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In this guest post, Coupa’s Tyler Chamberlain discusses the benefits of putting in place a procurement operation right from the birth of a business. Get it right, he says, and you could save yourself a lot of pain.
The common wisdom is that when a company gets to between 700-900 people that’s the right time to start working on getting spend under management. When I started as global head of spend management at Coupa in January, the company had just 300 employees. When I told colleagues and former co-workers about my new job, most said congratulations, quickly followed by, "Wow, that’s really early for a procurement organisation to get started."
The thing is, that’s not too early. In fact, in a perfect world, you could get started when you hit the 100-employee mark. Why? Because by the time you get to 700 people, it’s too late. Things are already breaking down. People are starting to feel the pain, and issues are popping up all over the place.
When clean-up is job one
The earlier you start the easier it is to make the business case for procurement. The only downside is that it means you have to wait much longer for the benefits to start rolling in. At that point, you’re bringing in someone whose job ends up being to clean up everything that’s broken, not the sourcing and other strategic activities outlined in the job description.
Since there is a strong chance your company will have to develop an effective process by which it manages spend, why let that break before you do anything about it? Why start with a P2P ’transformation’, which is really just code for ’something’s broken that needs to be fixed’. Why not build a foundation for success from the start?
I’ve been that guy who comes in to clean up the mess, and it’s miserable.
The CFO wants savings commitments. Procurement comes in thinking that its going to be doing strategic sourcing, and working toward becoming a trusted advisor and developing a more nuanced approach to spend.
What really happens is procurement comes in and gets stuck in trying to fix things. The company then isn’t getting the strategic value they want. In reality, there’s likely two years worth of tactical, operational work to do to get to that point.
Off the radar
It seems obvious that procurement should start on this when the company is much smaller. But there will be push-back because in the early stages of development the main focus is on revenue and chasing new business. There will be questions asked as to why the business would bring in new headcount to focus on something that isn’t on the CFO’s radar?
Instead, most companies focus on what is on their radar: the need to pay invoices. They set up an AP department and put just enough of a process in place so that they can pay suppliers.
Despite the best of intentions, it very likely ends there too, and it snowballs from that point to the 800-person company where the supplier data is messed up and you have broken processes and very little control. If an auditor looked at your books, you’d be embarrassed at the very least or maybe suffer more serious consequences.
Foregoing Aeron chairs and artisanal coffee
By the time you get to one or two hundred people you should have somebody looking at how the source-to-settle process is going to grow into a spend management programme.
Forego the Aeron chairs and the artisanal coffee. This has to happen and it’s a lot less expensive and less disruptive to start early.
I’ve done a clean-up operation where there were 600 suppliers that had been paid in the last year or so. Cleaning that data took a couple of days and we did it all in house. That’s manageable.
I’ve also done a clean-up where there were 12,000 suppliers but the company had no processes in place. We had to have an outside firm come in with several people and they spent the best part of six months trying to figure it all out. That’s just one example of how you could have already more than paid for that consultant by starting earlier.
Scalable to world domination
This is a need you will have. It doesn’t matter if your company wants to rule the world or not. Scalability is not a huge concern if growth is taken into consideration.
The processes are more or less the same for a 100-person company to bring on a supplier as for a 100,000-employee company. Be proactive, not reactive. Bring in somebody to help set up all of the interconnected systems and processes and policies, and make sure the policies are reflected in the processes. Then nobody will need to come in and “transform” it because it will work.
Tyler Chamberlain is global head of spend management at Coupa.
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.