How 2023 Has Changed CFOs and COOs Focus on Spend Management for the Coming Years
Takeaways from Priya Iver and Britt Tunick’s Fireside Webinar
In a compelling webinar discussion, Concertiv CEO Priya Iyer and renowned Financial Journalist Britt Erica Tunick delved into the transformative world of Spend Management. Their insightful Fireside Chat focused on how Concertiv is pioneering in the sector through its innovative Procurement-as-a-Service approach. At the onset of their dialogue, Tunick invited Iyer to reflect on the evolution of 2023, probing into how the year's developments could shape the future strategies of CFOs and COOs.
Reflecting on 2021 and 2022, Iyer noted a period characterized by historically low capital costs. “And because of that, spending was not a concern…I would say vendor-related spend was significantly up. Some of our clients would say that there was a vendor sprawl from the COVID years,” she observed.
Entering 2023, Iyer pointed out, there was a significant increase in the cost of capital, calling for heightened financial vigilance. This economic climate amplified the role of strategic spend management, emphasizing the imperative of detailed tracking for every dollar spent. COOs and CFOs found themselves adapting to maintain balanced budgets and control expenditures. Particularly in PE firms, Iyer noticed a concentrated focus from CFOs and COOs on managing company expenses, distilled into three key insights:
- A Shift in Focus: To reduce spend, many firms have placed much more focus on reducing portfolio company spending, using initiatives such as zero-based budgeting. Iyer insisted management spend at the company level is just as important. In 2023, many firms agreed, working toward corralling the vendor sprawl of the pandemic era.
- Spend Allocation: Firms shifted their focus beyond mere spend management, delving into strategically reassessing spend allocation. This involved a critical analysis of funds distribution, management company expenses, and comparing past practices against emerging norms.
- More Scrutinized Budget Intelligence: Iyer suggested that the era of uniform budgeting had become obsolete. CFOs had to embrace a more detailed approach, especially in vendor management. This evolution involved three principal strategies: firstly, throughout 2023, they began forecasting at a meticulous line-item level, closely analyzing each vendor spend. Secondly, CFOs shifted to breaking down budgets by categories such as geography, pods, and practice areas. Lastly, firms acknowledged that this process had evolved from an annual to a quarterly exercise.
Looking Forward to 2024
In light of the shifts experienced in 2023, the significance of seeking procurement solutions to manage vendor expansion and alleviate the administrative load on firms' back office teams has intensified. Iyer underscored this necessity: “In 2021 and 2022, firms grew a lot in terms of AUM and IRR. However, the pace of employee growth didn't keep up with the AUM growth. So, if there was employee growth, it was in the front office, and the great resignation just left the back office much more depleted than anything else.”
In 2023, the landscape for CFOs was reshaped by a myriad of challenges and opportunities, compelling a reevaluation of budgeting strategies, spend allocation, and vendor management. This pivotal year highlighted the irrefutable benefits of the Procurement-as-a-Service model, a key focus of Iyer and Tunick's enlightening discussion. Their Fireside Webinar not only dissected the evolving dynamics of spend management but also underscored the critical role of strategic foresight in navigating the complexities of the current financial climate. As we look toward 2024, the insights gleaned from this dialogue will undoubtedly serve as guiding principles for CFOs and COOs in their quest for optimized spend management and sustained organizational growth.
This was the first big takeaway from the enlivening and educational discussion about the benefits of procurement-as-a-service.
Part 2: The Approach and Benefits That CFOs Can Expect From Outsourcing Procurement with Concertiv.
Part 3: 3 Tips for CFOs and COOs Looking to Initiate the Procurement-as-a-Service Process.
For the complete, in-depth discussion around Spend Management, Watch the Entire Webinar.
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