As restrictions are lifted and we start to return to some form of normality, the damage wreaked by the global pandemic is plain to see. For procurement, playing a part in rebuilding organisations and building resilience to protect against further risks means a heavy focus on cost reduction.
According to the Deloitte Global Chief Procurement Officer Survey 2021, the top two priorities for CPOs are driving operational efficiency and reducing costs. The third priority was digital transformation, which regular readers of this blog will know is the quickest route to achieving both cost reduction and operational efficiency for a business.
Why should you conduct ongoing spend analysis?
So what part does spend analysis play? Simply put, knowing what you are spending your money on allows you to make informed decisions that benefit your business. Your spending should support your overall objectives and analysing your financial data to ensure this is happening is crucial to managing your spend.
However, your results will only be as good as the data you are analysing. Using a digital tool such as the Atamis Spend Analysis Module will ensure you are collecting the correct data. It also categorises it so you can easily analyse your spend by, for example:
● Business department
● Cost centre
Organisational-wide spend visibility
Spend analysis gives you a cohesive view of spend across your organisation to enhance your understanding of where you are spending your money and what on. From there you can make cost savings and make informed purchasing decisions. For example, you will be able to identify who in your organisation is not using your agreed procurement process and reduce the opportunity for maverick spending.
Highlight opportunities where your organisation can save money
Analysing your spend will allow you to see your organisation’s spending patterns. Once you know where you are spending your money you can weed out expensive suppliers and reduce overspend. You may see that different departments within your organisation are communicating separately with the same supplier. This gives you an opportunity to control this spend centrally and strengthens your position to negotiate company-wide discounts and reduce costs.
Spend analysis can also improve your payment processes. It can highlight any duplicate payments you are making as well as any you may have missed. Late payment fees can be avoided which in turn improves your supplier relationships.
Helps your organisation become more efficient
Digital spend analysis tools can improve organisational efficiency. By centralising your spend data and using one system to manage it, you reduce the number of different processes in play. You also lessen the chance of missing crucial information to inform your decision making.
You can standardise and automate the creation of your spend documentation such as invoices, purchase orders and receipts. Not only will this free up your employees to focus on more important work, it speeds up your financial processes.
Keeps you compliant
All financial matters are subject to regular audits, whether it be for industry regulatory or legal reasons. Your spend analysis tool provides a central repository for all your financial data as well as providing an audit trail of spend. You can also demonstrate that you are following your organisation’s documented processes and procedures, reducing the time and cost it takes to prepare for an audit.
Improves your supplier risk management
If one of your key suppliers goes out of business, it can cost you dearly, from both a financial and reputational damage viewpoint. By analysing your supplier spend, you can identify potential issues earlier and put measures in place to reduce your reliance on them and mitigate any financial impact.
Spend analysis allows you to make data-driven decisions that can help your organisation save more money. It also provides information to drive your strategic decision making, adding value at the very highest level. If you would like to speak to someone about how spend analysis software can help your business, we’d be happy to help.