BidEnergy Insights

So, you want to be energy-agile? Talk to finance.

Posted by Stuart Allinson on 10-Oct-2017 13:05:57
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Organisations are feeling the intense heat of digital disruption and are increasingly realising that, in the face of this, they cannot remain stagnant. 

The need for agility is of growing importance; companies should be able to adapt rapidly to market and environmental changes. Yet, when it comes to energy, few organisations can execute on this objective - despite significant changes in their sector and a near tripling of wholesale energy prices.

The need for agility is of growing importance; companies should be able to adapt rapidly to market and environmental changes.

Boards have experienced the excruciating pain of unbudgeted energy price rises or are about to do so as they look to re-contract their suppliers. Many have asked, “How did we not see this coming?” and “What can we do about it?” All too often, these same organisations want to become energy-agile but face internal barriers, or are expecting their current inflexible processes to somehow deliver a different outcome.

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The key to energy-agility is a seamless integration between procurement and finance. This integration can be achieved by focusing on four key activities:

  1. Data collection that is prompt and precise.  

    Many organisations have outsourced their energy data to consultants who operate largely manual processes. As a result, these Manually Constrained Businesses (MCBs) are forced to trade-off between speed and accuracy. Speed usually wins, at the expense of short cuts, limiting the granularity and accuracy of the data which, in turn, adversely affects reporting, analytics and procurement. While speed is critical to agility (whether it is mobilising to go to market or gaining valuable business insights that can be prioritised and actioned) – accuracy is imperative too; companies cannot afford the errors or to overlook opportunities. The solution to having both? Automation.

  2. Accounting that is right.

    Accounting accuracy relies on comprehensive validation protocols. Typically, MCBs complete their validations through sampling or running superficial “ball-park” checks in an effort to save time. Striving to ensure accuracy is often too time consuming for the accounting resources available, especially during month end accruals processes. In fact, for MCBs, validating every site is nearly impossible to do; not to mention their exposure to compromised data sets for business intelligence and compliance reporting, which can lead to opportunity costs, unnecessary risk, and civil penalties.

    Enter automation.

    Automation is able to validate exactly what is invoiced against meter data, contracts and tariffs as well as generate accruals to deliver month-end financial close upon receipt of invoices. And, as it goes, accurate accounting enables accurate reporting.

  3. Spend that is managed.

    Having continuously validated data not only keeps suppliers “honest” and management costs to a minimum, but the same data sets can be used to regularly monitor portfolios for cost reduction opportunities. Again, MCBs are forced to focus on a limited range of these opportunities, or commit speculative dollars to initiate an expensive data gathering exercise and hunt for opportunities. Conversely, an algorithmic review of live data enables entire portfolios to be constantly assessed for cost reduction opportunities – capturing the maximum possible benefits and keeping the total cost of supply to an absolute minimum.

  4. A sourcing strategy that is smart.

    A smart strategy aligns governance and risk appetite with process execution. A successful market engagement delivers the best contract/supplier fit for the organisation. Too often, MCBs will ask their consultants “When is a good time to go to market?” with absolutely no ability to execute on a moving date. Agile businesses are able to respond to short-run pricing opportunities.

    Deploying automation to execute on strategy supports good governance; enabling the budget forecast to be marked to market in a ‘no-surprises’ approach, contracts to be signed rapidly on delegated authority – minimising exposure to lapsed or withdrawn offers and moving seamlessly to the financial administration of the new contract.

BidEnergy applies automation to help our clients keep in control of their energy spend and achieve sourcing agility.

Are you a Manually Constrained Business? Register your details and our team will be in touch to determine how you can become an energy-agile organisation.

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Topics: Insider, insights