6 MIN. READ
If you own buildings and facilities, your focus, in the simplest terms, is to maximize profitability to increase NOI.
True, there are other worthy goals and concerns when operating a facility. You make decisions that affect not only your tenants but also your employees and others that use your facility. But profit is the keystone that holds all of these relationships together, and purchasing management software can help you maximize that profit.
Each of your real estate investments required a sizable initial investment and need ongoing maintenance and support. You spent hours and days identifying the best cost solutions and/or optimal service levels for your particular needs. You made uncountable phone calls and negotiated the very best prices and services possible for those items that your employees must continually use.
All your efforts for naught?
But then there is the dreaded rogue spend: the unanticipated, unapproved outlay of corporate cash for items that might otherwise have been procured via less expensive means.
You cannot know what crisis every person in the chain of command might be managing each day. They are not as focused as you on the macro-economic impact of ordering a one-off delivery from Amazon. They are more focused on how that one rogue purchase may facilitate a remedy to their micro-economic problem.
So what might you do?
Identify the hidden rogue spend hampering your NOI
There are several typical sources of rogue spend that can negatively impact your bottom line. You must analyze each of these in turn and take steps to address these cash siphons before you can expect to reap all the rewards associated with cost minimization.
You can also take advantage of the purchasing power available through Raiven's (formerly Qmerit's) purchasing management software. This allows your enterprise to join with other buyers in your industry to bulk purchase those products that are universally sought after, leading to substantial savings.
Take a look at five areas where rogue spend often arises, and discover how you can prevent it from reappearing in the future.
1. Engineering approves invoices from non-approved suppliers
This is the most prominent (and hence, most costly) aspect of rogue spending. Many organizations have adopted a natural and easy solution to the demands of each working day. If we have a problem to address, we often find the quickest solution and do not always consider the long-term impact.
It seems expedient to pick up the desired product from a local retailer or order an overnight delivery from the first source that appears on the Google search. However, this behavior, repeated again and again over the breadth of your operating base, will dig deep into your corporate pocketbook.
One easy remedy is to make use of Raiven's browser extension, a key component of our purchasing management platform. Our advanced technology alerts your employees while online shopping when it finds an exact match or a similar item of better value from one of your preferred suppliers. You simply remove the guessing game and time delays from your management team and allow them the flexibility to quickly acquire the goods they need from a trusted source that ensures the lowest total cost.
2. Vendor contracts contain add-ons that were not initially bargained for or discounted
More than you may expect, this problem typically arises when your employee asks a routine vendor to acquire additional materials not directly related to the supply contract. This saves them a step in ordering the desired materials from an approved provider. Your employee may justify the action by thinking they are saving time or delivery charges (or some similar rationalization), but ultimately, they are spending cash that need not be wasted.
The solution here is two-fold.
First, educate your managers and employees about what is important and why. Everyone can understand that the goal of any business is to be financially successful while providing a good or service. However, not all of your employees are educated or focused on the impact that their decisions have on the net operating income.
Good practice would dictate the following: If you expect your staff to order exclusively through established protocols, you need to tell them what the protocols are and why they are in operation.
Next, adopt Raiven's technology. By implementing Raiven Marketplace, your employees can quickly find and purchase the best products available at the best prices so they won't view purchasing protocols as a chore. Rather, they can go to one online location for all their purchasing needs so it is fast, simple and more cost-effective.
3. Employee expense reimbursement includes MRO and other supplies
Many organizations allow employees to conduct a certain amount of purchasing with a promise of reimbursement from the employer. However, if this has become an integral part of your organizational hierarchy, it may be time to institute changes.
As noted above, employees with purchasing authority need to be educated on the proper acquisition methods and approved vendors. Training must include an explanation of why the protocols are present, and employers must develop an atmosphere of responsibility whereby the employee realizes that if they do not follow protocols, then reimbursement may not be forthcoming. Raiven's browser extension can also help eliminate this rogue spend avenue by directing employees towards approved purchases right off the bat.
4. Non-authorized personnel make purchases
Similar to the above, this circumstance occurs when an employee makes a routine purchase and bypasses management due to the misconception that the item is of little consequence. For example, a receptionist may order toner or new pens from an unapproved supplier, unknowingly overpaying for the products.
Again, training and education should limit exposure to this problem. Furthermore, limit access to company purchasing power (such as possession of a corporate credit card or expense account) to managerial personnel and executive staff.
5. Field staff makes purchases due to emergency circumstances
Think of when a pipe breaks and field staff immediately orders a replacement part. While it may be impossible to anticipate every need at every property in your company's portfolio, experience would dictate that many of the emergency parts and materials your employees need can be on hand. However, even if they must order something on an expedited basis, having pre-negotiated discounts available through Raiven's purchasing management platform will allow most emergencies to be addressed quickly.
Allow Raiven to help minimize your rogue spend and improve NOI
You want to improve profitability, no doubt. In order to achieve this, you must increase income, cut expenses or both. Raiven wants to ease the cost-cutting burden and help you reach your corporate goals without sacrificing quality.
Raiven's purchasing management software provides your hardworking team with an apparatus built for lowering your outlays on materials by aggregating the purchasing power of your industry. At the same time, our powerful platform allows you to quickly source what you need and remedy the wants of your management team efficiently, without fuss or frustration.
We encourage you to examine your entity's present methodology and identify the negative impact that rogue spending may have on your balance sheet. Then contact us for a demo on how Raiven can contribute to your company's increasing success. We look forward to hearing from you!
