Delivering Profitability Through Indirect Procurement
When CFOs think about increasing profitability, they often turn to core revenue drivers and direct procurement strategies. But there is an equally significant, often under-explored area that can yield measurable gains: indirect procurement. For mid-sized businesses, optimising indirect procurement can lead to significant cost savings and better bottom-line performance.
In this post, we’ll explore five strategic ways CFOs can tap into the potential of indirect procurement, transforming it from a back-office function into a powerful lever for profitability.
Partnering with a specialist indirect procurement service can be a game-changer for mid-sized businesses looking to improve profitability. By bringing expertise, advanced tools, and a more strategic approach to spending such a partnership can address many of the challenges CFOs face in indirect procurement.
Centralise Data for Full Transparency
One of the biggest challenges with indirect procurement is visibility. Unlike direct procurement, which often has standardised systems and clear line items, indirect spend is typically spread across multiple categories—think IT, marketing, HR, and general office expenses. Without a centralised system, it’s easy for these costs to become fragmented, under managed and overlooked.
To increase transparency, CFOs should consider centralising indirect procurement data. This means consolidating spend across departments into one platform or system that tracks every dollar spent on indirect costs. Not only does this help identify unnecessary or redundant expenses, but it also allows for a holistic view of spend patterns across the company.
Specialist services come equipped with sophisticated procurement tools and knowledge that can centralise data across departments, vendors, and spending categories. By providing detailed visibility into all indirect costs, it is easier to track every pound spent. With better visibility, CFOs can make more informed decisions and work with their partner to quickly identify areas of potential savings and implement program for delivery.
Partner with Key Suppliers for More Than Discounts
For many businesses, the approach to indirect procurement is to source the cheapest products and services that fulfil their needs. However, focusing solely on price can limit the value these suppliers bring. Instead, businesses should value their best suppliers as strategic partners, working to establish relationships that yield long-term benefits.
When negotiating with suppliers, consider looking beyond discounts. Negotiate for extended payment terms, value-added services, or bundled deals that add flexibility and cost-efficiency to the partnership. Strategic supplier relationships can lead to better service levels, access to innovative solutions, and potentially even joint ventures that align with your company’s goals.
Our indirect procurement Subject Matter Experts have established relationships with a broad network of suppliers, which gives them negotiating leverage that an individual company may not have. They know how to negotiate for favourable terms that go beyond price, such as payment terms, quality guarantees, or additional services.
Because our specialists focus solely on procurement, they understand the nuances of the market and can secure terms that deliver long-term value rather than just cost reductions. They can also implement and conduct regular supplier performance evaluations to ensure suppliers remain aligned with business goals.
Automate & Streamline Procurement Processes
Manual processes are still common in indirect procurement, where smaller purchases may lack formalised systems and workflows. But these manual processes are costly in both time and resources. When procurement teams are bogged down with repetitive, paper-based tasks, they lose time that could be directed toward strategic planning.
By automating workflows, CFOs can ensure a smoother, faster procurement process. Automation in approval workflows, purchase orders, and even vendor selection processes can lead to quicker decision-making and fewer errors. Not only does this reduce costs, but it also improves productivity and helps teams focus on higher-value activities.
Our indirect procurement services bring process efficiencies to the table by leveraging automation, streamlining workflows, and industry best practices. We help eliminate manual tasks, speeding up procurement cycles and ensuring compliance with policies. With automation and refined workflows, these specialists can reduce the time and cost of managing indirect spend. They help standardise processes across the organisation, so teams spend less time on administrative tasks and more on strategic initiatives.
Develop a Cost-Conscious Culture Across Departments
Indirect procurement involves almost every department, which means that the habits and attitudes of all employees affect the company’s bottom line. A cost-conscious culture can help mitigate unnecessary spending by encouraging employees to think carefully before making a purchase or approving an expense. This cultural shift doesn’t mean compromising on quality; rather, it’s about raising awareness around the impact of indirect costs and encouraging teams to think strategically. CFOs can drive this cultural shift by engaging department heads and stakeholders on indirect costs, creating clear spending policies, and promoting responsible spending practices throughout the organisation.
Our specialists can provide training, resources, and best practices to help foster a cost-conscious mindset across departments. They educate teams on procurement’s role in profitability and how smart purchasing decisions can positively impact the company’s bottom line.
Leverage Data Analytics to Identify Trends and Optimise Spend
Data-driven decision-making has become crucial in all areas of finance, and indirect procurement is no exception. Leveraging data analytics can help CFOs gain insights into spending trends, forecast future needs, and spot areas of waste before they impact profitability. For example, by analysing spend data over time, CFOs can identify vendors with increasing costs, detect seasonal spending spikes, or uncover patterns of duplicate spending. With these insights, it’s easier to renegotiate contracts, consolidate vendors, or adjust budgets, as necessary. Data analytics also helps ensure that procurement strategies remain aligned with the company’s broader financial goals.
Indirect procurement specialists use advanced analytics to monitor and analyse spending patterns, helping CFOs identify opportunities for cost savings. They also provide benchmarking data to compare costs with industry standards, ensuring that the company is competitive and efficient in its spending. Our procurement specialists have access to more comprehensive data sets and specific benchmark data, allowing them to deliver insights that go beyond internal analysis.
Additional Benefits
Access to Category-Specific Subject Matter Expertise
Indirect procurement covers a wide range of categories—IT, facilities, office supplies, marketing—and specialists often bring category-specific expertise that many in-house teams lack. They know the specific factors that drive cost within each category, which can lead to more targeted savings.
Scalability and Flexibility
Specialists can adapt to the business’s needs, whether the company is in a rapid growth phase or looking to streamline spending. They can adjust the scope of their services to match changing business conditions, which allows mid-sized businesses to avoid overcommitting resources.
Focus on Core Competencies
By outsourcing indirect procurement to specialists, internal teams can focus on core business functions and strategic finance initiatives. This helps CFOs and their teams dedicate time and resources to initiatives that directly drive growth, knowing that a trusted partner is managing procurement efficiently.
Driving Profitability
Whilst indirect procurement may not seem like an obvious driver of profitability, it represents a considerable share of costs that mid-sized businesses can optimise. By implementing these strategies, executive teams can unlock a significant potential for cost savings and efficiency improvements. A proactive approach to indirect procurement can transform it from a back-office function into a competitive advantage that supports long-term growth.
By focusing on visibility, partnerships, automation, culture, and analytics, CFOs can lead the way to smarter, more strategic indirect procurement practices. The result? A leaner, more profitable organisation that maximises every pound spent.
Using a specialist indirect procurement service gives CFOs a strategic edge by leveraging expert knowledge, advanced tools, and established processes that optimise every aspect of indirect spend. With the right partner, mid-sized businesses can not only improve profitability but also gain flexibility, insight, and support that foster sustainable growth. By alleviating these challenges, a specialist service turns indirect procurement into a dynamic driver of value across the organisation.
We’re proud of the clients we work with and the projects we have completed. The savings and service improvements we have delivered have helped many companies add value to their bottom line. Our average ROI remains 5:1 across our client engagements. If you want to find out how we can make a difference to your business start the conversation.
