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UK business needs smarter spending strategies for growth
Industry report finds lack of awareness at board level of spending habits and inefficient supply chains holding back businesses.
Expense Reduction Analysts is launching a report as part of its 'Smarter spending for business' campaign, calling on UK businesses to implement smarter spending strategies to aid their chances of success or survival in 2013.
Rob Allison, managing director, ERA, says: "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 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.
The report has uncovered a series of barriers, blocking financial directors from implementing effective smarter spending strategies.
Short-term spending habits:
- 77% of companies only consider the short-term picture and immediately default to a defensive cost-cutting mentality in times of austerity.
- Only 4% 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% 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% of financial directors 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 financial directors state individual departments are responsible for their own business spending strategies.
- But 58% of financial directors 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
17th January 2013