What is Spend Analysis: Examples, Benefits, Best Practices and KPIs

When working with big data in procurement both Online analytical processing (OLAP) and online transaction processing (OLTP) are two important parts of this process. 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 Opening Entry performance is a multifaceted KPI that encompasses on-time delivery rates, order accuracy, and average quality.

Unlocking Efficiency: Automated Spend Analysis Explained

You might analyze IT spending across all business units, examine all purchases from a specific supplier, or review how a particular business unit spends across categories. The process gives you visibility into business spending and a clear way to influence financial performance. You collect spending data from various sources, cleanse it to remove errors, categorize it into a clear taxonomy, and analyze it to gain useful insights. The key to success lies in treating spend analysis as an ongoing capability rather automated spend analysis than a one-time project. Regular data refresh, continuous process improvement, and stakeholder engagement ensure sustained value delivery and competitive advantage in procurement operations. The foundation involves gathering comprehensive spending data from multiple sources across the organization.

Risk management

Suplari provides actionable insights to manage suppliers, deliver savings and manage compliance beyond the limits of traditional spend analytics. Suplari’s unique AI data management foundation empowers enterprise businesses to modernize procurement operating models with reliable, AI-ready data. The end goal is actionable insights that drive cost reduction and procurement optimization.

Free Supplier Risk Scorecard Download

Don’t wait for an initiative or KPI to be no longer relevant to re-evaluate. It is to be noted that though these reasons here are for why spend analysis projects fail, they might be applicable in general to any analysis implementation failure. Finance and procurement departments aim to optimise company spending to avoid waste and maximise ROI. The most evident benefit of automated expenditure analysis is better spend understanding.

Payment Term spend analysis

Detailed spend analysis and review of spend data by product, ledger account vendors, and expenditure category is essential for procurement spend management. Manually preparing data or using outdated methods can take months and limit usability. AI-driven SaaS solutions can complete this process in weeks or even days, providing more accurate and detailed results.

• And, clear analytics and trends can help business owners identify inefficiencies, uncover savings, and gain leverage in supplier negotiations.
• This level of detail helps organizations pinpoint their most significant spending areas and uncover opportunities to optimize procurement.
• A spend analysis collects and organizes the cost of doing business, which makes it easy to identify costs that can be cut back or eliminated.
• Cost-saving opportunities improve your bottom-line profitability and cash flow.
• In practice, this means connecting to multiple data sources that may use different formats, currencies, and naming conventions.

When it comes to financial management, overseeing your spending is probably as important as having a solid comprehension of the limits of your budget. Well, nobody is 100% sure but, one thing is certain, spend management is at the top of the list of priorities for any business owner. When the COVID-19 pandemic struck, we were all affected to some degree, businesses weren’t the exception. The type of spend analysis chosen depends on an organization’s goals and the areas it wants to improve. The choice of formula depends on what insights you want to gain from your spend analysis and the data available. If the analysis is a one-time or infrequent event, then exporting the data and collecting it in a spreadsheet, database, or spending analysis software is the easiest method.

Cons of a spend analysis consultant:

This iterative approach delivers value faster than waiting for perfect categorization from day one. This glossary defines the core concepts procurement professionals need to know. This visibility helps you understand why non-compliance occurs—whether it’s process friction, lack of awareness, or genuine gaps in your supplier base. You also demonstrate compliance to auditors and executives through clear reporting on policy adherence and contract utilization.

Tools for Automated Spend Analysis

KPIs and metrics for individual categories allow comparisons that drive savings insights. Both items and suppliers are classified to allow a narrow focus in the data. Finding data is relatively easy for smaller companies who may store the necessary data in a single ERP system. Larger companies may require access to ERPs, General Ledgers, eprocurement software, expense management solutions, and other specialized systems.

• Base your decision-making on spend analysis visibility, reports, and recommendations.
• Spend analysis uncovers business buying patterns through an in-depth review of procurement data.
• Putting the right KPIs and metrics for a use case on the same dashboard requires procurement expertise.
• According to APQC’s research in procurement, 70% of the participating organizations have begun a spend analysis program.
• Do it right and you’ll unlock cost-saving and efficiency insights that will help you make better decisions in the future.

Access and combine spend data into a centralized database for performing the spend analysis. This step ensures that all relevant spend data is analyzed for meaningful spend analysis. The handling of sensitive procurement data in BI tools, particularly cloud-based ones, can raise security and privacy concerns. Proper encryption, access controls, and compliance measures are necessary to protect against data breaches, adding to the overall cost and complexity of using BI tools. A Supplier Base Performance Dashboard lets you analyze your entire supplier base, track top and tail-spend suppliers, and identify consolidation opportunities to mitigate risks and create savings.

Bottom line on spend analysis

Analysis will enable you to track and identify non-contracted spend and vendors. Adding suppliers’ credit scores and ESG information to spend data allows for a more accurate assessment of overall supply chain risk. Spend analysis is the process of collecting, cleaning, classifying, and analyzing procurement data to gain visibility, identify savings opportunities, and improve decision-making.