A critical KPI for procurement teams aiming to streamline operations and reduce costs is minimizing the number of one-time suppliers in Enterprise Resource Planning (ERP) systems. While ad-hoc or infrequent vendors are often essential for meeting specific needs, onboarding them to the ERP introduces administrative burdens.
Organisations manage one-time supplier purchases in various ways, each presenting its own challenges. Some create and delete suppliers in the ERP system as needed, a manual and inefficient process that can lead to data inconsistencies. Others may issue purchase orders or process payments without formally onboarding these suppliers, potentially bypassing compliance requirements. In certain cases, urgent, one-off purchases bypass proper approvals altogether due to lengthy approval processes, which can foster maverick spending and limit oversight. When it comes to using corporate credit cards for these purchases, many companies face an additional hurdle: low supplier card acceptance rates in B2B transactions.
Each new supplier added to the ERP typically requires steps like due diligence, contract negotiation, and data entry, all of which consume valuable resources and add complexity to procurement workflows. In this blog, we'll explore effective strategies to streamline the management of ad-hoc vendors, helping you enhance procurement efficiency while maintaining oversight of suppliers and expenditures.
Traditional supplier onboarding is often both lengthy and expensive, with costs ranging from $400 to over $35,000 per supplier depending on the level of manual effort involved (with $400 being a minimum reported figure from a Billhop customer). When onboarding costs rival or even exceed the value of one-time transactions, it underscores the need for more efficient ways to manage these infrequent suppliers.
Billhop’s analysis of its Tail Spend solution highlights the scale of one-time suppliers and their impact on customers. Over a recent two-year period (October 2022 to September 2024), 70% of the suppliers engaged by the average Billhop customer were used only once. Transactions with these one-time suppliers averaged €1,360 per invoice, a cost often comparable to or even lower than the internal expenses associated with onboarding and managing each vendor. This data underscores the need for procurement teams to find more efficient ways to handle these infrequent suppliers.
Billhop offers a powerful solution for procurement teams looking to efficiently manage indirect spend without needing to onboard every supplier into the ERP. By enabling payments to any supplier via corporate credit cards—even if the supplier doesn’t accept card payments—Billhop acts as an intermediary, channeling one-time or infrequent transactions through its platform. This not only reduces ERP clutter but also lowers vendor management costs, allowing procurement teams to focus on strategic suppliers and core activities rather than administrative tasks.
One of Billhop’s standout advantages is its ability to reduce maverick spend, unauthorized or unplanned purchases made outside approved procurement processes and approval workflows. By providing a quick, compliant alternative for one-time payments, Billhop allows employees to meet urgent or low-value purchasing needs within the established procurement framework, helping ensure that all spend is visible and controlled.
When assessing the cost-efficiency of using Billhop, organizations should consider the break-even point where Billhop’s transaction fee becomes even more economical than the internal workaround of creating a purchase order - instead of fully onboarding a supplier. For organizations focused solely on reducing costs, this involves comparing Billhop's fee (a fixed percentage of the transaction amount) to the internal costs associated with processing a purchase order. However, for many organizations, the true threshold is often higher, as they also routinely onboard one-time suppliers, adding further administrative costs.
By dividing the purchase order processing cost by Billhop's transaction fee rate, procurement teams can identify the threshold transaction amount where using Billhop becomes the cheaper option. Below this threshold, it would be more cost-effective to pay through Billhop rather than rely on creating a purchase order.
This approach allows organizations to establish a clear decision-making framework, helping them to choose the most cost-effective method for one-time or infrequent payments. By defining this threshold, procurement teams can build a strong business case for when to utilize Billhop, ensuring that every transaction aligns with both efficiency and cost objectives.
By centralising one-time payments in a quick, compliant, and controlled manner, Billhop enables procurement teams to reduce administrative burdens while meeting KPIs for efficiency and cost control. If you're looking to minimize the onboarding of non-strategic suppliers and achieve your procurement KPIs, contact us to discover how Billhop can transform your procurement operations.
