Higher Education Learns The Value In Procurement Spend Visibility

The higher education sector is facing rising pressure to manage spend, as operating costs climb and organizations face greater scrutiny over tuition levels. Many entities in this space, however, struggle to gain a clear picture of where the money is going. That not only limits spend visibility, explained Anthony Rotoli, CEO of procurement and spend management technology provider ESM Solutions, but can expose higher education organizations like universities to risks, including fraud.

“The big challenge [for the higher education sector] is getting their arms around what spend is going to what suppliers,” he told PYMNTS in a recent interview, “especially when you get these multi-campus institutions with multiple department buildings.”

It’s a similar story at many organizations across industries, but a uniquely large pain point for entities like universities grappling with a public perception of sky-high tuition and other costs. According to Rotoli, enhanced spend management and visibility can certainly have a positive impact on the overall cost of operating within the higher education sector and, therefore, keep tuition hikes at bay.

However, there are other risks facing organizations in the market today, including the challenge of identifying the best suppliers with which to work. This is not only a process to identify lower prices on goods and services, or vendors that could be more strategic partners with a university, but a risk mitigation tactic that can combat fraud.

“People want to mitigate risk of where they are buying from,” he said. “They don’t want users buying from fraudulent suppliers. When you put automation in place, checks and balances come with it. [One] of the biggest things we’ve heard is, ‘Help me mitigate risk.'”

Manual and paper-based procurement processes require manual ways of verifying vendors, and ensuring that supplier payments remain compliant, he continued.

Yet, the effort to gain a deeper view into spend isn’t simply to avoid those threats, Rotoli noted. The process through which organizations, like universities, gain that spend visibility — that is, being able to integrate financial data across platforms — opens doors to other opportunities in the higher education industry. According to Rotoli, that means the concept of procurement modernization and spend management has evolved into something far beyond simply getting rid of paper.

“Procurement was always, ‘let’s get rid of paper,'” he said. “Institutions we work with all have this need for automation and doing more with less. But, at the end of the day, it’s more than that.”

Analysis from the American Association of State Colleges and Universities (AASCU) has confirmed that organizations in the higher education sphere have deeper goals.

“In light of the demands facing U.S. higher education, improving cost containment, efficiency and productivity has been a particular focus of the nation’s public universities,” the AASCU said in a recent report, adding that “America’s public colleges and universities are being called on to restrain spending, and to be more innovative and entrepreneurial in identifying and implementing cost containment and revenue enhancement measures.”

When the conversation focused on getting rid of paper, the procurement department was viewed as a unit under which a university or other organization could cut costs. Now, said Rotoli, it’s increasingly seen as a vehicle to not only drive savings, but introduce a revenue stream.

Automation also means that businesses do not have to manually assess a vendor to ensure that purchases are from vetted and approved sources. For instance, procurement systems are now able to integrate business rules that can support a deeper spend strategy, and more easily identify cost-saving opportunities.

Analysis from the U.K.’s YPO and iGov found that the vast majority of universities currently have a strategic procurement vision across their organizations, with one-third of universities noting that their biggest procurement priority is to further the organization’s overall goals. Fewer organizations are prioritizing simply finding cheaper deals on goods and services, signaling the industry’s ongoing shift toward turning procurement into a revenue driver — rather than simply a way to cut costs and paper.

However, achieving these more strategic goals is a feat that requires seamless integration of data across procurement, accounts payable, expense management, ERP and other financial systems, which introduces an entirely new beast of challenges for organizations: how to connect these platforms together. Solve for that hurdle, and the education space has a chance to do far more than simply cut costs.

Universities today, Rotoli noted, must have a “unified approach” to solve for procurement challenges like supplier management, cost-savings identification and spend visibility. Tackling spend from a holistic view of procurement to payment and reconciliation can unlock insights previously hidden within the silos of individual ERP, accounting and other financial platforms.

“In the past, institutions have tried to solve challenges in each of these areas independently,” he said. “There is opportunity now to bring it all together and complement each other. The question that institutions ask is, ‘How do we do that?’ And that challenge starts to open up other opportunities.”