The Expense Reduction Analysts (ERA) on UK businesses to implement smarter spending strategies to aid chances of survival in 2013
The ERA is launching a report on the subject as as part of its ‘Smarter spending for business’ campaign.
Rob Allison, managing director, ERA, said: ‘Organisations must start thinking long term instead of short term. Cutting costs may keep businesses afloat temporarily, but it won’t enable them to compete long-term.”
“A smarter spending strategy, combining effective cost control aligned with development for innovation and investment is the only way businesses will be able to successfully ride this storm.”
The report – based on a survey of 100 financial directors (FDs) from companies with revenues between £10million and £500million in UK and Ireland – suggests businesses are struggling to master the delicate balance between cutting and managing costs to survive today, and investing to grow tomorrow.
Barriers to Smarter Spending
The report has uncovered a series of barriers, blocking FDs from implementing effective smarter spending strategies.
- Short-term spending habits
- 77 per cent of companies only consider the short-term picture and immediately default to a defensive cost-cutting mentality in times of austerity.
- Only 4 per cent plan to increase research and development spending on new products and services in the coming years.
- A lack of ‘smarter spending’ understanding at board level
- 46 per cent of the companies surveyed stated that their company discussed business spending (procurement) at board level only once a year or never.
- Limited internal smarter spending skills
- 4 out of 5 organisations don’t have a specialist team or individual to oversee business spending.
- 52 per cent of FDs feel employees suffer from a lack of time, experience and energy when it comes to securing the best supplier deals.
- Only 1 in 10 respondents felt employees had excellent attitudes to business spending.
- Resistance towards smarter spending from internal departments
- More than 1 in 3 FDs state individual departments are responsible for their own business spending strategies.
- But 58 per cent of FDs stated that some departments have resisted efforts to establish smarter spending practices.
A Smarter Spending strategy – the future
- Next generation smarter spending
- Ensure smarter spending becomes a part of every organisation’s DNA – led from the board room to the shop floor to the supply chain
- Ensure that smarter spending gets onto the board’s agenda
- A smarter spending psychology
- Ensure all staff adopt a smarter spending psychology – just because your staff are good at purchasing core products, it doesn’t mean they will be good at ‘indirect spend’
- It’s essential that internal and external reporting provides accurate measurements and detailed business intelligence to allow the FD to provide strategic guidance for future smarter spending strategies
- Conduct regular evaluations of your supply chain and build closer relationships between your staff and suppliers