Tail Spend Management

Tail Spend translates to lower percentage spend that businesses transact across a much higher number of suppliers. Typically, it is observed that businesses spend on an average up to 20% of their total budget on 80% of suppliers. It also covers maverick spend across the business that is not covered by an organised procurement process sometimes also called Shadow IT, instances being purchases without a purchase order or contract or just one-time purchase transactions. Tracing of tail spend is not easy due to the poor data quality inherent in the process workflow which tends to happen below the radar and hence is best achieved through a professional and independent review.

Problems caused by Tail Spend

Some tail spend may be unavoidable. However, if it goes beyond control it can surely cause problems such as:

  • Lack of sufficient visibility of total spend restricting the ability of a business to base it’s future purchase decisions on reliable data
  • Delays in processing of small invoices due to lack of supporting documents like purchase orders, contracts etc.
  • Missed opportunities to consolidate spend with fewer suppliers thereby accessing volume discounts and forming strategic supplier relationships
  • Unavailability of contracts or documentation to guide in future events relating to current spend such as contract support, renewal, termination or dispute
  • Exposure to frauds through unauthorised purchases
  • Risk of insecure or incompatible IT applications being purchased without the knowledge of IT

How we can help

Mprovate has a pre-tested methodology to help businesses reduce and manage their tail spend. We help in many ways tuned to specific business situations as follows:

  • We define Tail spend in consultation with your stakeholders
  • Our consultants then identify tail spend through a review of your financial & non-financial systems of record and help you capture it on to a database
  • The database is analysed for duplication / redundancy and various risk parameters leading to suitable aggregation & categorisation
  • We then advise on corrective cost optimisation steps to reduce transaction & spend cost
  • We work with senior stakeholders to introduce processes and customised tools that restrict/reduce recurrence of tail spend events
  • We also provide an outsourced Tail Spend Management service to take the burden off your business leaving you to focus on your strategic areas

Benefits of Managing tail spend

As stated above, it may be impossible to eliminate tail spend completely, however by having a Management mechanism in place, businesses can access benefits like:

  • Increase in spend under “contract management” – provides more control
  • Increase in purchasing efficiency through management of reduced number of suppliers
  • Opportunity to win long term cost savings through volume discounts on increased “per supplier” buying resulting from a reduction in the number of suppliers
  • Preventing fraud by introducing robust contract management workflow
  • Increased compliance through uniformity of buying processes across business
  • The data cleansing and classification resulting from a tail spend review increase analytics coverage making it more meaningful and predictive

Please get in touch with us by emailing contact@mprovate.com to discuss how we can help you overcome Tail Spend issues !!