Spend analysis is the process of identifying, gathering, cleansing, grouping, categorizing and analyzing your organizations spend data with a goal of decreasing procurement costs and improving efficiencies. Using real-time data and analytics will give you the insight you need you to save money and gain efficiency.
Spend analysis is a branch of the much larger field of spend management. It is used to visualize all of your data so you can make better sourcing and supplier decisions. Additionally, it can also lead to improving compliance, reducing cycle times, and uncovering maverick spend.
You want to cash in on these benefits, but how do you get started?
There are three core areas of spend analysis – visibility, analysis, and process. When you leverage these three areas, you will be able to identify what you are spending, with whom you are spending and the ROI on that spend.
1. Spend Visibility:
Conducting a proper, seven-step spend analysis will give you complete visibility into your spend. Whether it’s your first spend analysis or your twentieth, you want to make sure that it was a success. How? By using key performance indicators (KPIs), you can quantify your success. We have compiled a list of KPIs in case you are unsure of where to start.
A spend analysis is your organization’s single source of truth, it turns your data into a powerhouse of information and insight. Gaining visibility is critical to successful spend analysis. After all, you can’t save what you can’t see.
2. Spend Analysis:
Once your data is cleansed and organized into relevant categories, you are ready to start analyzing. Look for trends and verify you are leveraging supplier data to get competitive pricing. Use this pool of aggregated spend information to understand where you spend is going and whom is it with. Your resulting data can be used by your CPO or CFO to gain insights and spot trends in your current spend. Other departments can also use this data to perform inventory management, budget, and plan, and set a strategic sourcing roadmap.
3. Procurement Process Improvements:
This is the step where you can begin to plan your process roadmap or implement a course correction if it is necessary. In order to improve your processes, you need to start with the credible data you gathered in your spend analysis. This data enables you to transform your procurement process from technical to strategic sourcing. How? Because of its fact-based, and you can use that fact-based data to change behaviors and improve your decision-making process. For example, you can create a spend report by category and then after your next spend analysis, you can compare results and monitor how processes and behaviors have changed.
If your goal is to bring more spend under management, conducting a spend analysis will help you get there. When you have fact-based data, it is easier to ensure compliance, improve decision making and expose areas of your business that may not have been targeted before for reducing spending. Spend Radar, our spend analysis solution, will not only give you full visibility into your organizational spend, but it will also deliver savings and increase efficiencies. Generate an unmatched spend analysis by entering your data in any format from any source. Spend Radar helps you get the fact-based data you need to improve processes and deliver results. Want to know more about how Spend Radar will help your business? Watch this two-minute demo.