you consolidate spending on packaging materials by sourcing from a single supplier, you negotiate bulk discounts, streamline procurement processes, and benefit from standardized materials. This approach reduces costs through economies of scale, simplifies logistics, and enhances overall operational efficiency.

To consolidate spending, conduct a thorough spend analysis, identify opportunities for consolidation, and negotiate with suppliers for better terms. Additionally, implement procurement software to streamline procurement processes. This will give you insights into your spending behaviors and help you identify optimization opportunities. Also, create a cross-functional procurement team to promote collaboration and standardization across the organization. Moreover, ensure proper cross-functional workflows to get stakeholders involved at each stage. 

5. Vendor Diversity

Vendor diversity involves engaging with various suppliers to reduce dependency on a single source. This strategy ensures increased competition, better negotiation opportunities, and improved risk management.

For instance, having vendor diversity enables you to source materials from multiple suppliers rather than relying solely on one. This creates competition among suppliers, encouraging competitive pricing and service levels to mitigate risks associated with potential disruptions from a single supplier. Hence, in the event of supply chain challenges or fluctuations, you get the flexibility to maintain production and minimize the impact on operations.

To ensure vendor diversity, adopt a global sourcing strategy and conduct thorough market research to identify potential suppliers across the globe with clear criteria for supplier selection. Additionally, actively seek partnerships with businesses that bring unique strengths to your supply chain. Moreover, it is important to also regularly reassess and diversify your supplier portfolio to ensure adaptability to changing market dynamics. Fostering open communication to build strong, collaborative relationships with various suppliers is a must

As a result, you get better pricing, quality, and innovation. It also provides a safety net if one supplier faces disruptions or fails to meet expectations.

Three-Step Process for Cost Reduction in Procurement

Before implementing these strategies, go through this strategic process each time you have to hunt down expenses for cost savings:

1. Analyze Spend

Start by conducting a comprehensive spending analysis to understand where the money goes. Use financial records, invoices, and procurement data to categorize and analyze spending patterns. In such cases, having procure-to-pay software helps a lot in getting insights and real-time visibility.

This step provides a clear overview of the organization's spending habits, allowing identification of areas for potential cost savings. It serves as a foundation for informed decision-making in subsequent cost-reduction strategies.

2. Identify the Biggest Expense

Compare across departments or suppliers to identify the largest expenses or categories and spot any unusual expenses. This step allows for targeted efforts in cost reduction.

Discuss these insights with relevant stakeholders to understand why these costs exist and their impact. Also, align the understanding of ‘savings’ with them to avoid unnecessary delays and rejections. It is advisable to align it with something measurable to make it easier to sell the business case and implement the necessary changes. 

For instance, the information technology (IT) department proposes investing in new software that, in the long run, promises increased efficiency and reduced maintenance costs. However, the finance team, focused on immediate budget constraints, may interpret ‘savings’ as strictly short-term cost reductions rather than considering long-term benefits. 

To align understanding, the IT team can quantify long-term savings through reduced downtime, improved productivity, and potential scalability benefits. This ensures both departments share a common definition of ‘savings’ and facilitates a collaborative decision-making process.

Additionally, you can target the smaller spend or tail-end spend as well. It is easier to cut people from making one-off purchases or buying small items on Amazon that another department may have. 

3. Conduct Market Research and Maintenance

Conduct market research to understand current pricing, trends, and available alternatives for the identified major expenses. Based on your research, you can optimize these expenses without impacting the supply chain. This includes incentives such as:

• Use spending data analysis to negotiate improved terms with suppliers. Seek discounts or bundled services to reduce costs without disrupting the supply chain.
• Research alternative suppliers or vendors for the identified major expenses. Assess their offerings, pricing, and reliability to diversify options and secure more cost-effective alternatives.
• Invest in automation to optimize procurement processes, reducing administrative overhead without disrupting the supply chain.
• Analyze inventory levels and adjust ordering practices based on demand forecasts to prevent overstocking or stockouts.
• Regularly monitor the expenses and supplier performance and reassess strategies to adjust optimization efforts based on changing market conditions and organizational needs.

Keep updating this information to stay informed about changes in the market. This ensures that you are well-informed about competitive pricing and industry trends. Additionally, you get the necessary data to negotiate better terms with suppliers, explore cost-effective alternatives, and adapt to market fluctuations, contributing to more strategic and informed decision-making.

How to Ensure Maximum Procurement Cost Reduction

Most companies have procurement processes running on autopilot with standard operating procedures. However, this leads to inconsistent efforts of procurement teams in reducing costs. They have to dedicate hours to analysis and optimization, which can be changed with intentional efforts to ongoing cost savings practices in procurement. 

However, with traditional manual processes, getting real-time visibility and comprehensive insights is impossible. To streamline the process and consolidate the expenses, you must adopt tools that support your cost savings initiative. This means centralizing all the information to build a unified platform for complete visibility and control. 

Pluto simplifies this for you. Not only do you get insights and controls, but you can also create cross-functional workflows to facilitate the collaborative procurement process. You can integrate your entire accounting and accounts payable system onto a single platform and streamline the entire process. As a result, you get real-time visibility and can optimize expenses in time.  

Book a demo to know more about how Pluto fits into your business and helps you streamline your procurement process for collaborative cost-saving efforts.

What is Pluto Card?

At Pluto, we believe better expense management should be within everyone's reach. We solve MENA finance teams' pain points by replacing their business credit cards with Pluto corporate cards to help manage their expenses, saving them time and money.

How do we do that?

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Create Unlimited Corporate Cards

When multiple employees have access to one company credit card, it can be difficult for finance teams and business owners to track how much is being spent and where.

The result: everyone texting the CEO or CFO for OTPs during important meetings.

Pluto makes it easy to create and distribute virtual and physical corporate cards to each employee. Not only does this minimize fraud risk, but it also makes expense tracking simpler for finance teams, CFOs, and CEOs.

With Pluto’s unlimited corporate cards, you’ll be able to:

• Create virtual cards in seconds.
• Receive physical cards in 1-2 days.
• Use cards for vendor-specific cases.
• Assign every employee a budgeted corporate card.

Spend Control

Are you running ads at a cost that exceeds your marketing budget? Are you providing new hires with an allowance to cover the costs of their office equipment and software, or do you offer employees additional perks such as a monthly gym stipend?

Pluto gives you the ability to set limits and take control of your company’s business expenses, hassle-free.

With Pluto’s all-in-one expense management platform, you’ll be able to:

• Assign virtual or physical cards with spend limits.
• Allocate a specific budget towards daily, weekly, or monthly expenditures.
• Create a single-use purchase card that automatically deactivates once it is used.
• Control spending for different departments by allotting a budgeted amount to be spent.

Goodbye overspending 👋🏼

Reimburse In Record Time 

Reimbursements can be a painful process when the end of the month rolls in. Whether you’re scrambling to find lost receipts, trying to match receipts to their expenses, or organizing them in a document, there’s no easy way.

Drag & drop receipts

Pluto makes it easy for employees to list receipts.

Once a business expense is made by an employee, they’ll be able to drag & drop an image or screenshot of the receipt onto the Pluto dashboard.

Yes, as simple as that.

Easily reconcile receipts

Pluto allows you to seamlessly submit your receipts onto the platform. With Pluto, reconciliation is a breeze.

Once a business expense is made:

• Attach receipts to card transactions with just a few clicks.
• Transactions will automatically be categorized.

Add a memo to every transaction.

Get reimbursed in minutes

Waiting till the end of the month to get reimbursed for out-of-pocket business expenses is no longer necessary! 

Pluto gives you the opportunity to get reimbursed in minutes.

Once a reimbursable out-of-pocket expense is made, head to the Pluto dashboard to log the expense and get reimbursed as soon as it is approved.

Get Real-Time Data

Your month-end expense report comes in—and you find that you've spent more money than budgeted. Again.

With Pluto, you can stay on top of your expenses at any given moment.  

By getting real-time data, you can view reports of your company’s spending and ensure that your company’s finances are in check.  

It's simple, Pluto helps you avoid overspending and keep track of your company's finances in real-time.

So what does this mean for you?

• See transactions happening on your cards in real time.
• Receive notifications about every single card transaction, if needed.
• Collect information on which vendors your company is spending the most money with.
• Identify which employees or departments are spending the most.
• Get an overview of the expenses you have incurred daily or month-to-month.

Pluto allows you to adjust if spending has gone off course—and plop some celebratory balloons if it hasn't 🎊!

Integrate With Other Platforms

Every business has multiple platforms, and we know how important it is for them to talk to each other. Pluto's integrations make it easy to get started and ensure you have all the data you need in one place. 

Accounting Integration

Pluto syncs your company's transactional data to the most popular accounting platforms through direct integrations so you can automate your accounting and close books faster.

No more end-of-month mayhem! 😅 

Mobile Wallet Integration

With Pluto, you can add your virtual or physical cards to your digital wallet to make transactions seamless and easy.

We support Google Pay, Android Pay, and Samsung Pay.

What Else Does Pluto Offer?

Pluto gives you the opportunity to scale your business, without having to worry about the smaller details.

No FX Fees

Pluto doesn't charge you any foreign transaction fees for using your Pluto corporate card outside of the UAE.

If your business is expanding rapidly and your team is traveling more frequently, you won't have to worry about those pesky charges eating into your profits.

Or if your company needs to pay for subscriptions, contractors, or freelancers in a different country, you can do so without racking up a bill in FX fees.

Remote teams, frequent flyers, or big spenders, we've got you covered!

Accepted Worldwide

Whether your team is distributed, travels a lot, or makes international payments, Pluto’s corporate cards are accepted worldwide.

Advanced Security & Privacy

Pluto is PCI DSS Compliant. We take the safety of your information very seriously; all your data is stored and processed following the highest data protection standards in the industry. 

Get Started in Minutes

Pluto's sign-up process takes minutes, not hours. By adopting a KYB and KYC process that can be done within a few clicks, you’ll be making transactions in no time.

• Simple application process.
• No credit history is required.
• Fast approvals.
• Instant card access once approved.

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Let us take the hassle out of managing your expenses. Start Using Pluto Today - For Free.

One of your teams discovers a SaaS tool and makes a quick purchase using the company credit card, thinking this software solution will simplify processes and increase efficiency. It seems straightforward at this point—a hassle-free process.

However, this purchase workflow shadows the IT and legal departments. None of them are involved in the decision-making process. As a result, the chosen product never undergoes the risk assessment for security threats and legal regulations. What appears as an elementary and frictionless process becomes a breeding ground for chaos and potential operational disruptions.

This blog post is for procurement teams that wish to understand the SaaS procurement process and streamline the purchases for efficiency. We will discuss the challenges with the traditional approach and how you can overcome these to create a secure and cost-effective tech stack.

What is SaaS Procurement?

SaaS procurement is the acquisition and management of cloud-based software solutions through a subscription model.

As a member of the procurement team, you assess organizational software needs, evaluate vendors, negotiate contracts, and oversee the entire lifecycle. You aim to ensure cost-effectiveness, compliance, and optimal performance of SaaS applications.

Challenges With Traditional SaaS Procurement Process 

The most significant loophole in traditional SaaS procurement processes is the lack of proper approval workflow. Employees purchase suitable SaaS tools by themselves based on self-assessment. While this approach is flexible and saves time, it leads to operational bottlenecks in the long run.

Here is an overview of what happens when the relevant stakeholders aren’t involved in the SaaS procurement process:

Absence of Procurement Team

When teams proceed without involving the procurement team, they introduce several challenges, impacting the following aspects:

1. Cost-Optimization: Without a centralized team overseeing SaaS subscriptions, different departments independently select similar plans, leading to redundant expenses. For example, two teams might unknowingly invest in the same SaaS product for $ 12/month/user plans. However, when consolidated under an enterprise plan, they could get added security features more cost-efficiently.
2. Vendor Management: Vendor management becomes fragmented without a procurement team, as various teams engage with multiple vendors independently. Hence, It becomes challenging to negotiate favorable terms, track performance, and ensure consistent service levels across the organization. This absence of centralized management hinders the organization's ability to leverage its purchasing power effectively.
3. Inconsistent User Experiences: Different teams choose diverse tools for similar tasks, resulting in variations in workflows and collaboration. This lack of standardization hinders overall efficiency and employees' ability to work seamlessly across different projects.
4. Renewal Management: The decentralized approach of SaaS procurement makes it challenging to track and manage subscription renewals effectively. Unintended renewals for underutilized or obsolete SaaS subscriptions ensue, leading to unnecessary costs and potential inefficiencies in resource allocation.

Absence of Legal Team

Legal professionals evaluate and ensure that the chosen SaaS solution adheres to data protection and privacy laws. Also, they help craft and review contracts to protect the enterprise’s interests.

The absence of legal scrutiny leads to inadequate safeguards, exposing sensitive information to security breaches. Moreover, without their input, contracts with SaaS vendors lack clarity, leaving room for misunderstandings, disputes, or unfavorable terms. There's a high risk of violating laws, regulations, or contractual obligations, leading to legal consequences and financial penalties.

Absence of IT Team (Also Known as Shadow IT)

IT professionals assess the security measures of SaaS products. The absence of IT involvement results in security compromise and operational inefficiencies. Let's say the sales team, without prior knowledge of the IT team, independently procures a SaaS product for inbound leads, integrating it swiftly into their workflow. This incident is also known as shadow IT.

But after a few weeks, a technical issue arises. Unaware of the product's existence, the IT department struggles to provide immediate support or resolve the issues promptly. It disrupts the sales team's workflow and raises broader concerns for the organization, exposing the company to potential data breaches or regulatory non-compliance. Moreover, fixing this issue involves potential legal ramifications and additional unplanned costs for IT intervention.

6-Step SaaS Procurement Process 

Each relevant stakeholder reviews and gets an overview of the purchase cycle — this is what a collaborative SaaS procurement process looks like.

1. Identify Need

This step involves identifying the specific software needs of the organization. Departments communicate their requirements to ensure the chosen SaaS solution aligns with overall business objectives. They fill out custom forms that become the procurement team's base to select the right vendor. 

2. Vendor Selection

The procurement team researches and evaluates various SaaS vendors to find a solution that meets the identified needs. At this stage, it aims to find the best vendor that offers functionality and security at reasonable pricing. Factors such as vendor reputation, integration capabilities, and contractual flexibility shape the selection process.

3. Approval Process

Relevant stakeholders, including IT, legal, and finance, review the selected vendor and approve the procurement. This collaborative approach ensures that the desired SaaS solution complies with legal standards, aligns with IT strategy, and fits within the budget.

However, this collaborative approach can quickly become a root cause for internal resentment if you don’t lay out proper approval workflows. A lack of workflow makes departments wait for weeks, while none of the stakeholders has visibility over the process. There is unnecessary back-and-forth communication, and eventually, teams move to the traditional, flexible, yet risky SaaS procurement process.

If delays and friction in approval workflows disrupt your SaaS procurement process, centralized SaaS procurement software helps teams collaborate with minimal friction.

You can create proper approval workflows that define who needs to approve what. You get a no-code workflow builder, where you add if-then rules and make the desired workflow. You can have multiple workflows for different kinds of purchases, including parallel approvals as well.

For instance, a purchase request goes to the line manager, then the finance team, and after that, for a combined legal and IT review. You can have intricate workflows as required to suit your hierarchical structures.

With proper workflows laid out in a procurement automation platform, you simplify approvals. Moreover, a centralized dashboard makes it easier for each stakeholder to get an overview of the process without getting stuck in long email threads. 

4. Purchase and Deployment 

After approval, the procurement team finalizes contractual agreements with the chosen SaaS vendor. They negotiate on pricing models, licensing terms, and any customization requirements unique to the enterprise's needs.

Also, the procurement team ensures that the purchase aligns with the organization's budgetary constraints and financial policies. This step involves securing the best possible pricing and managing payment structures through one-time transactions or recurring subscription models. Further, the procurement team develops and finalizes contractual agreements with the vendor. This step involves clarifying terms and conditions, specifying service-level agreements, and addressing legal or compliance-related aspects.

With the procurement formalities completed, the deployment phase starts. Firstly, the SaaS solution has to be configured to align with the specific needs and processes of the company. This step ensures that the SaaS solution seamlessly fits within the organizational framework.

Secondly, the deployment team collaborates with IT and relevant departments to ensure that the SaaS tool integrates effectively with other applications to have a unified data ecosystem. Moreover, they establish and maintain robust access controls by defining user roles, permissions, and authentication mechanisms to safeguard sensitive data and maintain compliance.

5. Onboarding and Training

Once deployed, the onboarding and training phase ensures employees use the new SaaS tool effectively. This step is crucial for optimizing usage and ensuring that the software contributes to increased productivity. 

Training sessions, documentation, and support materials are provided to familiarize end-users with the features and functionalities. This step minimizes the learning curve and maximizes user adoption.

6. Monitor and Renew

Once users are onboarded and the SaaS solution is integrated into the organization's workflow, the focus shifts to post-onboarding and ongoing management. This stage involves the following:

• Encouraging ongoing user engagement and collecting feedback, where regular communication channels help gather insights into user experiences and identify areas for improvement.
  
• Monitoring the SaaS solution's performance to identify and address issues promptly. The IT and support teams collaborate to resolve technical glitches, ensuring uninterrupted functionality and a positive user experience.
  
• Assessing functionality, user satisfaction, and alignment with business objectives to make renewal decisions. Simultaneously, compliance with legal and regulatory standards remains a significant consideration to avoid potential risks.

Collaborative Effort for Efficient SaaS Procurement

While SaaS procurement seems like a small piece of the puzzle, choosing and implementing it requires attention to detail to avoid operational and financial shocks. Each team needs to work together and help create a secure and cost-effective tech stack for the organization. 

However, collaborative efforts demand a centralized platform to overcome two core challenges — delay and friction. We have shared the top nine procure-to-pay software for enterprises for you to find solutions that transform the SaaS procurement process.