Managerial or corporate finance is the task of providing the funds for a corporation’s activities. For small business, this is referred to as SME finance. It generally involves balancing risk and profitability, while attempting to maximize an entity’s wealth and the value of its stock.
Financial management is an integral part within the financial function of the Accounting profession. However, financial accounting is more concerned with the reporting of historical financial information, while the financial decision is directed toward the future of the firm. Spend analysis and the visibility it enables, provide the necessary foundation for procurement and finance organizations seeking to make better, more informed sourcing decisions. Savings are typically achieved by a) identifying opportunities to aggregate spend and negotiate superior contracts, b) identifying and reducing non-compliant or maverick spend and c) improving procurement operations and supplier performance. Key initiatives would be consolidating invoices, reducing invoice queries and reducing the number of live supplier accounts.
- Inconsistent pricing (many different price increases per year)
- Invoice queries
- Volume of invoices
- Account management
- Multiple payment methods
- Credit limits and terms of payment
- Material costs
- Poor system data
- Consistent pricing
- Reduced electrical material cost (min 10%)
- 80% reduction in invoices
- 80% reduction in invoice queries
- Reduced number of payments
- Reduced number of active accounts to manage
- Increased credit limit
- Improved payment terms
- Electronic trading
Reduction in accounts management time
A vendor reduction exercise will significantly reduce the number of accounts to be managed by an OEM and all of the issues caused by varying levels of credit limits and payment terms.
Some supplier accounts will be transacted by account facilities, some by pro-forma and others by credit card. These can impact severely on supply chain when issues inevitably arise. Routeco can provide a tailored credit limit and negotiated terms that provide consistency and clarity to financial planning.
Major reduction in invoice traffic
Reduction in vendors will obviously reduce general invoice traffic but this is reduced further by the deployment of consolidated invoicing and single machine kit invoices. Not all suppliers will be within Routeco`s scope of supply due to specialist technical requirements terms or specification/commercial terms but our average is a 90% reduction in this area.
Minimal invoice queries
As part of our engagement process, scope of supply is established and then complimented by a cataloguing exercise that ensures accuracy in part numbers, quantities and pricing. This is all web based and regularly maintained to ensure that orders, delivery notes and invoices all match removing the majority of causes of invoice queries.
Improved net profitability
Demonstrated cost reductions in material procurement mean that any saving will impact directly on net profitability for the business. If we are able to reduce cost by 15% on a £300,000 per year electrical materials spend then £45,000 would be attributed to net profitability of the business. This could be a significant percentage improvement in EBITDA compared to the efforts required for the same improvement by way of increased sales.
Single kit invoices
As mentioned earlier, single kit invoices can have a significant impact on volume of invoices moving through an OEMs business and are a function of the creation of kit BOM quotes, single line kit orders and single delivery shipments. This can vary in the complexity of resource required to set up but once operational has an enormous impact in all departments and with beneficial ROI.