Digital Dealer - December 2017 - 18

By Doug Austin
Founder and President,
StrategicSource, Inc.

// Dealership
Management

Year-End Spend
Management
Assessment -
Setting Up for a
Successful 2018
December is here
and it is time to wrap
up the year and begin
planning for 2018 if you
haven't already done so.
As business owners, the
one performance metric
that is top of mind is total
top-line sales by month
and for the year. Every
business owner of top
executive will know
exactly where you stand
on revenue metrics. One
of the other important
metrics is profitability,
which some would argue
is even more important
than the sales metric. The
goal for a for profit
organization is to make a
profit...as much profit as
possible. Profits are the
lifeblood of an organization and allows the
organization to survive,
grow and move forward.
The spend management
space is focused on the
management of critical
corporate resources...
supporting the organization with competent and
18

DECEMBER 2017

competitive suppliers, the
commitment of company funds in a controlled
environment, minimizing
expenses, enhancing
profitability and increasing
cash.
As we look back in 2017
to assess our organization
performance, we usually
make these assessments
by reviewing overall
organization performance. Did we achieve
our objectives? Where
did we miss? We also
assess performance at
the functional or departmental level. How well
did our operating units
perform? Did they achieve
their functional objectives,
did they contribute to our
overall success...or did
they hold us back from
achieving our company
objectives?
In the spirit of looking
back to improve what
we do going forward, I
thought it might be an
appropriate time to take
a few minutes and review
D I G I TA L D E A L E R . C O M

the condition of your
spend management function in 2017. If you have
access to the right data,
have the correct plans in
place, are employing the
correct tools and controls
across an organization...
you are probably throwing
off a decent level of profit
for the year.
If your organization is
not generating the profits
you needed or expected,
then it is probably time
to assess where you are
in preparation for some
focused change.
The following assessment is broken out by the
significant components
within spend management. Spend a few
minutes to walk through
this exercise to see where
you are strong and no improvements are needed,
and to determine where
the gaps are that need to
be plugged.
If your answer to many
of the questions is "no"
or that you "don't know"

you probably have some
challenges to address near
term.
The best plan of attack
to get the spend management function under
control is to centralize the
function. By that I mean,
pull back all purchasing
and commitment authority that employees have.
Do not allow anyone to
make a supplier selection
or a supplier commitment
until spend management is
centralized.

WHAT CENTRALIZATION MEANS

I would recommend
that spend management
be centralized under the
finance department and
the CFO. If your organization does not have a CFO,
then I would recommend
that the dealer principal or
president retain full control
of spend management.
Authority can be delegated and should be...but
controlled from a central
point. Centralization of
spend management should
include the following:
1. PLANNING - Sourcing of the 130 expense
categories is planned from
the top.
2. POLICIES - Purchasing
policies are in place and
apply to all staff and all
suppliers.
3. COMMITMENT AUTHORITY - the ability to

execute a purchase order,
contract or approve an
invoice is limited to only
those titles outlined in the
purchasing policy.
4. SUPPLIER MANAGE-
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Table of Contents for the Digital Edition of Digital Dealer - December 2017
