Spend analysis in strategic sourcing helps to analyze a company’s expenditure and identify areas of improvement for better cost control. Maverick spend is a form of unjustified spend where an employee purchases goods or services outside of the set company policy. Such expenses are generally part of the tail spend of the company and are overlooked automated spend analysis otherwise.
- For example, three different business units may buy laptops from Dell each using a different supplier name—DELL, Dell Technologies, Dell, Inc.
- It is one of the four pillars of spend management along with strategic sourcing, supplier management, and procurement process efficiency improvement.
- Procurement optimization is the process of purchasing goods and services at the best possible price.
- However, some organizations opt for more frequent assessments, like quarterly or semi-annual reviews, to continuously track expenditure trends and adapt as necessary.
- While the words “spend analysis” may sound like buzzwords, in reality, it’s a simple concept that can be applied across any industry.
Savings Through Realised Saving
That’s nothing short of a disaster that might take a toll on company revenue. Our user-friendly interface makes it easy for anyone in your procurement team to leverage the power of spend analytics, regardless of their technical abilities. Supplier performance is a multifaceted KPI that encompasses on-time delivery rates, order accuracy, and average quality.
Use data to implement decisions
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- Cflow is a procurement solution that provides a consolidated view of all your procurement spending, including invoice data, purchase orders, and other financial records.
- It allows you to assess and understand your spending habits, including the how, where, and why.
- Data cleansing might include translating international currencies or phrases and converting data formats.
- At this point, you can create infographics, tables, and graphs that tell a story with the numbers.
- Spend analysis is when you collect all the data from your business expenses to reorganise, categorise, and examine it.
- It’s normal to feel a bit overwhelmed with this step, especially if you’ve got a lot of data to categorise.
By clearly communicating the implications and integrating the perspectives of multiple stakeholders even before the contract cycle can enhance the effectiveness and relevance of your practice. Organizations that are strategic navigator level, have robust and strategic spend analytics capabilities. They have well-defined and integrated data collection processes, including the ability to capture data from multiple sources and income statement systems. This involves categorizing spend data based on different criteria such as suppliers, products, services, departments, or geographical locations. Our FP&A software helps mid-market companies streamline their spend analysis process, ensuring data accuracy and providing insights that lead to smarter decisions. With spend analysis, businesses can lower procurement costs by reducing procurement cycle time.
How Does Automated Spend Analysis Work?
Contracts help procurement teams reap the full benefits of their negotiated contract terms with suppliers. A contract spend analysis helps highlight cracks in negotiated contract terms that ultimately lead to spending leaks or missed opportunities for discounts. A supplier spend analysis measures how much a company spends on goods and services from suppliers or vendors. This type of analysis gathers data related to supplier invoices in order to identify patterns and opportunities to increase savings. Spend data, or procurement spend data, is all the information related to a company’s spending, specifically goods and services purchased from external suppliers or vendors.
Now analyze the data!
While there are challenges in spend analysis, a well-planned and executed process can optimise your spending. The company gathers spending data from all sources, edits and enriches it, and stores the clean data in a database. The spend analysis process classifies all purchases and categorises suppliers by their parent company. Spend analysis software enables automation of processes, including spend data centralization and real-time dashboards with category and overall trends and KPI comparisons for business intelligence.
Spend analysis
Spend Accounts Payable Management analysis software helps businesses automate the collection, cleansing, categorization, visualization, and analysis of spend data in one central location. After analyzing data, you might conclude that it’s in the best interest of the organization to mitigate the risk by switching suppliers, saving you money in the long run. With its many variables and dependencies, business finance management can be tricky and painful for the Finance team and the entire company. The power of spend analytics to help you control and prioritize spend is undeniable, but not all platforms are created equal.
Establish an analysis framework
The direct spend in procurement includes the direct cost, direct spend sources, the raw materials, and the supplies needed for manufacturing the product to be sold to your customers. D2C (direct-to-consumer) companies and brands usually have high volumes of direct spending. For instance, the direct spending of a car manufacturer would account for the spending on steel for the car’s body, electronic parts inside the car, plastic for interiors and dials, and rubber for the tires. Connect all the data possible from your vendors, suppliers, affiliates, etc., this can help you create a comprehensive view of spending. These are the best-in-class organizations that have highly mature and optimized spend analytics capabilities.