In an uncertain business environment, companies need to take a closer look at the efficiency of their internal processes, particularly around company purchasing. The goals of spend analysis include discovering opportunities for cost savings, improving operations, strategic sourcing, and strengthening supplier relationships.
Spend analysis surfaces opportunities to improve procurement performance, which has been in the spotlight recently thanks to the pivots many companies had to make in response to the pandemic, ensuing supply chain breakdowns, and the current economic slowdowns. The good news is that the latest generation of spend management platforms can streamline and simplify the spend analysis process by consolidating all spend data and making it accessible in real time.
What is spend analysis?
Spend analysis is a deep dive into the way a company spends money and examines procurement data, vendor activity, and purchases by category. Spend analysis looks for the answers to questions like:
- Where are we spending money?
- Are we getting the best value for our money?
- How can we improve vendor relations?
- Can purchasing be streamlined or consolidated?
- Are we working with the right vendors?
- Does pricing and delivery reflect what is in our contracts?
- Can we improve payment terms?
The benefits of spend analysis.
By tracking spending metrics and looking for trends across a company, spend analysis can unearth opportunities to save money. For example, examining spend data could bring to light that multiple people are paying full price for an individual software subscription, instead of getting a multi-user discount. A spend management platform like Airbase alerts users when someone else in their company has the same subscription — automating that element of spend analysis.
When finance teams can easily produce real-time reports on spending trends, they can look for patterns from different perspectives and make historical comparisons. This helps measure the impact of cost reduction measures whenever necessary.
Insight into supplier performance.
Are you getting what you’re paying for? Visibility into bill payments, including 3-way matching for purchase orders, receipts, and invoices, make it easy to track.
In this area, spend analytics moves beyond cost and savings evaluation to risk assessment for procurement teams: Is it better to work with fewer vendors to reduce your administrative effort, or many in order to reduce the risk of supply chain breakdown? Being able to evaluate vendor performance can help answer questions like these.
Analyzing vendor activity can reveal fraud attempts like sending duplicate or false invoices and the creation of fraudulent vendor accounts.
Support for budget adjustments.
Spend analysis helps determine the ROI on budgetary adjustments. A platform that lets you adjust the levers of control for procurement costs in real time makes it possible to respond quickly when needed.
Insight into procurement patterns can improve efficiency. Can contracts be consolidated? Should you negotiate better payment terms? Spend analysis gives actionable insights into questions like these.
Improved vendor relationships.
Late payment fees, disorganized invoices, and poor communication can damage relationships. Spend analysis can point to ways to improve interactions with suppliers. Being able to easily view the historical activity with a vendor can also strengthen contract negotiations or support requests.
How to streamline spend analysis with spend management.
Historically, gathering data for spend analysis was a laborious process that involved consolidating spend data from multiple systems and business units. That data often had to be cleansed and converted to a common format. Spend management platforms like Airbase eliminate that time-consuming and tedious step, allowing analysts to dig into the data right away. When all non-payroll spend data is consolidated and available in real time, it’s possible to conduct ad hoc spend analysis whenever needed.
Accounting automation incorporates the goals of spend analysis right into the purchasing workflow. Intelligent workflows help by:
- Identifying opportunities to generate cash back by paying bills by virtual card.
- Flagging duplicate, maverick, and zombie spending.
- Making sure all transactions are properly categorized.
- Ensuring all necessary stakeholders can review a spend request.
- Incorporating contract reviews into spend requests whenever possible. For example, Airbase’s Guided Procurement can be configured to ensure the legal team reviews all contracts over a certain threshold.
Now is the time to focus on spend analysis and ways to improve procurement performance. Find out how Airbase can help.