Fleetowner 32329 053118 Dark Grid
Fleetowner 32329 053118 Dark Grid
Fleetowner 32329 053118 Dark Grid
Fleetowner 32329 053118 Dark Grid
Fleetowner 32329 053118 Dark Grid

Two factors that feed dark purchasing in your company

May 31, 2018
Dark purchasing doesn't just happen. There are things within your organization that allow dark purchasing to flourish.

The term “dark purchasing” has been coined to describe the shadowy area where items are purchased outside of standardized processes and can’t be easily tracked to capital outlay or material inventory. I talked about this in a previous blog post.

Dark purchasing doesn't just happen. There are things within your organization that allow dark purchasing to flourish. Two big factors are non-standardized processes and human error. Allowing indirect spend to be handled in a decentralized manner or by functional areas of your business makes it easier for rogue spend — purchases from unauthorized vendors or those outside of dollar parameters — to happen on a regular basis.

Indirect spend is likely to happen in the dark because it typically involves 80% of all suppliers even though it may only account for 20% of all purchases. Indirect purchases tend to be in smaller amounts so may go unnoticed, especially since they happen across multiple departments. No one person in the organization may ever see the full scope of the indirect spend.

A report from Accenture found that every procurement dollar in indirect spend that is brought under management control can represent a savings of as much as 10% to 20%. That is a compelling reason to develop standardized processes and procedures for indirect spend as you have for your direct spend items.

Human error is the other big factor that makes dark purchasing a reality. This is especially true if you are still using manual processes in your accounts payable department. All too often, companies fail to automate accounts payable and don't take advantage of the benefits automation brings to payables which include making it an integral part of the procure-to-pay process.

According to the Institute of Finance and Management, only 13% of companies responding to a survey had “straight through processes with virtually no human intervention.” It is easy to see how human error can occur when you realize that email, fax, phone and “free-form documents” are still being used in the accounts payables process. 

When there is no consistent way to track invoices and payments, they fall into the area of dark purchasing. You need a system in place that supports both your direct purchases and your indirect ones. This helps optimize cash flow and gives you a more accurate picture of what you are actually spending.

Having the proper procedures in place for all of your purchases — both direct and indirect — and automating your payable process will keep all of your spend in the light of day.

About the Author

Matt Clark | Chief Operating Officer

Matt Clark is the Chief Operating Officer for Corcentric, a procurement and finance company that helps companies reduce expenses and improve working capital by optimizing how they purchase, pay, and get paid. He is responsible for setting and steering Corcentric’s strategic vision, which has experienced record growth since its founding. Matt has been with the company since 2004.

Matt is an adviser and guest lecturer for the University of Maryland’s Entrepreneurship and Innovation Program, and is an active member of Vistage Chief Executive Group, which provides peer-to-peer mentoring for DC area business leaders. He earned his bachelor’s degree from the University of Maryland.

Sponsored Recommendations

Tackling the Tech Shortage: Lessons in Recruiting Talent and Reducing Turnover

Discover innovative strategies for recruiting and retaining tech talent in the trucking industry at our April 16th webinar, where experts will share insights on competitive pay...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

How Electric Vehicles Help You Prolong the Life of Your Fleet

Before adopting electric vehicles for commercial/government fleets, prioritize cost inquiries. Maintenance is essential; understand the upkeep of EV fleets. Here’s what you need...

Voice your opinion!

To join the conversation, and become an exclusive member of FleetOwner, create an account today!