Having a dedicated supplier management function or an individual who manages suppliers as their full time job is a luxury that few SMEs can afford. One of the first things we do when working with a new business is to work with finance teams and other functional owners to better understand the supplier cost base. There are a number of benefits to running this analysis and they include:
Generating a better view of cost control within the business. Where there are multiple staff who own contractual relationships with customers, including the payment of bills, it can be an indication that there is minimal cost control involved with setting up new supplier arrangements. Being tight on the approvals required to set-up new supplier arrangements minimises the risk of duplicative services and excessive spend.
Having a clear view on contract end dates. Knowing when a contract is due for renewal better positions you to have a commercial discussion with a supplier. Sleepwalking into auto-renew periods means not being in a position to negotiate pricing structures or access to new products. Entering commercial discussions ahead of a break period gives more power to you, discussing commercials at a point where it’s already too late to move away from a supplier gives them all of the leverage.
Understanding which suppliers and subscriptions are under utilised. Historic supplier arrangements and subscriptions may renew unchallenged, if a product is no longer used or you’re paying for excessive license coverage then this is a cost that can be re-focused to strategic investment in the business.
Where rivals are focusing on growing revenues above all else, focusing on your cost base can put you on strong footing to invest that money elsewhere in the business or to increase cash flow within the business.