How to Improve Your Organisation’s Spend Analysis & Procurement
The most important business strategy today, according to a report on a survey conducted by Deloitte, is reducing costs. Organisations need to do a thorough analysis of exactly where they are spending money and on what. They must identify what the company is purchasing, who is making these purchases, what the purpose of these purchases is, how much the company is spending, and so on. The organisation should also know whether the suppliers are delivering as promised.
Something that often comes up in spend analysis is the lack of quality data. Of instances where there is information, organisations often report the poor quality of the data gathered. According to the same report, technology can greatly enhance spend analysis and reporting and will improve processes in procurement over the next five years.
You should choose a procurement analytics software that includes spend analysis, e-procurement, e-sourcing, and supplier contract management. This way, your organisation has all the data you need in one place and ready for your team to analyse.
Here are the necessary steps to conduct an effective spend analysis:
1. Consolidate and standardise the data
A large organisation will have many of departments, all with their own budgets, internal processes, accounting systems, and more. All the data from these areas should be in a central database. This practice helps to consolidate all the spend data, which leads to an effective spend analysis process.
You will also have to standardise the formats, currencies and languages of these reports. Work with department representatives and suppliers to keep the formats of invoices and purchase orders consistent. This way, you will shave time off of your spend analysis.
2. Organise suppliers and expenses
Accurate spend analysis also comes from a well-organised system tagging the proper suppliers and departments. Your system should have the right prices for items or services, turnaround times, and accompanying expenses. It would also be helpful if you have suppliers tagged as ‘preferred suppliers‘ where applicable.
After you have individual suppliers grouped and classified, you should do the same with your organisations’ expenses. Break these down into categories like marketing, travel, office supplies, and the like. This will give you a better idea of how your company is spending money, and it will let you make decisions more aligned with your company’s goals.
3. How you benefit from spend analysis
Initiating these processes will take some time. However, once they are in place, your organisation would have a streamlined and effective way of conducting spend analysis. There are also other benefits to consolidating your spending data.
4. You get clear visibility
You can put a stop to unjustified spending if you implement a controlled and centralised procurement process. The biggest priority of budget officers is understanding how much the company is spending, and where it is doing so.
Through supplier management software, organisations gain a better grasp of the costs of materials and services through a consolidated database. They also identify which suppliers meet expectations and make the necessary adjustments.
5. You reap more savings
Maximising profits and reducing costs is important to all organisations, and spend analysis allows them to get insights into supplier profiles and spending patterns. When your business can compile a list of preferred suppliers, it will be able to realise savings from preventing overbuying and from waste reduction.
Companies can also avoid duplicate payments from multiple invoice issuance’s. You can also avoid late payments, which often brings with them penalty fees and loss of preferred status with suppliers. Cutting unnecessary steps in operations will help you trim some of the fat off of your spend.
6. You manage risk and are compliant
Regular monitoring will also improve your risk management. You can check your dependency on suppliers based on your dealings and put this alongside their company’s credit score and annual revenue. You should adjust your procurement strategy if your reliance on them outweighs their strength as a business.
With spend analysis, your organisation can easily identify if you are compliant with governmental checks. Since all relevant data will be available in a centralised database, you are sure that you have access to any information that might be necessary during an audit.
Technology plays a major role in the implementation of a comprehensive procurement solution. If you want to streamline your spend analysis, you must assess your spend activity thoroughly and make changes as needed. This will allow you to manage your risks, ensure compliance, and maximise your profits.
Oboloo lets you gain full visibility and control of your company’s sourcing activities. We provide cost-effective pricing plans for our online procurement management system. Get in touch with us today to learn more.