Spend Tracking And Analysis In Business Procurement
Un-managed spend is a major concern for many businesses. It prevents the necessary visibility into an essential part of the business spend thereby making planning and forecasting complicated, incomplete or inaccurate. Also, un-managed spend significantly reduces the value of a procurement organization.
The procurement professionals are typically tasked with high profile buys, key strategic initiatives and high volume purchases that align with the business vision and are crucial to the organization’s growth. These purchases are linked to large key contracts with specialized terms which use the organization’s buying capability and specify terms of use.
Without having full visibility into procurement spend, businesses can’t move un-managed spend into managed categories. Organizations should have to begin identifying the areas where lower value transactions are usually made. That can either be by category or by monetary threshold. This is a crucial step towards greater visibility and eventually embracing a fully automated and comprehensive spend tracking and analysis system.
A few tips to gain high visibility
Define a Threshold Value
Companies need to set a threshold based on present procurement information. All purchases below the threshold should be secured through the use of a purchase card. Purchases can then be tracked and trends can be identified for future planning.
Create Preferred Buying Channels
Create an e-catalog system where lower value purchases can be found in an online catalog with preferred vendors. Over time, one-off purchases can be recognized and added to the catalog thereby moving items from unmanaged to managed.
Contract Repository
Having access to all contracts in an organization is crucial to managing spend. With so many suppliers not being managed at one location, comes a whole lot of contracts whose terms may overlap with other divisional or business-wide ones. This will put your organization’s compliance at greater risk and cause you to miss out on volume discounts.
This is why a single contract repository is so essential. With all the contracts in one place and monitored, flags can be set up to find overlapping or conflicting terms. Moreover, alerts for contracts close to their terms-end allow for necessary re-negotiation time or a new source bid auction.
Business procurement is undergoing a major transformation with the quick increase of use of robotics and 3D printing. New supply chain data points are being added daily. The more visible and real-time your data is, the better your organization can adapt and plan effectively, saving a lot of money. A spend tracking tool plays a crucial role in this entire process.
Having the ability to get a view by any factor – such as supplier, purchase threshold, category or any other key metrics, provides insights into what the organization is doing right and also what it could do better. Creating automatic KPIs to rate performance enables customization based on the industry, size, and type of business.
Analyzing your business spend will require a year’s worth of data. The quicker you start the process of implementing an analysis tool, the closer your business is to full visibility of its procurement spend.
