Commodities are a structured way to group items and services together based on the type of spend. Once created, every line of a transaction can be associated a commodity - this allows for roll-up reporting across all transactions to more easily assess where money is being spent. Broad level commodities are defined at the top (ex: IT, Office Supplies, Services), with more granular commodities nested underneath (Computer, Paper, Cleaning Service). Users can search & browse based on these commodities and reports, KPIs, and insights can be built around reviewing spend based on commodities.
Assigning master data (suppliers, items, punchouts etc.) to a commodity can help facilitate defaulting onto transaction, while commodities themselves can help with defaulting billing information. The lowest level commodities often mimic or are closely related to the GL accounts that a customer has - so when building a commodity structure from scratch, it can be helpful to start with the list of accounts and work backwards to define the hierarchy.
Overall commodities help with:
- Classified spend & reporting
- Simplify end user experience
- Defaulted billing
- Not every category needs to go to the lowest level; if some commodities require a third or fourth level for granularity this does not mean every commodity should be broken down to 4 levels.
- If a customer is even considering enabling the 'enforce leaf node selection' - ensure it is on, the system will prevent you from enabling this if commodities that are parents are already used in transactions or assigned to master data as they would no longer be viable options.
- Use commodity translations to allow for a better end user experience for multi-lingual roll-outs.
- Leverage commodity insights to view and analyze consolidated transactions with the most critical commodities.
- Consider using Coupa Native Taxonomy and/or UNSPSC classification to build commodity structure
- If there are over 2000 commodities the system will switch the commodity field from a hierarchical dropdown to a lookup list.
Regional/Country Specific Considerations
- Recommendation is that a commodity structure is normalized at a global level across all business entities and ERPs
Do's & Don'ts
|Design Element||Recommended Design||Alternatives||Risks||Rationale|
Structure is 3 levels
|Structure is 2-4 levels||Structure is less than 2 or more than 5 levels||
A single list of commodities offers a user minimal guidance and is likely not very valuable for reporting. Alternatively more than 5 levels is not technically supported as it can become a cumbersome user experience and likely is indicative that the categories are too granular.
|Enforce Leaf Node Selection||Enabled||Disabled||Enforcing leaf node selection ensures the most specific commodity is selected on a given transaction - this allows for the simplest and most accurate defaulting (only the lowest level values need to be mapped), and the best reporting as it can be done at any level.|
|Volume||Number of commodities 200-400||
More than 2000 Commodities
A high volume of commodities makes this confusing for end users to have a good understanding of each and will have a hard time selecting the appropriate one. It also reduces the value of the reporting as it can become too granular and nuanced. A few hundred accommodates usability, granularity, and reporting needs evenly.
|Naming Convention||Commodities written in user friendly language||Commodities incorporate user friendly language and accounting values||Commodities mimic accounting language only||Commodities need to be well understood by the end user in order to be used accurately. Incorporating accounting terminology or codes into the naming convention can be done if needed but if they are too heavily focused on this standard end users will not be able to select the correct value.|
|Defaulting||Commodities should be used to default GL Account or related COA segment||No defaulting for COA||Defaulting billing information removes this task from the end user, making the system easier to use and the resulting account string more accurate. If COA values are not defaulted users will need to select them on every line on every transaction which can impede adoption and be a time consuming task.|
Heat Map Assessment
|Commodities will not be created in Coupa||No Risks are incorporated into the current design and the design is fully defined.||Customer is still defining Commodity structure or how it will be used||One or more Risks are incorporated into the current design||External tool is being used to classify and categorize spend|
Related Success Metrics and Value Drivers
- While commodities don't tie to any one specific metric or value driver - they can help analyze metrics & KPIs more granularly.