At its core, managing services spend is about determining where budgets are going and how they are contributing to your goals as a business. While many teams have already looked at opportunities to reduce their spending in some capacity, markets are becoming more competitive, making it more crucial than ever before to seek opportunities to decrease their costs further if they want to secure profitable returns.
From an industry perspective, recurring services in SAP(also known as contract-based invoicing) are often the type of services that are defined as not being professional SOW services, contingent labour or services invoicing. By default, recurring services become the only other type of services procurement that must be tracked and accounted for.
However, given that this type of spend is among the simplest of the services spend use cases, many organizations, in an ironic twist, continue to overlook this type of spend. The resulting logical next question for businesses becomes, is my team managing this type of spend already? And if not, what can we do to ensure the entirety of our services spend is being managed with the same attention to detail? We consider the answer to these questions in the duration of the post.
What Are Recurring Services Invoicing?
Recurring services are classified as a type of outcome-based spend. Here, the people or service providers that complete the task do not matter, and their help is enlisted in the event of a scheduled or external trigger.
One of the most used examples is a company that leverages a snow removal service. Although a team may not know how many times it will snow, they know it will happen, and they require a plan for when this time arrives. Therefore, a blanket contract or Purchase Order (PO) is enacted so that services can be invoiced on a recurring, as-needed basis.
For manufacturers, recurring “services” are still applicable in the presence of a blanket PO, but it has a schedule and overall number that says that a company can buy a set amount of products from a constrained commit. Alternatively, some supplier-managed (or vendor-managed) inventory systems operate with the same blanket contract method.
Procurement teams must then compare the estimate and actuals to determine if the services were completed within the agreed-upon budget and timelines while also considering factors such as the quality of services provided.
Why Managing Recurring Services Matters
As mentioned, managing services becomes a matter of comparing estimates and actuals, meaning opportunities for optimization (and error) can still exist. Therefore, teams need to ensure that invoices made against a purchase order are being managed with proper visibility.
When done correctly, accurately planning recurring services help better schedule resources, including materials and personnel, for more efficient allocation. A key consideration is that planned services are often contracted upfront and billed on different cycles (e.g., monthly, bi-monthly, or annually), making it easy to lose track of what has been contracted and leading to wasted spending and unused services (or in the manufacturing example, products).
Furthermore, at an initial glance teams may struggle to determine how much progress is made towards the blanket PO. Therefore, in the absence of visual dashboards that are updated in real-time in response to invoices, teams may struggle to track progress in between reporting periods, making it more difficult to pinpoint when budgets require increases in the subsequent period. For example, if snow removal totals are nearing completion halfway through the winter season.
Finally, teams who manage this "simple" type of procurement spend with a tool separate from their ERP system may also be overlooking optimization opportunities. Consider that since invoices are made against a PO with recurring services, opportunities such as Evaluated Receipt Settlement (ERS) can also be leveraged.
How Can Recurring Services Be Managed with Greater Efficiency in SAP?
The ConvergentIS team helps improve this process by providing businesses with a single source of truth for spend. Consider that procurement leaders need to categorize and process data to generate effective reports on organizational spending. A centralized portal can help to improve this process by consolidating details about the expiry and renewal of contracts and guaranteeing procurement teams are not letting resources go to waste.
The ConvergentIS Services Procurement Portal presents one example of a portal that enables organizations to address the larger scope of total services spend, while also presenting the first step to more extensive solutions like SAP Fieldglass or SAP Ariba. The result is that procurement teams can monitor all purchases for compliance and ensure non-compliant purchases that cause spend leakage are kept to a minimum.