Spendesk research shows that SMBs struggle to manage their mass of vendors, with dormant suppliers costing nearly £1 billion annually
Spendesk, the complete spend management platform, released the findings of its new report: Uncovering the Hidden Costs of Supplier Management. Analysing 4.7 million suppliers across a sample of 5,000 Spendesk customers in the UK, France, Germany and Spain, the report found that the average small and medium-sized business (SMB) has nine times more suppliers than it has employees, however it only uses one quarter of these. The findings indicate that today’s SMBs rely heavily on outsourced capabilities yet they may not be holistically and actively managing them, resulting in hidden financial losses.
“SMBs need to adopt an active spend management approach. By consolidating payments and negotiating as a single entity, finance teams can leverage their combined purchasing power to secure more favourable rates and terms from suppliers. This approach not only helps in managing costs but also strengthens relationships with suppliers”
Overview of key findings:
- SMBs have nine times more suppliers than employees, with a median average of 800 suppliers.
- Many SMBs only use one-quarter of the suppliers on their books, resulting in a potential total loss of £964,440,000 in wasted time and management costs.
- The top five areas of spend with suppliers are: business services, travel and accommodation, utilities, maintenance and office supplies, food and beverage, and retail and merchandise.
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The findings emphasise the need for businesses to adopt an active spend management approach. With outsourcing continuously increasing and each supplier on the books costing a business £855 per year, supplier management (including holistic overviews, negotiation, and payment) become an increasingly important subset of managing a company’s spend and eliminating these hidden costs.
The report into supplier management comes on the back of Spendesk’s acquisition of procurement company Okko in April 2024. Julien Chriqui, co-founder and CEO of Okko, said: “The findings of the report highlight how crucial it is for businesses to optimise their vendor management processes to keep costs under control and reduce inefficiencies.”
“SMBs need to adopt an active spend management approach. By consolidating payments and negotiating as a single entity, finance teams can leverage their combined purchasing power to secure more favourable rates and terms from suppliers. This approach not only helps in managing costs but also strengthens relationships with suppliers,” he continued.
The report also examined where SMBs are spending money with suppliers. According to Spendesk’s data, the top three card spend categories are business services (such as software subscriptions and consulting services) at 42%; travel and accommodation at 19%; and general business expenses such as utilities and office supplies at 9%.
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Julien Lafouge, CFO of Spendesk, commented: “Actively managing spend is not just about managing “who” you are paying, but also “how” you are paying them. Knowing where the money goes is crucial for financial controllers to improve financial operations. Paying a supplier by invoice is a great option when the cost of the invoice and the cost to push the invoice to payment balances out. For example, if you have a £200 invoice but the time spent receiving and putting it through your systems costs £100, then your invoice has cost you nearly 50% more. This also isn’t including the bank fees for transferring money to pay suppliers. However if the invoice is £20k then the management costs are minimal in comparison. So, large one-off invoices are fine, but everything else you should pay with a card.”