Why is Spend Analysis a Necessity for Reducing Facility Management Costs?
What is spend analysis?
Spend analysis is the process of identifying, cleansing, grouping, categorizing, and analyzing an organization’s spend data with an ultimate goal of decreasing procurement costs and improving efficiencies. Companies can gain the insight that they need to save money and gain efficiency by using real-time data and analytics. It is used to visualize all the data so that businesses can make better sourcing and supplier decisions. Additionally, it also helps in improving compliance, reducing cycle times, and uncovering maverick spend. A sourcing program that seeks to become successful hinges on the ability of an enterprise to thoroughly understand its spend. Getting spend analysis right is an obligatory step toward actual cost reduction, continual process improvement, and value creation. Some of the key steps involved in spend analysis include:
Identify and consolidate spend data
The company’s data may be stored in a variety of places. In several cases, each department or each project within each department has a separate accounting and budget system. Each of these separate sources may have its own internal process: general ledger, accounts payable, eProcurement systems, and other financial software. The first step involved in spend analysis is to identify all invoices and payments from various sources and consolidate everything into a central database.
Clean the data
Information that is gathered from different sources must be standardized. Fields may need to be added to identify where the order originated or define the purpose of the order, and purchases from international sources may require currency conversion. Once the data is standardized, compare duplicate entries to ensure double payments were not issued.
Identify scope of spend analysis
The next step is to determine the minimal time period that will return an accurate picture of the company’s current spend and still allow to identify all recurring expenses. Companies with decentralized budgeting systems may seek to limit the scope of each spend analysis process by department, project, and division.
By breaking the organization’s spending into general categories, companies will be able to see exactly where their money goes. Be as specific as the situation demands, whether the company orders building supplies, outsources digital services, or sends engineers to assess damage in remote locations. Furthermore, it is essential to make a category for every major expense: personnel, travel, outsourced programming, legal, manufacturing supplies, and office supplies.
Analyze the data
Once the company’s spend data is consolidated, the next step is to take a close look at how the businesses’ money is spent and make appropriate changes and informed decisions about future spend. Keep the data up-to-date in order to remain on top.
Spend analysis services from SpendEdge have helped leading companies from across the globe to identify and realize multimillion-dollar savings opportunities previously unknown to them. Our spend analysis experts are motivated by the same goals and measure success just as you do — through actual realized savings. Get in touch now!
Benefits of spend analysis in facility management
Minimize maverick purchasing
Sourcing organizations often tend to focus only on what happens before signing a contract. But in several cases, the available contracts go unused, this proves to be true especially in the case of indirect spend. Minimizing maverick purchasing in facility management is not only about getting better prices and terms that have been negotiated, but more importantly ensuring legal and CSR compliance using approved suppliers. After starting a systematic measurement.