Every organization should thoroughly monitor where their hard-earned dollars and cents are spent. A proper tracking and monitoring of spends across categories increases the operational efficiency of the organization and improves the success of subsequent sourcing strategies. Penetrating, insightful, and actionable analysis of spend provides a strong base to devise effective sourcing plans. Organizations can opt for spend analysis solutions which will cleanse, validate, enrich, classify and report the spend data across spend categories and thereby generate accurate information and actionable insights.

4C’s of Spend Analysis

Spend Consolidation

The first essential step for a proper category spend analysis is to identify all data sources to collect spend data including accounts payable, pCard, eProcurement systems, and general ledger. Large organizations running on multiple ERP platforms should consolidate their data to comprehend the volume and costs associated with spending.

Spend Classification

After gathering one consolidated spend data into one central database, it is essential to standardize the spend data to facilitate the grouping and classification process. It is essential to correctly attribute each spend such as office supplies, legal, marketing travel, direct and indirect spend to their right category so an accurate analysis can be performed later. This process also helps in identifying duplicate and maverick purchases across different categories to ease the supplier negotiation priorities.

Spend Collaboration

Organizations can identify opportunities to consolidate suppliers based on similar purchases. Having a complete spend visibility of each category paves the way to find the best supplier for the given category in order to gain better value from a single supplier. Such synergies are very crucial in maintaining a long-term supplier relationship which can be beneficial in the long run.

Spend Control

An extensive spend analysis provides comprehensive information and insights for a CPO to make informed decisions on their organizational spend. Decisions supported by spending data can significantly increase the operational efficiency and subsequently set benchmarks for the future. Additionally, organizations should repeatedly assess their spend data and improvise their spend strategy.

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