Start-ups face a unique set of challenges when it relates to the balancing of time and resource management. On one side, they are likely to be cash strapped and in a race to get their product or service to the market and generate cash flow. On the other, they need to manage their day-to-day operation, namely dealing with vendors, paying bills, meeting with VC firms and all the other ancillary tasks to run an operation.

The first part, getting a product or service to market, is their primary task and likely the main area of expertise of the founders and initial pool of employees. But sometimes this initial team lacks the resources or knowledge to make the day-to-day operation an efficient one. Among the administrative tasks that are usually neglected are the ones related to spend management. This articles focuses on the common mistakes made by small enterprises around spend management and some steps and techniques on how to avoid them. Also, we will make the point that a company that avoids those mistakes is in much better position to make a better impression to outside investors by showing it’s commitment to be the best-in-class in every area, including non-core activities, therefore rendering their business case a much more robust one.

Definition of Spend Management

Before we define the practice of Spend Management (or variations of the term) for the purposes of this article, let’s review what the leaders in the area have to say.

1.- Institute for Supply Management [ISM]
“ Supply Management is the identification, acquisition, access, positioning, and management of resources the organization needs or potentially needs in the attainment of its strategic objectives. Other key components of supply management are disposition, distribution, inventory control, logistics, materials management, packaging, product or service development, procurement, quality management, receiving, transportation and shipping, and warehousing.

2.- Ariba, Inc. Leader in Spend Management Solutions [Link]
“Spend Management aligns organizations, processes, and systems to analyze, source, contract, procure, pay, manage and continuously improve global supply for best-value performance in support of the strategic objectives of the business.”

3.- AMR Research
“Spend that is currently under control or management. Control includes the use of structured events (RFX, auctions), contract management, preferred suppliers with active supplier development programs, and spend analysis/visibility involving spend data management and the use of third-party content.” This definition was provided by Lora Cecere to Jason Busch of SpendMatters blog.

These definitions are substantially different, going from the strategic approach from the ISM to almost entirely tactical from Lora Cecere. I really like the one from the ISM, as it really puts into perspective the fact that all organizations must have a spend management practice in order to be successful, and that’s the one we are going to dissect.

With this definition cleared, now we can start to translate it into practical steps and techniques that a start-up can actually use in order to avoid waste and save scarce resources. Please check The Sourcing Post tomorrow for the second and final part in the series.