The table below summarizes key capabilities and why they matter, along with what to look for when evaluating spend analysis solutions. By focusing on the types of spend analysis that align with their automated spend analysis goals, leading organizations turn raw data into targeted action that has measurable impact. Whether you build or buy a spend analysis solution depends on your specific needs, data complexity, available resources, and strategic objectives. Design budget-holder dashboards show departmental spend patterns, compliance with procurement policies, and savings contributions.
The 2025 State of Source-to-Pay Digitization: Key Insights for CPOs
Say, for instance, employees find your chosen spend management software clunky and difficult to navigate; they will not use features that may genuinely be useful. And that’s the recipe for a time-consuming, error-prone manual spend reporting process. There is not much that real-time data can do for your business unless your Finance teams have complete control over spending at all times. Superior customizability and control over workflows help admins truly streamline and automate processes to achieve seamless business finance management.
- Globality survey from 2023 estimates that between 20% and 40% of a company’s revenue can be allocated to indirect spend categories.
- Credit card statements and contract management platforms complete the data picture.
- The improved spend visibility and decreased manual responsibility that automated spend analysis offers can form the foundation of better spend management processes.
- In Procurement , spend analysis serves as a basis for strategic decisions and negotiations with suppliers.
- Without their input, your procurement strategies may not fully address the organization’s needs.
- Procurement functions that fall under this category, would normally start developing standard templates and tools for collection and analysis.
- The focus would be mainly on most needed analysis data like transactional data or spend categories.
Understanding Global Sourcing Strategy
Innovation opportunities emerge from discovery of new sourcing strategies and supplier capabilities. While it may seem simple, many companies struggle with how to use spend analysis effectively. With spend analysis, businesses can lower procurement costs by reducing procurement cycle time.
- Similar to BI tools, spend analysis software offers real-time data processing, ensuring that procurement teams have access to the most up-to-date information.
- It’s no surprise that automated spend analysis is one of the top priorities of modern-day procurement executives.
- This can be done to analyze spend across all predefined categories and subcategories.
- These tools give a clear view of spending, uncover cost-saving opportunities, and improve efficiency.
- Data for spend analysis includes the entire purchase history, and it should help answer the who, what, when, how, and why of your organization’s expenditure.
- Finding cost-saving opportunities manually is like searching for a needle in a haystack.
Spend Analysis Example
- Without appropriate inputs, the usefulness of spend analysis software is restricted.
- The most evident benefit of automated expenditure analysis is better spend understanding.
- It also helps to minimize risk by highlighting dependencies on individual suppliers and identifying alternatives.
- Many organizations rely on outdated systems or manual processes for Procurement Spend Analysis.
- Before conducting a spend analysis, it is crucial to set objectives, identify and collect data from all data sources, clean up the data, develop KPIs for the analysis, and set attainable targets.
Close the books 4x faster, collect over 95% of receipts on time, and get 100% visibility over company spending. Setting an unrealistic timeline for the spend analysis project without proper contra asset account bandwidth can also lead to burnout and loss of motivation for employees. 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.
Procurement Consulting
Another best practice is to hold spend analysis workshops to gather input and foster a collaborative approach. This ensures that every perspective is considered, resulting in a more comprehensive and aligned spend analysis. In addition to categorizing stakeholders, it’s essential to form a cross-functional team with representatives from key departments such as finance, operations, and procurement.
Four types of spend analysis tools
Companies also remain vulnerable to concentration risks, compliance violations, and poor Budgeting for Nonprofits supplier performance that goes undetected until critical failures occur. Cost reduction is the main focus for many organizations and therefore, they spend more time doing spend analysis. From enhancing operational efficiency to forecasting risks, spend analysis has several benefits.