Spend Management

Improving your Business With Spend Analytics

A profitable business efficiently manages its cash flow by tracking its spending through spend analytics.Find out how spend analytics work.

A profitable business unit depends not only on the numbers that come into its earnings. A thriving business efficiently manages its cash flow by tracking spending through spend analytics. Business units should analyse their costs to dramatically decrease them, improve supplier relationships, and avoid maverick spending, leading to financial mismanagement within the organisation.

Expense tracking is a mundane task, and business owners should not look past it. By efficiently identifying procurement details, businesses can see where the money is going, how much is being spent, and what expenses should be curbed to save more money.


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What is Spend Analytics?

Spend analytics is how businesses evaluate the spend data involved in procurement. The process involves collecting, cleansing, classifying, sourcing, and analysing the procurement data. Whether direct or indirect expense, evaluating your company’s spending is crucial to enrich procurement procedures.

Coming up with a spend analytics solution can help you understand the details of a procurement. Those involved in spend analysis, like procurement professionals, can ask the following questions:


1. What did we buy?

Knowing the items purchased and the expense category they fall under is vital in understanding the company’s spending. Doing so will immediately justify if the item is allowable or nonallowable, and it will help determine whether or not a product or service contributes to achieving the team’s KPIs.

Did your company buy office supplies, manufacturing materials, machines, or did you pay for an ad spend?
The procurement team should ensure that details of the purchased items are clearly stated in the invoice to promote better spending visibility.

2. What was the cost of expense?

What is the true cost of procurement? Cost of purchase should include all charges such as the actual price, delivery charge, and tax. For instance, if you’re going to track travel expenses, you must also consider the taxes added on top of the flight’s base cost. Visualising the entire purchase cost leads to strategic sourcing.

3. How much did we buy?

Checking the number of items you’ve bought will make you realise which supplier provides cheaper products or services. In a way, you’d be able to identify supplier performance that will offer you the real value for your money. You can check the affordability of supplies procured by comparing the total cost against the number of items bought. Upon further spend analysis, you can clearly distinguish the total price and base pricing of the goods and services procured.

4. Where did we buy it?

Who are your suppliers? Are you buying locally or from overseas? How much taxes were involved in the procurement process?
Knowing where your supplies come from can help you decide whether the total spending is reasonable or not. If you’re aiming for cost reduction, remember that not all locally sourced supplies are more affordable than services and goods sourced outside the country.

5. Who procured the item or service?

Why do you need to know who was responsible for the procurement? Most business units allot budgets for each department. Knowing who procured will immediately tell you if a particular department is spending within its budget or not. You can automatically streamline the budget and allot more funding to other aspects of the business.

6. How did we pay?

Payment details are important since the business needs to know whether the company settled the purchase through cash o credit card. Recording the correct payment information can help the procurement and accounting team conduct expense reconciliation more efficiently. The company will also have clearer, actionable insights into payables and potential savings.

How Does Spend Analytics Work?

Spend analytics answer the core questions that serve as the foundation of the company’s finances:

  • How much did we spend?
  • What goods or services do our suppliers provide?
  • Are the goals of the procurement fulfilled?

Spend analytics solution helps companies identify how much money is going out, where is it going, and if the spending is reasonable and justified. These will help the owners and their managers develop actionable insights to improve the business finances.

Why Is Spend Analytics Important To Your Business?

Business units that track their spending through analytics software are more likely to identify unnecessary purchases and trim down their costs. Aside from these, here are more benefits businesses can enjoy:

Accounts transparency

Transparency is essential in an organisation, and spend analytics allows the sharing of actionable insights on the company’s financial health. Once these actionable insights reach the significant departments, business owners can pool together benchmark solutions and action plans to curb spending and check opportunities to save money.

Sets priorities

Analysing the procurement process shows you where your money is going allows you to prioritise your resources. You and your finance team can finalise where to allot more funds and which aspect of the business needs to have more managed resources.

Prevents maverick spending

Maverick spending is a situation where your company purchases from unpreferred suppliers or gets into a contract that deviates from the procurement policy.
Maverick spend poses risks to your company’s financial health because it curtails many savings opportunities through negotiated contracts.

Provides insights on value-friendly suppliers

Spend analytics is an opportunity for companies to compare pricing across all available suppliers. At some point, locally sourced goods and services can sometimes be more expensive. The upside in purchases from within your locality is the shorter lead time, and more affordable logistics cost. On the other hand, overseas suppliers can lead to cost savings.

Ensuring available supplies

With spend analytics, you’d be able to minimise alterations in the supply chain, ensuring that the most critical materials are available from an established supplier base. You can identify regular suppliers that could provide your most essential materials and services through strategic sourcing and optimisation.

What are the Types of Spend Analysis?

  • Tail spend analysis – Tail spends are too small to go through the formal procurement process and are not made regularly. What is considered a tail spend in one company may not be the same with another. Tail spending can cover business travels, printing costs, or other irregular expenses that were not initially catalogued by your finance team.
  • Vendor or procurement analyses – Procurement or vendor fees refer to the costs incurred in managing the supply chain. Spend analytics, cost reduction, and cost-efficiency are three of the most common categories companies spend on. Vendor analysis can improve your supplier management system, ensuring that the best deals are negotiated and implemented in the contract.
  • Category spend analysis – Categorisation is important in spend analysis as it allows the proper groupings of items and services with standard suppliers and demand. Categorisation helps you identify inconsistencies and leakages in the procurement process.
  • Item spends analysis – This lets you classify each purchase, the department or end-user requesting it and the item supplier for better visualisation. Doing this can aid the business units to ensure data accuracy, prevent leakages from indirect spend and maverick spending or non-negotiated suppliers.
  • Payment term spend – The payment term spend analysis is crucial if you want to leverage discounts and early payment rewards from your procure-to-pay processes. Payment term spend analysis lets you explore opportunities to save more and renegotiate the terms of your contract and improve supplier relationships.
  • Contract spend – Analysing your existing agreements can be very cost-efficient because it leads you to identify chances of renegotiation, too. It ensures proper implementations of contract terms.

Getting Started On Spend Analysis

Through the process below, spend analytics will effectively answer the questions above.

  1. Conduct consolidation of procurement data for spend visibility
  2. Check for data accuracy and complete
  3. Complete the procurement data for missing information.
  4. Arrange the data into categories or in a template customised for your company’s needs
  5. Analyse the data and data sources like invoices depending on an analysis solution
  6. Check if there are savings opportunities

Spend Analysis Best Practices

Since procurement analytics can contribute much in trimming down the maverick spend, improving supplier relationships, and allowing for opportunities to curb losses, it is crucial for business units to start implementing these best practices:

Evaluate existing expense management system

Business owners should start evaluating how they track their spending through customised metrics to understand how their teams purchase supplies.

Conduct regular spend analysis

The entire process of analysing expenses is tedious considering that sufficient spend data is gathered, categorised, and analysed. Regular spend analysis can help address flaws in the tracking system and prevent more money from being wasted.

Simplify your data collection and filing process

More simple data consolidation and storage systems make it easier for the procurement and finance team to track expenses. Implement a simplified way of generating spend data, categorising purchases, and filing them for future reference.

Analyse spending habits and suggest solutions

Which departments purchase frequently and spend much on delivery and logistics? Is there any chance for the department to procure in bulk to reduce logistics costs? These questions and more can be effectively answered when companies analyse their team’s spending habits and evaluate their supply chain.

Create a forecast

Forecasting based on spend analysis results can help you plan your entire organisation’s finance. It will lead you to identify suppliers and procurement habits that work best for your company.


Automated spend analysis eliminates manual steps in generating information and categorising purchases. Much more, some software for automation and spend analysis can provide real-time updates and sound forecasts to improve your company’s spend management procedures.

Use A Spend Management Software For Better Spend Visibility And Analysis

The best spend management and analysis software should allow you to extract and consolidate spending data efficiently. It should also have an analytics dashboard connected with the procurement data. More than anything else, your spend analysis software should also:

  • Help you improve the user experience of your procurement professionals and employees, especially when it comes to submitting expense reports and claims and reconciling them with your purchase orders.
  • Ensure that it can be integrated well with other technologies like your existing ERP and SaaS accounting software.
  • Should consider how easily your team could adapt to the system and how well can you train employees in using the tool
  • Allows you to focus on efficiency to save time by providing access to functions such as receipt submission and document scanning.

Final Thoughts

Spend analysis may seem to be a complex task for your business. When done regularly and correctly, spend analysis tools can prevent flaws of financial leakage on unnegotiated purchases and procurement mistakes. Getting the best expense automation platform and spend analysis software can ensure that you’re aware of your company’s financial health, helping you make more effective financial planning ahead. Spend analytics also allows you to improve supplier relationships, making sourcing easier for your team to reduce pricing and potential savings.

A cloud-based payments solution, like Spenmo, can provide accurate spend analysis data while centralising all of your corporate spendings in one dashboard. Moreover, it seamlessly integrates all this data with your accounting software of choice.

Talk to us about managing your payables today!

Try spenmo now to start managing your payables

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