Why Health System P2P Leaders Need Spend Visibility (Spend Visibility Part 1)
How to Map your Health System’s Procure to Pay Processes
June 28, 2022
Is your Health System Achieving Clear Spend Visibility? (Spend Visibility Part 2)
August 29, 2022Why do finance and supply chain leaders need spend visibility? The answer is almost endless, but it comes down to better decision-making. When data, especially dark data, takes on the form of graphs and diagrams, leaders obtain insights rather than simply numbers filled in columns and rows. Suddenly it turns into potential fraudulent vendors, quality-controlled vendors, and an equitable, diverse vendor mix. With this information, leaders can make decisions to increase buying power, reduce reliance on any single supplier, and improve the organization’s patient outcomes.
What is Spend Visibility?
Comprehensive data analysis of spend data tells the story of expenses at the micro and macro levels. This “story” provides spend visibility, oversight, and understanding of how and where funds are spent across your organization. It is a crucial element of spend management and allows leaders to make quick, informed decisions.
With spend visibility, leaders control their complete spend management processes - from sourcing to buying to payments.
Spend analysis provides high-level visibility to these questions and so much more.
- What does the health system purchase?
- How much does the health system purchase?
- How much does the system pay?
- Who is supplying goods and services?
- Who is purchasing?
- What is being delivered and returned?
Benefits of Spend Visibility for Health System Leaders
Spend Visibility Benefits for CFOS
Benchmarking.
Spend visibility allows CFOs to benchmark spending in many ways, such as per business unit or entity and by industry.
Budget Approvals.
Through insight into past and current spend trends, CFOs can view forecasted spend allowing them to approve future budgets.
Ability to Monitor Budget.
Visibility into spend allows health system CFOs to monitor their budgeted goals and make decisions in real-time. With insight into spend, CFOs can see if their business units effectively manage their budgets and targets and quickly address any individual departments or entities that fall behind.
Increased Efficiency.
While improving efficiency is in the best interest at all levels of leadership, spend visibility provides CFOs with a macro-level view of efficiency. This macro view allows CFOs to advise their teams on areas where they need to streamline operations to align with organizational goals.
TAG TIP: Process mapping can provide insight into micro and macro views of processes and indicate opportunities to improve efficiencies. A procure to pay (P2P) process map can be enhanced by adding spend data throughout the map where errors occur. Providing visibility into processes and spending. For example, visually seeing where duplicate payments most often occur in the P2P process coupled with the information of number, value, and cause of occurrences provides insight into possible improvements via new technology, retraining staff, leadership prioritization, and more.
Auditable Records.
By documenting system-wide spend in a single source of truth (SSOT), health systems have a data trail that helps meet regulatory and financial reporting requirements such as losing 340B eligibility and funds.
Spend Visibility Benefits for AP Leaders
Reduce Fraud.
While all the responsibility of identifying fraud does not fall on Accounts Payable (AP), the department can track certain factors to provide visibility into potential fraud for further investigation. For example, invoices from a vendor that are missing required information may indicate a fraudulent vendor – especially if it is recurring.
Identification and Tracking of Overpayments.
Spend analysis provides visibility into lost funds through overpayments such as duplicate payments, unprocessed credits, and overcharges. Visibility into overpayments allows for root cause discovery and the ability to track toward improvement.
Insight into incremental spend to manage cash flow better.
Viewing total spend at a predetermined rate such as daily, weekly, or monthly allows finance teams to better understand, forecast, and manage cash flow, plan large expenditures, track productivity, and govern payment terms.
AP Performance Metrics.
AP leaders can utilize spend-visibility in their team, tool, and process productivity. For example, leaders can track how long it takes to process invoices, and the rate of discounts captured, understand the root cause of inefficiencies and create goals toward improving metrics to align with cash flow strategies.
Payment Type.
Insight into payment methods helps AP leaders improve the number of discounts captured by managed and consolidating types. It also provides insight into the need for new tools such as Paymode or Viewpost.
Spend Visibility Benefits for Supply Chain Leaders
Savings Opportunities.
Spend visibility provides insight into missed discounts and overcharges from higher prices than the contracted price. For example, monitoring purchase volume can help ensure tier thresholds are met or, even further, can point to opportunities to move up in tier by consolidating volume or moving purchases from another supplier.
Additionally, moving all volume to another supplier every two to three years can provide leverage in negotiating lower prices. Spend visibility also provides insight into purchased items not under a contract that may cost more than if the items were arranged.
TAG TIP: While TAG encourages using GPOs for saving opportunities, health systems should stay aware of local suppliers that may offer lower pricing.
Identifying Maverick Spend.
Spend analysis provides insight into how much maverick spend occurs in a health system and who is doing the purchasing, and who is approving the purchases. With this information, Supply Chain leaders can work toward restricting further access from these vendors, thus increasing procurement efficiency. Reducing maverick spend also provides the opportunity for savings when transitioning to on-contract vendors.
Contract Compliance Enforcement.
Comprehensive spend visibility should provide insight into what is being purchased from each supplier and the rates and terms used. This information should power the purchasing team to enforce contract price compliance and reduce maverick spending.
Supplier Consolidation and Purchasing Leverage.
Health systems can consolidate their supplier lists with visibility into supplier count and usage per commodity, business unit, and location. Consolidation increases negotiating power when purchasing more items and services from fewer suppliers.
Decrease Spend Waste.
With visibility into item purchasing, warranties, and inventory, Supply Chain leaders are powered with the data to cut down on waste that is associated with unused, expired, or discarded.
The effectiveness of spend visibility relies heavily on accurate, clean, and complete data. It is well worth the effort and time to manage this data as it provides insight into spending is invaluable, and goes beyond the benefits mentioned above. Health systems often struggle to look at spend visibility due to multiple sources or data (ERP, GPOs, etc.).
The best spend visibility is provided by third parties that create a single source of truth (SSOT) for all contracted and spend data. Third parties can devote the time health systems do not have to fill in missing data and ultimately provide an unbiased look into spending and the processes surrounding it.
Turn to TAG for your spend data analysis, cleanse, repository, and reporting to provide just that. Reach out now to get started.
