AI-driven spend management vital for better visibility, says new Hackett data
Finance workloads are expected to increase 4.1% in 2025, but CFOs are having to slash staffing levels and curb their operational budgets. At the same time, organisations with strong spend management practices consistently outperform their peers in cost control, risk mitigation and compliance adherence, says new research from US-based The Hackett Group. So how can CFOs balance these to do more with less?
The answer, says Hackett, can only be technology - specifically, by applying advanced AI techniques to the problem of spend and procurement optimisation.
The Hackett report, AI-Driven Spend Management: The CFO's Key to Driving Strategic Growth in 2025, holds some clues on where to focus. It calculated purchased cost savings as a percentage of spend average at just 3.7% per annum in 'low spend visibility' contexts. Yet this figure climbs to 4.8% when CFOs have "high" visibility into how the firm is spending its cash.
Looking at Procurement ROI, Hackett's analysts estimate that overall organisational purchasing savings divided by cost is just 5.2 in low spend visibility environments, yet, again, can be pushed up to around 8.9 in a high spend visibility environment.
These figures hopefully provide an incentive for finance leaders to seek out more granular understanding of their spend through better use of data. The kicker here is that In both cases cited above, Hackett says even better outcomes are on offer when companies achieve 'digital world-class' levels of visibility through tech. That's a healthy 7.8% on purchased cost savings as a percentage of spend, and a whopping 13.6x ROI in procurement ROI.
Another benefit of investing in technology for high-def spend visibility, according to the study: potentially very sharp reductions in the elapsed time you and your teams need to spend on dealing with bids and suppliers.
For one, a 31% acceleration in average sourcing cycle time business days (measured in business days, from 61 to 42) is reported to be achievable in moving from low-visibility to digital world-class visibility. Likewise, teams exploiting world-class visibility were found to be slashing their late delivery percentage rates from a 20% on the low end to a robust 5.6% at the top end - a 72% improvement.
To repeat these kinds of successes, the report advises CFOs and CPOs to evaluate autonomous sourcing platforms that leverage AI-driven insights to maximise visibility.
"By leveraging deep sourcing knowledge and expertise, predictive analytics, real-time spend visibility and automated workflows," says the research, "CFOs can achieve greater cost certainty, enhance financial forecasting and protect margins in an unpredictable economic climate."
AI-Driven Spend Management: The CFO's Key to Driving Strategic Growth in 2025 also includes profiles of two real-world organisations that are achieving world class results, Tesco and T. Rowe Price. In the report, Tesco cited its use of Globality's AI as key to its "Save to Invest" programme being able to achieve a £1.2bn cut in indirect spend in its first year of use.
For T. Rowe Price, AI is improving outcomes for the company's 40-strong procurement team to support $1B of annual indirect spend. It's helped deliver an impressive 90% improvement in sourcing efficiency and driven down sourcing cycle times from months to weeks, sometimes days. AI has achieved this in several ways, including allowing team members to create template-based RFP documents in minutes. It also recommends pre-approved suppliers so the company can specify better business requirements upfront, plus get a better foundation for objective evaluation, sourcing and contracting downstream, the report adds.
Hackett's conclusion is that AI-driven spend management is a tool hard-pressed Finance teams should be proactively evaluating to help them optimise cash flow, accelerate digital transformation and strengthen their organisation's overall financial resilience.
The full research can be found here.
