Well, hello. Good afternoon. Good evening to everyone wherever you're joining us from. Very warm welcome to this webinar from Tropic, where we're going to be talking about all about the perils of ignoring procurement and why it may cost more than you think.
I've got two great panelists with me today who I will let them introduce themselves in just a second. Just a couple of housekeeping things before we start and while we're waiting for any latecomers to join us. So if you're joining on the Zoom platform for the first time and you're not familiar with it, there is a little icon at the bottom of your screen with a picture of a question mark on it, which pretty unsurprisingly is the Q and A icon. So if during the webinar you have a question that you want to put to either myself or one of the panelists, Just click on that button, type your question in there and if it's relevant to the to the slide or the question that we're, talking about at that specific point, I will introduce the question at that given point.
If not, then we'll bring it at the end of the webinar. We've planned about ten minutes at the end for questions, so we'll definitely cover as much as we can there. I would discourage you to use the chat function to ask questions because if there's a lot of chat in there, we may miss something, whereas if it comes into the Q and A, there's no way that we will stumble over it. So just pop in the chat where you're joining from just so as we can get an idea of what sort of participation we've got.
And while you're doing that, I'll allow our two panelists to give a quick intro. So, Russell, do you wanna give, go first as, as Tropic's CFO? Over to you, sir.
Yeah. Happy to. Thank you so much. Thanks everyone for being here. Russell Lester. I am CFO of Tropic.
I joined about a year ago. I'm also a customer, of Tropic. I I I'm in the platform every single day, so speak from experience.
I'm a four time CFO, previously CFO of VersaPay, Calendly, and Keap, and excited to be here today.
Thank you, Russell. CJ, over to you. I think everyone knows you anyway. You've got a pretty big sub stack in a podcast.
I wouldn't say that.
But happy to be here. I'm a I'm a huge fan of Tropic.
Most recently, I was the CFO at a vertical software company called Parts Tech, where we were a customer. It's actually where I got to know Russell and the crew. We were, pleased and, happy with our experience there. And since then, I've gone full time on a newsletter called Mostly Metrics and a podcast called Run the Numbers, where I interview world class CFOs. In in a couple weeks, actually, I got a blockbuster interview with Russell dropping, so so everybody stay tuned. But I'm excited to be here today. I came up in the FP and A world before becoming a a CFO, and so I'm excited to discuss the perils.
Awesome. Thank you both, and I'll definitely keep an ear out for when that drops. And just to round off, I am your resident procurement professional. So I actually run a website called procurementsoftware.
Site which is a search and directory website of procurement technology companies, of which Tropic is one of the over four hundred solutions that we have listed in there. So I'm approaching this, from the battle trenches, I guess, as a former procurement practitioner, turned business owner. Now before we jump in, just one quick announcement from Tropic's marketing team. One lucky listener or watcher of this webinar, will receive an Amazon gift card and that will be a lucky dip after, this session where Tropic's marketing team will pick a name out of the hat. So, if you have joined, they've made a note of everyone who's joined today and they will draw a name out of a hat and inform you, I assume by email or by LinkedIn, if you've been the lucky winner. So let's get started.
This is really to celebrate, I guess, why procurement is a valuable function but is often overlooked. And we want to make it honest and peer led and look at the financial, the operational, and the strategic costs of doing so, and hopefully take away a few stories and anecdotes from experiences that we've all come across in the past of what can happen if you don't have a well staffed procurement team and you don't have the right procurement technology in place. So let's kick it off with how spend typically happens in a fast growth or perhaps decentralized immature organization that doesn't have a strategic procurement team in place. Russell, when when we chatted last week when we were running through the order of play to to to to go through today, We chatted a little bit about how people often tend to look at spend through quite a narrow lens. Can you maybe elaborate a bit on what you meant by that?
Yeah. Happy to. And I caught earlier that you used the words celebrate and procurement, like, the same sentence. And how common is that? Right? And we need to change that. We need to celebrate procurement.
Yeah. Look. Often, people approach this far too tactical because they many of them companies may not even have a procurement dedicated person or a function. It's a hat that someone else wears, and it really only shows up reactively when someone wants to spend money on something. And then the FP and A group gets the question of, is this in the budget?
And so it opens up this whole process of, what are we buying? Who are we buying it from? Why are we buying it? Should we buy it? Is this a good price? And it it's this cornucopia of questions that demand process and automation and expertise.
But far too often, people simply approach it as, I'm evaluating supplier a. Am I getting a good price? I need help figuring that out. And that's too narrow a lens because it misses out on the huge opportunity for the process of spend management to be a strategic function at the business.
Yeah. And that's a it's a great comment, actually, because at that point, the deal's already done, isn't it? The supplier knows that he or she is gonna get the business, and it's just a case of damage limitation or trying to squeeze the two or three percent out that the salesperson is is mandated to give as a as a token gesture.
So we've seen the we'll deal with it later kind of mindset when it comes to introducing procurement or some sort of software to manage spend.
What's your experience of that, CJ, in your sort of former role as a CFO? Have you come across that situation before?
Russell had, said to me a couple weeks back, if you've ever bought a software license before, congrats. You're now in the business of procurement. And I think the word procurement gets thrown around like this heavy object. Like, what is it?
What's inside of there? But, like, if we were just to talk about it really simply, it's it's when you're purchasing things for your organization and who's gonna have the oversight of if this is a good purchase or not. And I think what happens is you have these orgs who actually it's it's kind of chicken or the egg, where you're growing up and growing so fast that it kinda it kinda sits in multiple places. There's not one person who raises their hand and say, hey, I'm the person who goes and purchases stuff.
Right? IT needs something. They throw it on a credit card, which has been the bane of my existence too, tracking that down through different departments. The CEO needs something.
You don't have a head of finance yet. Throw it on a credit card.
Or even worse, you have someone, like, outside of these departments who, somehow figure out how to put something on a recurring ACH payment, which has happened to me before. And so I think it's because you don't have, like, this one, for lack of a better term, there's no one throat to choke in an early stage org who owns buying because buying resides everywhere that that it's functionally needed. And what I've seen is procurement becomes a topic once you start to have a budget. And so when I said chicken or the egg, I meant, like, what do we even measure this against? And I think that's why you end up with this, as Russell had said, this view of let's look backwards rather than let's look forward. It's it's often, in my experience, a cleanup job when you start to talk about procurement and not, a proactive approach to to resource allocation.
Yeah. I love that, the cleanup job, because every company knows what they sell and to whom. Right? But very, very few, and I include even large corporates in here, truly understand what they buy.
Now I'll I'll caveat that with everyone or most companies will know what they've paid to such and such supplier because they can just look through, you know, what they've paid in invoices. But that isn't spend management. That's just reactively knowing what you've what what money's gone out of the door after the fact.
And it's kind of it's kind of a weird paradox, isn't it, that everyone thinks that they know how to buy because they've haggled over a used car at some point. But then if you flip that on the other side of the coin, well then, well, why do you need sales? Because we've all sold something on Craigslist or Facebook Marketplace at some point as well.
How are teams typically managing it then today? Without any tools or without any coordination, what typically happens?
Yeah. I mean, you have the manual way of doing this right. Well, first of all, sometimes there's no methodology.
It's just wild west.
People are asking to spin things. They're running with scissors, and people are getting hurt.
Any company that has some sense of process, it's probably a Frankenstein. It's a cobbled together mess of maybe or maybe not a repository of sorts or several repositories or drives or folders, probably lack of ownership, clarity around who owns the particular supplier relationship, and they just manually or, you know, hey. Can we spend money on this? I don't know.
What what is the tool? And people are going out on Google and researching it. And so it's just this massive, what I call, spoilage and waste of time and energy. And and then often, like I said, it's a hobby.
It either lives in it can live in IT.
It can live in a function that's called procurement. It can live in finance, accounting, FP and A, operations. So it often has multiple owners or there is often not even a central owner. So you see a myriad of those things. And then the cringe factor is when people think about going back to the old way of doing that because that that way is madness. That way is is a mess, and it creates chaos. And they often don't even realize the chaos it's creating.
Just to piggyback on what Russell was saying, I I wanted to make it tactical for people. So when I came into my first CFO role, I actually went and printed out paper copies of the last twelve months of credit card statements that I could get from Capital One and from Brex. And then I also printed out, anything that came directly out of the bank account because I just had to figure out, like, it you're telling me there's this Google Drive somewhere that has some of this stuff, but I know we're spending more than the numbers add up to and there. And I had to go line by line and see, okay.
Well, that we made an annual payment for this LinkedIn membership here, and somebody else did in the org over here. So it was really like, this this, like, crime scene investigation I was trying to piece together. And the biggest takeaway that I had is even though some of the stuff was in a Google Drive somewhere, most of it was living in an email. And I've, to be frank, fallen victim to this myself where I've gotten lazy at times and just kept it all on my email and said, well, at least it's somewhere and I can look for it later.
But, it ended up being kind of like this false level of confidence that I was giving myself.
Yeah. I can only second that from a practitioner standpoint that when we had to put to back in my corporate days when and this is always I'd always worked in pretty big companies, but when we had to put together our procurement category strategies, the least pleasurable part of doing that was pulling together the spend analysis.
The one or two slides that we had to put together on spend analysis were, honestly speaking, probably the best works of fiction since Charles Dickens because you just couldn't get good numbers. You could you had a rough idea, obviously. If if the if the CEO asked or CFO asked me who who who are your top ten suppliers, I would know. But I would bet a penny to a pound that the date that the data wasn't accurate that we were presenting in there because yeah. I mean, you know what in you know what invoices you've paid the supplier, but, you know, how much of that you know, which supplier is a part of which parent company? You often didn't have that relationship within within your ERP system or within your vendor master data. And this is talking about the Fortune five hundred companies, let alone, you know, mid market or rapidly scaling tech, tech companies.
But let's go back to that rapidly scaling tech company example because I know that's a lot of Tropics client base or typically where you initially found a lot of growth.
You might get then a CFO that would say foolishly, well, we don't really care about spend. We're a juggernaut. We're a rocket ship. We're growing so fast. We can we can kind of manage that later when when growth starts to plateau.
I would obviously counter that with it's not just about costs. You know, if you're not managing your spend properly, you've got huge risk and compliance, potential banana skins that you could slip up on there. So talk to me a little bit around what would keep a CFO up all night in terms of in terms of risk and compliance, traps that you could fall into.
Yeah. I mean and the concern I would have is that people approach this just as a binary yes, no. I think the old way of, can I spend money on this, and the finance answer was just yes or no?
It minimizes the value that finance can actually provide.
And I think that includes all vectors of decision criteria or consideration. So is the money there? Is it the right supplier?
Are we getting a good price? Do we know what this tool is being hired for? How are we going to measure success?
Didn't we invest in something like this last time? Did it work out? Don't we already have this tool over here doing a similar fund? Like, so I think, the risk and security side of things is an is a vector of that consideration that if you're too narrow or myopic in how you're viewing spend management, you'll miss out on that opportunity. So I think CFOs that view it as just like a stopgap or I just need to make sure people are spending wisely, they are forgetting or neglecting the opportunity for this spend management process to change mindset and culture in the business and to empower the finance team to have a strategic seat at the table with their department heads to help guide them through the process and self rationalize.
Yeah. Maybe I don't maybe this isn't the best use of funds. Maybe there is a better alternative. Maybe I can get a better price. And so, yeah, security and risk part of it, is often neglected or we just assume the CISO will do that. And the problem is, like, risk happens, you know, one agreement at a time as people light up these shadow IT tools and they sign up for agreements that are just click through. And they don't even know what they're obligating the company to.
Yeah.
And so you need eyes on that.
That can be really scary. And so, to to everybody loves horror stories. Right? So I have a friend who, they were doing business with another company that they competed against with some products, but also purchased from them.
Like, once you get big enough as a certain size, you end up competing with people who you also buy from if you have enough product lines. And what they didn't realize in the procurement contract that they had signed up for was there was a clause that if they wanted to sell the company, the other company had to sign off on it. And so just to be, not so friendly at the end of it, the other company dragged their feet for, like, three weeks holding up the whole deal process. So imagine and many of you out there work for venture backed or private equity backed companies.
Like, the reality is you're always for sale. Okay? Like, somebody could come along and try to buy you at any time, and there can be clauses with certain vendors if they're big enough, especially if they're part of your core infrastructure, you're getting data from them that can hold up a deal if they don't sign off on it. So to me, that that keeps me up at night.
Like, what what's the ultimate doomsday scenario? And now many of these things don't actually happen, like, but it is our job as a CFO to say, well, what is the risk playing field out there?
And if the reality is that you're handing that job to someone as a side job, even if even if you are the dedicated procurement person, you're probably one of a few people in the business. You're it's probably a loan you feel like an island sometimes. You have no home. You have no place to lay your head.
Like, if even if that's you and you are an expert at negotiating, are you an expert at reading legal documents? Do you have the bandwidth to do that? So you you can't multiply your efforts doing it the manual way. It's just you can't be an expert at all of those things.
You have to employ automation to be able to solve that or something's gonna leak through. Some multiple things will leak through, and next thing you know, you've signed your company up for who knows what.
Yeah. That's a great point, actually, that procurement is often seen as just negotiation or cost management, but it's much more multifaceted than that, isn't it? In the same way that sales and key account management and customer success are all, you know, they're they're three separate roles, whereas procurement tends to get sort of lumped into one.
But but, yeah, we have supplier management. We have sourcing. We have negotiation. We have risk management.
We have all of this. That's not to mention all of the other stuff that's that's that's been dumped on us now with things like ESG and sustainability and managing diversity and every and and everything that comes more into the corporate social responsibility side. So, yeah, it's, it's a lot of work and procurement typically is is in every business, it's pretty under resourced. And that might be one of the reasons why procurement often gets accused of being a department that slows everything down or just adds red tape.
What would be your counterargument to that if someone says, you know, we don't need we don't need procurement, we need to be agile, and we need to get stuff done fast?
Yeah. I remember at one of my, first CFO roles in a rapidly scaling business, going to the founder and saying, I think we need to stand up a procurement function. And it wasn't that the founder didn't value the importance of what that could bring, but it's like, well, we're cash flow positive.
We're well capitalized. Like, that's not our problem right now. We're focused on growth and, you know, driving the driving the funnel. And it's like, it's never too early to begin that process.
And I think people hear procurement and they hear red tape, complexity, process slowdown, and they don't realize they can actually speed things up and avoid redundancy and prevent, getting intertangled with some vendor that you ought not. And so I think it's a mindset shift. It begins with a mindset shift of what even is procurement. Back to CJ's original point of, like, if you're buying stuff, which is every not every company is producing revenue, but every company is buying stuff.
A hundred percent. Yeah.
Right. You're doing procurement.
You actually do procurement before you do revenue in most places.
Exactly.
It's a good point, actually.
Yeah. Yeah.
Yeah. So I've been on the wrong end of this stick a couple of times as well, but don't punish me for saying this, but CFOs often look at procurement and and treat it as a cost center or as an overhead.
Right.
Why is that a foolish attitude very just really holistically without digging into too much of the detail behind it?
Well, I see right? Business is a it's a P and L, and the P and L is interconnected.
And we think about top of the P and L is the revenue or the profit, bottom of the P and L expenses, and then whatever is left is your profit or loss.
These are interconnected things. And so when we focus just on, well, it's just expense. So if you free up expense savings, we have a report about six percent save is equivalent to a twenty percent improvement in revenue, there's power to that. There's durability to that. It's not celebrated.
We don't view it in that way. And it there's a misconception that the dollars you free up are not then redeployed back into growth oriented activities.
And so that then speaks to the original point, which is it's too narrow of you, and it really is undermining it's undermining the role that procurement and finance at large can play in the business. Finance can be a profit generating center. If we're the ones unlocking the the levers and identifying the leakages, we're we're we're helping to drive the engine of the business.
This is like a hell I would die on too, Russell. Like, it's all interconnected here. It's not this static thing where, congrats, pat on the back, some cost savings there. It's, like, people forget.
You can take that and reinvest it back into the business. You can use that to go and hire more people who can help you build more product or generate more revenue. It's not this one time savings. And I I saw this stat that the median American company has an eight percent profit margin.
To Russell's point earlier, it's a nonlinear impact to the business of saving. So even if your revenue was static, it changes your bottom line by a different amount once it filters through. So like, this is a live living breathing organism of a p and l, but people treat procurement as, well, I save some money, so you know, one time thing, put it in my pocket, save it for a rainy day. It's like, no, that that that thing can keep working its way through the ecosystem and and give you yield.
Well, and they often Yeah. That's true.
Sorry. I was just gonna I was just gonna say that's true, but you have to be make you have to make sure then that if a saving is realized, then either you have to have a strategy of what are you going to spend that money on to drive top line growth or to make your products or innovation or whatever it might be, but R and D more attractive, or there has to be a coordinated effort then between procurement and the office of the CFO to ensure that those respective budgets are cut to make sure that that hits the bottom line. I've been in that situation in the past when I've negotiated cost downs with OEM manufacturers on spare parts for machinery and equipment, but the the savings just went into the just just flowed back into the maintenance budget and they spent it on something else.
So there is there is a coordinated effort that's necessary between finance and procurement. But to your point, CJ, when you were saying, the average American company has an eight percent margin, Russell, the six percent savings is equivalent to a twenty percent growth in revenue.
That calculation, because we actually did it together just for anyone that's listening, that was based on a company making an average of fifteen percent margin, which, which so even with that as a fifteen percent margin, which is above what the average company makes, it's still a massive difference. Sorry. I cut you off, Russell. Go ahead.
You wanted to Well and why this happens is I mean, I can think of as growing up in my career, we all would do the annual review process or the mid cycle review, and your boss would come to you and say, what wins have you generated for the business?
Right? If you're in sales or product or marketing, you speak to new bookings, you speak to customers retained, products delivered. When you're in finance, you're like, okay. Like, we stood up the system.
Like, we closed on time. We and so there's the the lack of trackability often is the problem where you're generating upside. You are every day squashing monsters as it relates to things that kill momentum and dilute margin, but no one's keeping track of it. So then after the fact, you're, like, scrambling and saying, well, no.
I can't remember the things that we did. And so part of it is just there had had not been throughout the back office of, House of Finance an easy way to track the savings that are being accrued, the benefits that are being racked up, the time that's been saved, the hassle that's been avoided, the risk that's been avoided. Think about all of the vectors of that versus all the ways we measure success on the go to market and and funnel side of things. So I think part of it is just that side of the p and l, if you will, is catching up to the top side in in visibility and trackability, And we need to shine more of a light on that.
Every business needs a way of doing that. And if you're doing it manually or no one really owns it or multiple people with multiple hats around it, like, you're not gonna be able to shine as bright a light on it. So when you go to your investors, your board, or you celebrate company accomplishments, you're gonna be back in that cycle, end of the period, reaching out through Slack. Can you remind me?
Did we say you know, what benefits did we drive for the business? And so it's not just to take credit for it. It's because you wanna understand what's working in the engine of your business. And if you're only shining a really bright light on what's working or not on the top side and you're missing out on what's happening on the operating side where you're actually spending money, you're missing out on a huge opportunity.
And you had said to engineer your business, Russell. I like that because I look at the CFO's job to be a portfolio allocator. You have only so many chips that you can put on the table, and procurement is like a character within that story or it's one lever that you have to pull. But what you're trying to do is get this engine to run as fast as possible and as efficiently as possible.
And you can redeploy those chips that you have in front of you depending on how you spend them. So I like the analogy that that you you said it's like this whole engine where you're trying to toggle it to get the most out of it. And that can also be why people take this myopic view of, like, cost avoidance. It's like, no.
No. No. I'm not trying to avoid cost. I'm trying to make this engine overall more efficient.
Right.
Yeah. And to to that point as well, it's, and you're absolutely right. Everyone measures everyone measures top line growth, and every every sales team has a CRM even if they're only only a two or three person sales team. But managing cost reduction or any sort of activity around cost mitigation, even to your point on cost avoidance, CJ, it's it's often in a very siloed Excel spreadsheet that only procurement professionals and maybe somebody in finance has access to. But if that if that message if we're not communicating our wins to the wider business, it's no wonder that there's confusion and that and that our stakeholders often don't know what we do and don't know that the full value that we deliver over and above the trying to squeeze two or three percent off a contract that's all that's virtually been awarded anyway by the time it it lands on our desk. Yeah.
James, I got a I got a question for you. So from from your seat, you probably see the word cost avoidance thrown around a lot. Is that a good or a bad way to describe an outcome? Like, how how should people come to a CFO? Is that a term that you should you should lean on, or is it kind of empty?
I mean, we I, historically, as a practitioner, have had mixed results from pitching cost avoidance to to CFOs.
I've had I've had one that, like, point blankly refused to acknowledge anything as a saving that wasn't purchase price variance. So if I was managing a category that didn't have much repeatable spend, then I kind of looked bad versus the guy that was buying direct materials that had repeat purchase orders week in week out that he could report as savings.
Most senior finance leaders these days, from what I see, are somewhat more progressive towards it now. But I think we as procurement perhaps are our own worst enemies that we tend to bucket everything as savings. And at cost of cost avoidance, we need to track it because if we didn't track it then what's on the p would pretty soon become on the l. But I think we have to be clear in our messaging to the way that we explain that to finance people because it is difficult to measure it on the bottom line. It doesn't typically hit the bottom line. It's mitigation and ensuring that budgets don't increase from one year to the next.
You know, it's kind of it's something that is vitally important to keep costs under control and to make sure that you can still get what you what you need to get without having to increase your budgets from one year to the next in terms of general inflation. But it isn't a hard saving. We have to acknowledge that. And I think also procurement has been a little bit naive in the way that they've tried to communicate that to finance historically. Yeah.
I mean but think about what is I think cost avoidance has gotten a bad rap. What's the opposite of cost avoidance?
And so maybe it's all in framing and wording that people resist because sometimes I think it's like the CFOs resist the notion of, did you really avoid cost? Like, I didn't feel the pain. And so I think it's pointing out examples where cost avoidance didn't happen, where a renewal happened that you did not intend or you overpaid for something you did not need or you'd lit you lit up a fourth project management tool in your software stack. Like, that's the opposite of cost avoidance, and it's real, and it's happening in every single company.
Yeah. It's kinda like saying I didn't maybe get a cold.
Yeah. Right.
Leslie in the chat said, I do the avoidance against the budgeted amount slash line items and how we achieved it through cleanup or scope reduction, and then if we capped increases. That's good. I really like the last part of that, if we capped increases. Mhmm.
Yeah. And against budgeted advances, particularly popular if you're buying anything that's considered capex.
So if you're buying a new facility or a new production line or or or any sort of major construction project, that's typically how we always reported savings as well. I used to buy capital equipment many moons ago. So so before we move on, Russell, what are some easy wins here?
You know, if you if you if you could give top two or three easy wins in terms of in in terms of being able to show some benefit here.
I think it begins with resolving that focusing on spend management matters, that it's a worthy endeavor, that it can be bigger than just saving money on the next supplier agreement. So a quick win would be broadening that. Bringing your leadership team along on the journey to say, like, how we all spend money as a business matters equally as how well we're doing in driving the top of the funnel. We need a similar amount of passion, instrumentation, visibility, and celebration on that part of the business engine.
That would be number one. Number two would be quick wins, like, begin creating that visibility, that single source of truth of all of your spend data and identify who owns what, how's it being used, what when are the contracts up, because it begins there. This is a data this is a data exercise. Data feeds this process, this engine.
That's how insights get uncovered. That's how the benchmarks are performed. And so you've got to take those initial steps of resolving it's important and beginning to assimilate and aggregate the information.
Got it. Okay. Let's move on now and talk a little bit about how the changing face of procurement is, is is becoming ever more present. And by that, I mean not only more rounded individuals that are working in procurement that are not just working as a back office function, but are becoming more strategic. But also, obviously, the tech comes into this too in term in in terms of enabling that headcount and that resource to be able to maximise their impact in the most effective way. Let's start off by busting one of the common myths and that is that procurement tech is only designed for large corporates and it takes a year to implement.
Why is that no longer true?
Do you want me to take a swing at that?
Yeah. You're a vendor, so you're probably best off doing that.
Yeah. So, I mean, I think it be it begins with the process of misunderstanding what is procurement, and it begins with procurement is buying things.
And everybody's buying things, and you're buying things every day. So why not inject more rigor and, protocol and scrutiny to the things that you're buying? So it's it's debunking the myth that it has to be painful. Also, procurement, spend management has grown up a lot over the past several years.
As Tropic, we're a huge part of that.
The ecosystem is more robust and with the advent of AI, even more so. And so the tools are far more capable of doing things that save you time and make it not so much a hassle. You know, think, for example, the ability to ingest a contract through o OCR and and optically grab all the metadata off that contract, tag it into the system, run a compliance check, and see if it violates anything that you decided as a business is important to you, flag that, recommend, you know, remediation through email. Like, we're there now.
That's how far we've come and evolved. And so it's bringing people up to the speed to the fact that we can do that. I mean, I've been on the phone with customers that are like, wait. You can do AI invoice matching?
I didn't know you could do that. And so even within our own customer base, things are evolving so quickly that it's just hard to keep up sometimes at how quickly this space of spend management is is really growing up.
Yeah. I would only echo that. I mean, I think from my obviously, this is an area that I specialize in in terms of looking at different areas of procurement tech. But, oh, it looks like we lost CJ. I guess it'll come back on.
So He didn't like something I said.
There are there are two there are two core ones that I see. The first one is it gives us better market intel.
Historically, the seller, the salesperson from the supplier always had better data or always was able to prepare better for negotiation than procurement because they just had more access to the tools. So market intel is the other one.
The second one, and probably the the most important one if we look at resourcing and headcount, is just time and operational efficiency.
Whether that's having people in in in DevOps or in in marketing or in product that that are that are buying stuff that they shouldn't really be lumbered with, or if you've got an existing procurement team and they're just not leveraging their capabilities to their best effect because they're spending between a third and a half of their time on admin. And that even happens in large corporates. You know, back in my day, I was probably spending about a third of my week on stuff that I could have outsourced to an admin assistant that I could hire on Upwork or Fiverr. So, they're the biggies.
I'm going to introduce a question now that was, that's been in there for a while but I was looking for the right opportunity to bring it in. This is from James Nicholas. Thank you for your question James. So James's question is, I'm curious what steps is procurement as a function taking to leverage AI to optimise and automate processes and to proactively prevent bleeding money?
And then the second part of that question, so maybe CJ if you can take that first part. And then the second part, Russell, which is probably best for you is, does Tropic offer open APIs that would allow for data access or skimming to identify AI automation opportunities?
AI is great, but it's pretty useless if you don't give it context and you don't place it within a workflow that meets the customer where they wanna transact, for lack of a better term. And so it kinda goes to what we were discussing a second ago about why why has adoption historically been so painful? And it's because the systems that we were tasked with using are the only thing we had at our disposal where these huge monoliths, these huge systems that, like, were a huge learning curve to to get up to speed on and to figure out the ins and outs. Took a while to implement them so they would hook up to your, ERP, the other system of record.
And now we're we're finding that you can create lighter weight solutions that get you up and running faster because, they're they're more extensible. Zatropic's an example of that. But I I truly think the larger the larger theme here is the future of finance is gonna be modular in many ways, where you can pick best of breed for your size. You don't have to go out and get the eight hundred pound gorilla at first if, like, you're a fifty person shop. Like, that's just unrealistic. So you can now bend the software or choose the software that fits that fits you best. But when it comes to AI, like, you have to be able to give it the appropriate context, which starts, I think, at the contract level.
Yeah. We do offer APIs.
We integrate with various systems. But I think there's even more to the underlying that question, which is, like, you know, what is our view of how we're how we're ensuring that our use of AI is driving value? And to CJ's point, it's very much in the context of as you do your work in going about buying things, where is there a lot of administrative burden?
Where is there a lack of bandwidth?
Where are repetitive actions?
Where are opportunities to surface insights quickly that take you a long amount of time? So all of those are places where we are already employing AI within the workflow, within the context of using Tropic. And and sometimes, the user is not even aware that they've just been AI'd, and that something magical has happened behind the scenes to make that process faster, more efficient to feed the next step. Other times, you're literally going and asking AI a question about, you know, how many contracts are up for renewal in the next ninety days, or am I getting a good price, or how do I negotiate with this supplier, or, are there any violations to my risk and security checks, for this particular agreement?
All of that now is empowered by AI. But if you just hopped out onto Google and use chat g p t to do that, the problem with that is CJ's point. The parameters are wide open. It's not trained on knowing the context of your business.
It doesn't have visibility into other things you've attempted and how those suppliers are behaving. Like, it's way too broad. It needs the richness of all the years of experience, the human led experience, combined with the power of data, with models that have been trained, specifically tuned to get after that item that you're solving for while going about doing your everyday job of buying things.
Yeah. A hundred percent. It's also it's also about what data you're feeding it as well. There was once a famous phrase from I think it was a chief procurement officer of Deutsche Telekom, the national German, telecoms company in Germany.
And he said if you digitise a crappy process, you get a crappy digital process. And I think there's a there's a lot of truth in that. So it depends on the data that you're feeding it, and it also depends on your attitude and mindset towards how you're going to use it as well. Because if you if you're just going to wave a magic wand and hope that AI is going to fix all of your underlying problems, AI is not going to fix toxic business culture, AI is not going to fix having apathetic stakeholders, AI is not going to fix not having all of your suppliers properly managed and under contract.
So it can give you a lot of insights and it can save you a lot of spade work, but it's not going to be the knight in shining armour that's going to be the silver bullet that can fix all of your woes. So it is it does require some prep and planning before you can get the most out of it.
With that being said, it's getting much better at being able to read and understand and take unstructured data and make sense of it, isn't it?
Oh, yeah. It's I mean, how quickly it's evolved just in the in the past several months is is mind blowing. I mean, even, like, transparently, like, I'm in Tropic today. Right?
Using it myself as CFO. I ask it a question, and I was telling up here, I was shocked at how good the answer was. I was like, that's really spot on. And it it was a question about budget processes and variance analysis, and it it it gave me a good answer.
The quickest way to lose trust in a new process is when it gives you a bad answer. Right? And that we see that with AI. You in the beginning days of chat GPT, we would call it hallucinating.
Right? It would hallucinate by giving you this wacky answer or image that had nothing to do with what you were asking.
So It still does.
Right? Yeah. And it and it still very much can. So within the constraints of the data environment that has all of the context of process and your specific setup, it's it's more likely to yield far richer results that are that are actually useful, and that CFOs are more likely to adopt.
I've seen a comment in the chat from from Daniel. He's saying he's from a nonprofit in in New York City, and he's saying adoption has been difficult. So this resonates.
To Daniel's point, do either of you have an example of maybe a pilot project or a small step or a simple automation that can make a big difference and be the use case that sort of perks everyone's interest that can then lead to looking at looking at bigger and better stuff as as as you start to build trust and and and get that snowball rolling?
I think use cases around quick communication because, like, procurement is difficult to talk about with people if you're just gonna drop them into a process and, like, not teach them what the vocabulary is, etcetera. So simply just, like, integrating it into how you talk, whether that's Microsoft Teams or Slack. Like, going through and just yay or nay to Slack approvals has been big for me, and that's, like, a workflow integration.
But I I think a lot of a lot of these wins are dependent on how you communicate, why you're doing something, why it benefits the person themselves who who's participating. Right? Because at the end of the day, people are inherently a bit selfish. Like, you wanna help the org, but, like, how is this gonna make someone else's job easier? How is it gonna save them time?
So that's what I would stress.
Yeah. And in the nonprofit world, you want to make good use of donor funds, and you want to give them assurance that you're spending those donor funds wisely no differently than in the for profit world. But it's interesting how the mindset is often different, especially internally within the nonprofit organizations, but all the more because you're reliant upon, not deep pocket PE or VC firms, but donors themselves. And so spending wisely is one could argue in a nonprofit, spending wisely is even ever more important. And so just creating that shared vision around why spend management matters, particularly to make good use of donor funds, I think, can also and that's not related to AI or that's not even a fancy answer about technology. That's more of a mindset.
That's a principle, a philosophical answer.
Yeah. And I I liked your point, CJ, around and I and I think this echoes what often procurement tech companies are starting to do even more now is to to meet the user where they're at. And and if that's Slack or Microsoft Teams in most companies, if you've got if you've got an intake tool where a requisition or a user will go when when he or she wants to buy something, it's going to be a hell of a lot easier to integrate that into whichever app that you use for for day to day communication. It used to be Skype for Business back in the day when I was in corporate. Now it's Microsoft Teams or Slack depending on on the organization usually. But having some sort of front end in there that that punches back into your system, that's a game changer in terms of user adoption, isn't it?
Yeah. And and just to use another, I guess, comparison to another point in the tool stack. I bet I bet many people on the webinar have used FP and A tools, and they failed because it forced everybody in the department to log in to a tool that they've never used before on some website, or maybe it wasn't even cloud based. And it's like, now changing behavior around budgeting is hard enough, and now you wanna force them to use this license of this tool. It's like, that's kind of backwards if you're striving for adoption.
Yeah. I I remember distinctly at a previous company, not the current one, trying to deploy a democratized FP and A tool. So excited about it. Hired the tool. Started to instrument it. And the COO said, I refuse to have my people in a budget tool.
Period, in a sentence. And, like, that's where the conversation stopped. It's like, woah. How do I pivot from that?
And so I think it's sometimes it works best when it's it's the what's in it for me Yeah. When people can see that seeing the background of a request prior to getting to them without having to email, call, right, scour the information, that's already saving them some time. And so the process itself needs to be a giver, not a taker. It needs to give someone more than it's taking from them.
And I think that's the the hope of how all of this is evolving with the advent of AI and the interconnectedness of tools and the combining that with data and expertise that it's giving more than it's requiring.
That was the moment for me because, like, I remember there was this request that came across for more Salesforce licenses, and it was under a certain threshold that we had already said. And, my head of FP and A call and picked it up. And I saw it, like, later, like, okay, that would have taken me ten or fifteen minutes to go through and research and stuff, but, like, we set up a process where somebody else took it off my plate. Nice. I didn't have to do that.
And Russell, just on the FP and A thing, another nightmare, and this is, like, also a comparison to how if you don't do procurement right, we had this tool. And even though we had it before every budgeting conversation with the CMO, he would say, hey. Can you just export that to Excel for me?
Mhmm.
So it's kind of the same sentiment when you're using a procurement tool. Like, it's only as good as, like, you, you know, giving the person an on ramp where they're happy enough to use it.
Yeah. So we've covered a lot there in terms of meeting your user where they're at and what's in it for them and and making it the least the least point of resistance. Are there any other tips that you would add to that in terms of getting started and making sure that it doesn't create overwhelm or confusion, particularly maybe around sort of internal comm strategies or how you how you look at the change management piece?
Yeah. I think deciding your delegation of authorities, your approval thresholds, who needs to be involved in what, and really, like, evaluating doesn't even make sense. Sometimes every company has some form of that, but they often aren't revisited.
We recently revisited ours, and we were like, wait. It shouldn't take we recently posted on LinkedIn about, our head of procurement buying a microphone and it taking fourteen steps because our own internal process was ridiculous. And so I think, just evaluating what is the right level of touch for the right groups, who needs to be involved, which things can run through really fast, which things do we need to really get eyes on and scrutinize, and dialing that in in your business can pay great dividends.
Yeah. To Russell's point, picking out a couple of things that you're gonna green light or per se, like, just, like, make way easier for people that helps you point to wins. Like, hey. Remember, you know, it used to take you this long to do that? Like, that we took away that thing. So, like, show show demonstrate that you've removed some roadblocks even though you're bringing in a new system just to make it real to people.
Love it. Okay. Thank you, gentlemen. So just conscious of the time, I'm going to move on now to we've just got over ten minutes left. I'm going to move on to the Q and A. So if you want to ask a question, just pop it into the Q and A section. We already already covered the one from James.
There's one more that's popped in. Okay. This one is from Oscar Fernandez.
Thanks for your question, Oscar.
Okay.
So he's asking: if departments are measured purely on revenue generation while cost savings quietly evaporate into other budgets, Isn't the real issue one of mindset and accountability not having the right tool to track spend data or savings? How do you propose we fix what we measure before we invest in new tools to measure it better? Yeah. It's a great question.
I I love the and I love quietly evaporate.
It's very I can picture it That was poetic.
That was like a haiku, I think.
It was very Oscar has a great way with words.
And I agree wholeheartedly, but I would also say I don't see these as dichotomous.
I think it does begin with the philosophical alignment and understanding of what needs to be measured, why are we measuring it, what's the importance of keeping an eye on this. And then, by the way, it really helps if you have a way of measuring it and a tool to automate that. Because back to my previous point, even if you align on what's important to measure, or the mindset is all there, then you're scrambling through emails and slacks and shared drives and spreadsheets and just trying to rely upon remembering it all. So why not stand up a tool that also makes it easier, to track and measure in real time?
And it creates a flywheel because to CJ's point, if the tool helps keep it top of mind and visible and trackable, it reinforces that positive behavior. Look at how good we're doing. You know? Oop.
Here's a reminder. Oh, yeah. I need to go in there and address this one. So it creates that positive reinforcement to keep doing the right thing, and there's inertia to that.
CJ, anything to add, or should I move on to the next one?
I I think he put a bow in a ribbon on that one. That was good.
Okay. I've got one then just as the last question. So there's not the the the there's no more that have come in, but I did have one that I wanted to ask. And this kind of goes to so I'm handling on a webinar in in about three weeks time with a with another software vendor that's in the supplier relationship management space. And, that is typically a harder sell to the to the CFO than than something that that that tracks business spend management or or intake and procure to pay.
Other than cost savings, if we're moving towards procurement being more of a value driver as a as a and a profit center to the business rather than a cost center, other than cost savings, how do you calculate then ROI in a procurement tool, especially if you're at a stage that, you know, maybe you don't even have that much spend in your organization, but you wanna you wanna get the tools in place early and do the and do the hard hard yards now before you've got, you know, hundred, two hundred person organization to fight against to get something through.
So other than hard dollar cost savings and the previous conversation about cost avoidance being, is it a good term or a bad term, you're saying those two are not options to the answer?
No. I think cost avoidance is is is is relevant as long as you can as long as you can get finance to buy into it. I I I certainly think it's relevant.
I would look at number of applications per person and check it each quarter as a ratio and see if that's going up or down.
Russell, didn't you have a crazy stat about how many tools you're using per person at the private company?
Well, it was the previous company where it was like, why do we need a procurement person? And my answer was, we actually have more tools than we have people.
Yeah. That's what it was.
And I realized as I've gone as I've journeyed through various other orgs, that is almost a true axiom as you're going up, you know, up until, I don't know at what point, two hundred and fifty employees, three, four.
But you see that's more common than you would realize. You literally have, like, two point something whatever tools per employee. That's very eye opening. It's like, wait. What? Are you serious? Or cost per, you know, software cost per employee.
My favorite financial metric is revenue per head, just because it cuts through all the noise, and you can measure leveraging your model over time. Like, I also like to look at Yeah. Applications per head. And we would also look at how much you're spending in dollars in app in applications per person in each department, and we'd match that up.
Like, okay. Yeah. Well, the engineering department may have more, but, like, it definitely shouldn't be more than what we're spending on finance per head, things like that. So there are different ways.
I don't think there's, like, one metric overall, but, like, how do you get signal from all of them just to know that it's getting better over time?
Yeah. Or even a post mortem on a request that was done the old way. How many touches, emails, calls, back and forth I like that. Hours that it took.
I mean, previously CFO of Calendly, Tope founded Calendly to try to save the hassle out of scheduling meetings, that back and forth. This is really no different. It's saving the hassle out of the back and forth of buying things.
It's actually no different. And so how you can get your arms around that is agreeing to, yeah, that was a pain in the rear doing that the old way. We couldn't reach each other. We were trying to find time. We had to set up a meeting to talk about it. And so kind of retrospectively looking at one that didn't go so well is another effective means.
Yeah. I I like the revenue per head example. And, I I read I don't know where I read this, but I'm I'm guessing it's true that OnlyFans is, like, massively one of the most successful companies out there in terms of the amount of revenue that they have per per per employee.
Another great metric is effective hourly rate. If you know, you're a tech company, Russell, right? So if you're looking at what the average salary is of someone on your devs someone on your devs team or even on your product or marketing team, when you look at what their average what their hourly rate is, when you divide their salary by forty six, forty seven weeks and then divide it by eight hours a day, is it a good use of their time for them to be doing transactional purchasing? Probably not. What else could they be doing to drive top line value in the time that they're spending purchasing what we would call in in in procurement parlance, tail spend items.
Yeah.
James, who asked the question earlier on, has has popped up with with a bit of a follow-up to what he was asking. So he was saying to add some context, I'm curious whether procurement teams are starting to integrate data from multiple applications to make AI chat interfaces more powerful. So for example, if AI had API access to tools like Coupa, Salesforce, and Tropic, You could hypothetically build a much richer vendor profile via AI, how long we've worked with them, total spend, whether they're also a customer and their size, what others are paying for similar SKUs, and how competitive their market is.
Is this something that's already being discussed or implemented, or is it still too early? I'm not sure, James, if you're referring to Tropic incorporating that into their product roadmap specifically or or more or more generically towards the procurement tech market. But I'll I'll pass that over to Russell first.
Actually, he's saying generic. Okay.
Yeah. I mean, so AgenTic Services is all the rage. How you do that in context in the back office of the CFO with all these interconnected tools is a great question.
The right use of agents, I think continues to be a question for you know, I've I've spoken, I think, CJ, on your podcast perhaps about this notion of AI doing ingestion, analysis, prediction, recommendation, nudge, and do. And the recommendation, nudge, and do the do part is where people freak out. And so I think it depends what all of these systems talking to each other and AI doing equals for for CFOs out there. Because if it equals literally firing off the contract without any eyes on it, they're not gonna be okay with that. If it equals surfacing things that, through these various systems integration, yield a faster, richer, more robust response, I think we'll see that continue to evolve and and be adopted in the days ahead. And we are rolling out more exciting things on the AI front. You'll hear more about that in the days ahead, but I won't steal the thunder of my product marketing organization or they'd probably, be upset with me.
Okay. So just conscious of the time, we've only got about a minute left. So a couple of things before we wrap up.
So as I hope you've seen, spend can happen really, really fast, but getting it under control often doesn't happen overnight.
And anyone can take a big leap forward without necessarily investing hundreds of thousands of dollars into legacy procurement technology. Take some small steps, maybe even experiment with a couple of no code tools to dip your feet in the water first. And then if, if you get it, if you're really serious about getting started with spend management, then I'm sure the Tropic team will point you in the right direction and would be happy to show you a demo.
Tropic will follow-up with an industry report on this that gives some deeper insights to everyone that's joined today.
And yeah, Russell, maybe if you want to just say some closing words around how people can get in touch with your team if they would like to learn more about Tropic.
Yeah. We're at tropic app dot I o.
All everyone that's attending will probably receive feedback from us, and we appreciate everybody joining the conversation and continue to spread the word. Spend management is worth doing. It's worth doing well.
Partner with an expert at that. Heather dropped a link to our website right there for more information about us. But, otherwise, appreciate everybody's time.
Likewise. Thank you everyone and for the questions as well. Really great to get a lively audience and to be able to pop some questions to the audience. So thanks everyone for joining, and have a great rest of your afternoon. Cheers.
Thanks.
