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How Spend Management and Standardization Can Help Decrease Expenses

How Spend Management and Standardization Can Help Decrease Expenses

It takes many hands to ensure property management on any level goes smoothly and efficiently. But too many cooks in the kitchen, so to speak, is not always a good thing.

The absence of spend management and a non-standardized product purchasing program can cost a property owner or management group some significant savings. Imagine missing an annual rebate that could be worth several thousands of dollars simply because a preferred vendor program wasn’t in place for your maintenance team.

Spend management is the infrastructure to support management’s philosophy of who you are buying from, what you’re buying and ways to enforce best practices. Standardization makes spending practices consistent. Why is this so important?

“Standardization promotes procedural consistency while helping drive program compliance and standardized product and pricing options,” says Jennifer Lester, who is RealPage’s Vice President, Supplier Management.

And saves money. One management group, she said, saved $100,000 in maintenance, repairs and operations by having a proven spend management and standardization program in place.

Compliance improved, emotion removed from standardization

Through standardization, compliance levels are improved to ensure that managers optimize supplier partnerships. Add execution resources that are necessary to keep everyone on the same page, plus portfolio-based training and education to establish a basic foundation for work flow, and purchasing big-ticket items like toilets, garbage disposals, HVAC systems and others becomes more streamlined and creates the opportunity for discounts and rebates.

“Standardization also removes emotion from the process,” Lester says. “The maintenance team has a lot emotion when it comes to certain things, like caulking. But when it comes to a larger ticket item, those should be standardized and uniform throughout the entire portfolio to realize significant benefits.”

Lester identified a few key components to creating a successful standardization program that can help a portfolio save money and achieve consistency in day-to-day purchases:

Emphasize effective communication

Communication is important during any kind of change management process like establishing a long-term agreement with a preferred vendor. Everybody should be on the same page, especially the field, Lester says. Communicating that a change is in place and how the players should work through the process is the first step.

Data intelligence drives negotiation

Data intelligence is key to any type of spend management or standardization program. Good data will determine what it is that you’re going to negotiate, how you’re going to fine tune your process and best ways to communicate that information to your team to drive compliance. A comparison of invoices across a portfolio might reveal that each property is paying a different price for a gallon of paint. Ideally, a property manager could negotiate a standardized rate for paint.

Establishing reporting method

Monitor closely to ensure that agreements are being followed and that there is compliance of internal purchasing procedures. Periodic reporting will reveal if you’re paying the same negotiated price for a particular supply line, or if there has been an increase.

Manageable Work flow/Process

Complete visibility, into property-level spend at the time of purchase all the way through the receipt of goods is essential. Also, invoices should be electronically transmitted into an accounts payable system for payment.

Maintain compliance at all levels

Reporting and communication drive compliance, which is integral to your purchasing structure. A lack of compliance with the partnerships that support your business often results in leaving savings on the table, Lester says. A mechanism should be in place to educate staff to ensure full compliance.

“Successful spend management and standardization is all about communication, execution of resources and reporting,” she added. “The results are more transparency into key portfolio expenditures and identifying and achieving savings.”

(Image Source: Shutterstock)

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