In Part 1 of this blog, I had covered the key metrics that need to be on Procurement’s watch list for better procurement compliance. Access Part 1 here. In Part 2 of this blog, we look at how organizations are faring on these metrics and how they can move the metrics for an improved compliance.
Metric 1: Spend Under Management
According to an Ardent Partners report titled ‘The ROI of a Best-in-Class Procurement Department’, best-in-class organizations have 91% spend under management (SUM) compared to 57% for peers. Having more SUM holds the key to unlocking savings opportunities. For a $100mn of spend, a best-in-class organization will gain a larger spend portfolio ($91mn Vs. $57mn) and with better savings rate achieve higher savings amount.
How to move the metrics on SUM?
Metric 2: Contract Compliance
Contracts are pivotal to the procurement cause: they provide legal security, help establish rules for transactions and most importantly capture the very essence of detailed sourcing and negotiation activities. According to the Ardent Partners, best-in-class organizations have 67% spend on contract compared to 47% for peer groups.
Learn More: Procure to Pay Solution
How to move the metric on Contract Compliance?
Download this White Paper, ContractLock – Making every contract count to know more.
Metric 3: Transactional Compliance
In Part 1 of the blog, we discussed the following key areas to track under transactional compliance – PO creation compliance rate, Invoice acceptance rate, First-Pass match rate & On-Time payment rate. Let us consider the benchmarks for each of these.
According to the latest benchmark from The Hackett Group, Best-in-Class organizations have a PO compliance rate of 98%, Invoice acceptance rate of 94%, First-Pass Match rate of 83% & On-time payment rate of 85%. If one were to check for the perfect order rate for best-in-class organizations it stands at 80%. A perfect order is defined as no transaction processing errors across the P2P process cycle (requisition to payment)
To know more access our on-demand webinar – Decoding the Latest Procure to Pay Benchmarks – Know the Secret behind the Leading Procurement Teams.
How to move metrics on transactional compliance?
To know more on how you can improve your metrics on procurement compliance schedule a 1-1 meeting with our subject matter expert by emailing us on firstname.lastname@example.org