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SOURCE

Payables

Your accounts payable system contains the most complete and reliable source of what was spent on goods & services and with whom. However, without transformation of the raw payables data, your accounts payable data does not provide a sufficiently complete, accurate or granular profile of your spend for the procurement function's purposes. To avoid analysis that is misleading, or overstates the value of spend that can be influenced by the procurement or sourcing teams, there are several data issues that need to be addressed including:

  • General ledger, departmental and subjective codes are designed for financial reporting rather than supporting decision making for procurement purposes
  • Coding of payments to general ledger account codes is driven by the budget to which funding has been allocated which may not be consistent with the true nature of the goods & services purchased.
  • Allocation of payments to subjective or cost codes is prone to error as the invoice may not provide sufficient information for the payment to be coded accurately.
  • The accounts payable system will contain significant numbers of payments that are not relevant for procurement's purposes but are difficult to accurately identify and remove.

Purchase Orders

Your purchase order system will usually contain a more detailed and granular record of the goods & services purchased by the organization than your accounts payable system. However, without transformation of the raw purchase order data it does not provide an accurate or fit-for-purpose profile of your spend for the purposes of analysis by the procurement or sourcing teams. To avoid analysis that is misleading, inaccurate or significantly understates the value of spend that can be influenced by your procurement or sourcing teams, there are several data issues that need to be addressed including:

  • The purchase order system generally provides useable data for only a small proportion of the totality of spend on goods & services.
  • Coding and classification of the goods & services purchased is incomplete, inappropriate or inconsistent – particularly for the substantial majority of typical public sector purchasing that is not a commodity or that can not be purchased from a catalogue.
  • Descriptions of the goods & services purchased are often incomplete, inconsistent, lacking structure and unhelpful in attempting to determine what was actually purchased

Purchase Cards

The use of Procurement or Purchasing cards to more effectively manage small and one-off purchases is becomingly increasingly widespread. Analysis of purchase card data has the potential to provide useful insights into tactical purchases of lower value. However without transformation of the raw purchase card data spend it is difficult to reconcile the detail with your accounts payable system and is thus, in effect, invisible. To generate meaningful analysis of your purchase card spend there are several data issues that need to be addressed including:

  • Coding and classification of purchases to support decision making for procurement purposes such that it can be reconciled to the accounts payable system.
  • Identification of those of your vendors that are merchant enabled but where you are not currently using a procurement card to order and pay for goods & services.

Contracts

Your contract register or contract management system contains data that becomes more valuable for managing maverick spend when it is joined to your spend in each of the 500+ categories in which public sector organizations typically buy goods & services. To generate maximum value from your contract data beyond its use for the contract management process, there are several data issues that need to be addressed including:

  • Collation, centralization and classification of the contracts currently being used.
  • Joining the contract data for each vendor with its corresponding spend in the accounts payable system.

"So far we’ve delivered savings in the region of $500,000 and our analysis indicates that there’s plenty more to come."

Bill Ward, City of Lee's Summit