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In today’s business environment, where every pound counts and companies are looking to maximise efficiency and cut costs, managing indirect spend has become a critical focus for procurement teams. Indirect spend covers purchases that support the day-to-day operations of a business but aren’t directly tied to production such as office supplies, services, software, and utilities. These costs can often go unnoticed and can resemble a hidden iceberg beneath the surface of corporate finances and can quickly become uncontrollable, unlike direct spend which is closely monitored. It’s estimated that indirect costs amount to between 20-50% of all company spending.
Do you know how much of your business spending is direct and indirect or has your indirect spending become uncontrollable? Let’s look at some ways to take control of your indirect spend and turn it into a strategic advantage.
You can't manage what you can't measure. If you answered no to the previous question then your immediate first step is to run a comprehensive analysis to identify who is spending what, where and why, and to try and establish a clearer picture of your indirect or non-compliant spending. During this process you should also be able to spot duplicate or fragmented purchasing where numerous purchases are being made from the same supplier but by different departments – this is not sensible buying.
Disparate spending often stems from a lack of control or oversight in the first instance but establishing centralised procurement policies can help. Look at implementing systems and policies that route purchase through approved channels, use preferred suppliers and enforce approval workflows. This helps to reduce rogue spending and ensures contract compliance, plus increases the likelihood of obtaining volume discounts.
Building strong long-term partnerships with key indirect suppliers is vital to secure better pricing, improved service and greater availability and quality of products. Indirect spending does not need to mean shallow and indispensable supplier relationships.
Manual processes are error-prone, inefficient and costly which is why online buying software is becoming highly sought after by so many businesses to provide transparency and regain control over company spending. Implementing procurement software can reduce real-time spend visibility, assist in budget tracking, set and manage approved suppliers and allow you to implement approver workflows.
Indirect spend management isn’t a one-time project. Regularly reviewing spend categories, supplier performance, and market benchmarks to identify new savings opportunities is critical for long term success.
Indirect spend may be invisible but left unmanaged it can become uncontrolled and be a significant cost issue for companies. Managing indirect spend effectively requires a blend of data, discipline, and collaboration, but most importantly, it requires transparency. With the right tools, such as online buying software, companies can reduce costs, mitigate risks, and improve operational efficiency.
Take control of your companies indirect spending today by exploring Online Buying from Pegasus Software, available with Opera 3 SE and contact us to discuss your indirect spending challenges.
Posted On: May 01, 2025
