If you're looking to improve spend visibility for your organization, there are several steps you can take. Spend visibility refers to the ability to see exactly where your money is going and can provide insights into inefficiencies, risks, and opportunities for cost reduction.
Why Spend Visibility is Essential for Businesses
Spend visibility delivers many benefits beyond identifying savings. It highlights inefficient processes, identifies maverick spend, and highlights risk areas.
When converted into management information, data can provide both an overview and a granular view of procurement activity. By slicing and dicing the data, we can achieve insights.
Challenges in Achieving Spend Visibility
For completeness, data must be collected from all available sources, including company-wide ERP or procure-to-pay systems, other accounts payable processes, and data obtained from suppliers.
Miscoding and inaccurate data analysis blur the visibility, meaning missed opportunities. Tail spend is also a challenge and an opportunity. There will always be many low-value transactions with multiple vendors in any organization.
The most common way of addressing this is by ranking the suppliers based on annual spend and focusing on the top ones. An in-depth spend analysis on tail spend provides an opportunity for consolidation of spend and reduction in the supplier base.
Benefits of Spend Visibility for Organizations
With a clear view of validated spend information, organizations can take a more strategic approach to sourcing and focus their efforts on opportunities. This includes:
- Identifying cost savings opportunities
- Improving supplier relationships and minimizing contract risk
- Avoiding duplication of purchases across divisions and geographies by aggregating demand
- Identifying and rectifying poor processes
- Informing future procurement strategy.
Common Mistakes in Spend Visibility Analysis
When analyzing spend data, choosing the appropriate time frame is crucial and should depend on the type of commodity or service. Capex and high-value repeat purchases need a more extended period of review and more visibility into the detail than, for example, HR services, janitorial services, and office supplies.
Tracking all spend internally is often impractical, costly, and time-consuming. The sheer volume of data can be overwhelming, and data sources often change as IT systems are updated, making it challenging to maintain consistent visibility.
Strategies to Increase Spend Visibility
To increase spend visibility, it's important to have clear and easy-to-follow policies and processes that limit errors and inconsistencies and promote accountability within sourcing teams.
Payment solutions also play a crucial role in improving visibility. Spend management solutions can locate and aggregate payments from every source and display the analysis results in an online dashboard.
Increasing spend visibility means applying a suitable automated spend analysis solution to track spend data in real time. Technology tools that go beyond limited MS Excel capabilities can deliver validated supplier information and reporting.
By implementing these strategies and tools, you can improve your organization's spend visibility and gain valuable insights into your spending patterns.
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Don't settle for limited spend visibility. As your procurement analytics partner, we provide the tools and expertise to improve visibility and capture opportunities you never knew existed. Ready to see the results for yourself? Book demo with us today.
