Monitoring Consulting Spend: 6 Tips for Confidence & Peace of Mind

by | Apr 20, 2023

Much like a sculptor chipping away at a block of marble to reveal a masterpiece, monitoring consulting spend and conducting a rigorous spend analysis helps in chiseling out your company’s financial elegance.

It is by understanding where your resources flow, by constructing that foundational baseline, that you can then marvel at the trajectory of your progress.

 “Analysis is the art of creation through destruction.” – P.S.Baber, ‘Cassie Draws the Universe’

This isn’t just number-crunching for the sake of it; it’s akin to setting the stage for a financial ballet where each dollar pirouettes with purpose.

Dive in, and let’s choreograph your financial performance, so it receives a standing ovation every quarter.

#1. Establish Your Guidelines – Navigating with Purpose

What are you aiming for? In the world of business, ‘going with the flow’ can sometimes result in unexpected whirlpools.

Just as a sailor doesn’t set sail without a charted course, you shouldn’t approach your consulting spend without a target.

You might opt for a flexible goal, perhaps staying within a certain percentage of revenues. Alternatively, you could choose a strict, fixed target.

Now, here’s the tricky bit: many companies often sail the vast financial ocean without a reliable compass, adhering to a “We’ll see where we go” mentality.

Or even worse, they might lazily replicate the previous year’s budget with a subtraction of X%. But here’s the catch – not all departments or groups within your organization will have the same consulting needs, and these needs can shift dramatically year-on-year.

For instance, if your company is in the thick of a transformative phase, it’ll inevitably require more guidance from external consultants than it would two years into the transformation.

By establishing clear guidelines for various segments of your Consulting Expenses, you’ll gain clarity on the expenditure levels, anticipate performance, and forecast returns on investment.

In doing so, you ensure that you’re not just spending but investing every dollar with a clear, purposeful vision.

#2. Prioritize Consulting Projects for Maximum Impact

In the dynamic world of business, every endeavor begs the question: “Is this worth it?” Consulting projects, with their varied scope and potential outcomes, are no different.

They come in different shapes and sizes, and not all are created equal. While some might promise skyscraping aspirations, others deliver tangible, immediate value.

Here’s the golden nugget: rather than spraying your efforts everywhere, concentrate on those projects that pack the most punch. These can be:

Strategic Projects: Those that align with your organization’s long-term vision and mission.

Enabler Projects: Not directly linked to immediate gains but set the stage for bigger, more strategic initiatives down the line.

Quick Wins: Projects that promise tangible benefits in the short term, such as cost savings or a swift spike in sales.

Now, this isn’t to say you should ignore projects that don’t fit neatly into these categories. After all, today’s strategic move might be preparing the groundwork for tomorrow’s game-changer.

However, especially when funds are tight, it’s crucial to channel resources where they can make the most significant difference.

In essence, think of your consulting projects as investments. And as with any wise investment strategy, the aim is to maximize returns.

So, when allocating funds, always ask, “Where will this bring the most value?” Investing wisely today can pay significant dividends tomorrow.

#3. Segmenting the Expenses Will Give You the Real Picture

There’s a common pitfall in business analysis: drowning in a deluge of data. When staring at the grand total of your consulting spend, it’s akin to trying to decipher a novel written in Morse code. It’s all dots and dashes until you break it down and interpret the segments.

Segmenting is the magnifying glass that brings clarity. Instead of a massive lump sum, you see individual patterns and narratives. By categorizing your expenses, you can identify:

Size Matters: Distinguish between small-scale projects and mammoth undertakings. Each comes with its own set of dynamics and implications.

Strategic Significance: Some projects are your crown jewels — core to your strategic direction. Others might play a supporting role. Knowing which is which helps prioritize.

Who’s in Charge: Different teams or groups might handle procurement with varied efficiency and effectiveness. Segmenting by this criterion can spotlight where the process excels and where it might need a tune-up.

And if you’re venturing into the realm of Demand Management, these segments should be your guiding stars. They’ll help ensure that the criteria you set resonate with the nuances of your organization.

Remember, in the world of data, breadth without depth can be misleading. Dive deeper, segment wisely, and let the true narrative of your Consulting Spend unfold.

Monitoring consulting spend effectively

#4. Tracking Beyond the Big Tickets: The Sneaky Weight of Tail Spend

There’s a deceptive belief that floats around boardrooms: if it’s not a mega-project, it’s not worth monitoring.

Companies, quite frequently, pay undivided attention to the towering expenses that make their way through the centralized Indirect Procurement group. And it’s understandable; these are the behemoths that demand attention.

But here’s where the plot twist lies: while everyone’s eyes are on the giants, the smaller projects, often overlooked, are busy accumulating in the background. This is what we call ‘tail spend’.

Think of it as the silent leak in your budget bucket – not always noticeable, but given time, the consequences of the oversight can be substantial.

Ignoring tail spend is akin to dismissing pennies while chasing dollars. It’s the accumulation of these ‘pennies’ that can quietly gnaw at your budget. Thus, integrating all Consulting Expenses, regardless of their size, is crucial.

Now, while it’s vital to keep an eye on these, it doesn’t mean turning your procurement process into a bureaucratic maze. That’s a trap many fall into. In our digital age, there’s no need for tracking to be synonymous with slowing down.

Use digital tools wisely. They can offer the panoramic view that procurement needs without making them the unintentional obstacle in your spend management process.

#5. Build a Monthly Dashboard

It’s surprising how often the obvious gets overlooked. And this is a shout-out to one such underrated champion: the Monthly (or, if you’re more the quarterly type, Quarterly) Dashboard.

Now, why is this dashboard so crucial? Because Consulting Expenses love to throw surprise parties, and not always the fun kind. They’re notorious for their seasonality – coming in like a lion at the start of the year and then going out like a lamb towards the end.

Beware of that deceptive lull; it’s easy to think you’re riding the wave perfectly, only to realize you’ve consumed most of your consulting budget in a short time. And then what happens when a sudden, pivotal project emerges from the horizon? It’s always prudent to have a little treasure tucked away for such rainy days.

But the magic of the dashboard doesn’t end there. Monitoring isn’t just about tracking what you’ve already shelled out. It’s equally vital to keep an eagle eye on pending engagements – the ones that are yet to make a dent in your coffers.

Because, trust us, the only thing worse than an end-of-year surprise is an end-of-year financial surprise.

And while we’re on the subject of dashboards, let’s talk digital. A dashboard in this digital era should be more than just a static report. It should allow you to slice, dice, zoom in, and pan out. The ability to deep dive into your data on a whim? That’s not just a feature; that’s a superpower.

#6. Make Data Your Strongest Ally

Jim Barksdale once quipped, “If we have data, let’s look at data. If all we have are opinions, let’s go with mine.” It’s a funny quote, sure, but the underlying message is pure gold. In the fast-paced world of business, data isn’t just numbers on a spreadsheet.

It’s the backbone of informed decisions, the compass that points north when navigating tricky business terrains.

A recent study from the MIT Center for Digital Business threw out some intriguing numbers: companies that are driven by data boast a 4% increase in productivity and rake in profits that are 6% fatter than their less enlightened peers.

Yet, bafflingly, a significant number of business leaders still prefer to ride the wave on instinct rather than empirical evidence.

Now, don’t get us wrong. Gut instinct has its moments in the sun, but why rely solely on that when you have a treasure trove of data at your fingertips? Especially in an era where digital isn’t just a buzzword; it’s the zeitgeist.

It’s the lens through which businesses view the world, and those who wear these glasses tend to see more clearly, act more decisively, and reap the rewards.

So, in a world where ‘Digital is the new black,’ think of data as the chic accessory that never goes out of style. Deck your business decisions with it, and watch as it complements and elevates every move you make.

Conclusion: Monitoring Consulting Spend

Diving into the world of monitoring consulting spend isn’t just about crunching numbers—it’s crafting a masterpiece.

With every brushstroke of strategy and nuance of technique, you’re painting a clearer picture of financial prosperity. Don’t just aim for satisfactory; strive for the spectacular.

Whether you’re laying down the first layers or adding finishing touches, arm yourself with these insights and watch as mastery becomes less a goal and more a given.

And, in the spirit of encores, always be ready for the next show-stopping performance in your financial theater. Take a bow!

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Monitoring Consulting Spend: 6 Tips for Confidence & Peace of Mind

How Consource Can Help?

Consource offers a smarter, more efficient way to manage consulting sourcing, by managing various complexities of the industry, including spend management as well as managing the tail and ensuring optimal results.




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