Maverick Spend Persists Despite e-Procurement

Study shows one-third of spend not in compliance; Accenture touts benefits of p-card

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Tempe, AZ — April 14, 2003 — Despite millions invested in e-procurement systems, companies continue to lose money daily due to off-contract spending and manual, paper-based processes, according to a new survey by consulting firm Accenture.

For its latest study, Accenture surveyed more than 50 companies in the United States and Europe across 12 industries to determine how organizations are handling their procurement-to-payment processes. The majority of companies surveyed (63 percent) had more than $5 billion in annual revenues.

The study focused on indirect expenditure, where many organizations have opportunities to improve their procurement performance through effective sourcing of goods and services, management of preferred supplier compliance and efficient processing of large volumes of transaction fees.

The survey revealed that companies continue to forfeit negotiated savings with preferred suppliers because employees continue to buy from the wrong suppliers. Nearly a third (32 percent) of all spend does not comply with company purchasing policy, the survey respondents reported.

In addition, despite the millions of dollars that companies have invested to move purchasing processes online, paper still dominates the process, with 35 percent of all transactions being entirely paper-based and 67 percent of all orders generating a paper invoice. Overall, manual paper processes — the most expensive process for indirect spend — accounted for an average of 42 percent of spend.

In reporting the results of the survey, Accenture argued in favor of adopting a purchasing card program. Currently purchasing cards only account for 5 percent of spend and approximately 16 percent of transactions, the consultancy reported.

Average transaction costs for the majority of companies that continue to rely on manual, paper-based processes came in at $94.93, but Accenture asserted that companies can cut the average transaction cost by 79 percent by implementing a purchasing card, reducing transactions costs to an average of $20.57 in three months.

Accenture said its study shows that purchasing cards can improve preferred supplier compliance levels by 12 percent, taking the industry average (68 percent) to 80 percent. Organizations, on average, achieve 5 percent cost savings through consolidating spend with preferred suppliers, and the average discount achieved by using a preferred supplier is 11 percent, according to the study.

The consultancy said that in contrast to competing purchasing systems, purchasing cards typically cost under $160,000 to implement, compared with enterprise resource planning (ERP) and e-procurement systems costing significantly more.

Companies seem to be getting the message. Respondents to the Accenture survey said they anticipate an increase in purchasing card and e-procurement usage by up to 6 percent over the next 12 months, and a decrease in paper-based processes by 9 percent.