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UK businesses need 'long-term spending strategies'

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

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