How Spend Analytics Works
Spend analytics isn’t some mysterious, catch-all financial solution for your organization. It’s a methodical, data-driven process that provides you with the actionable insight you need to establish strategic spend management. In order to realize some of the most powerful spend analytics benefits, you need to understand how this process actually works.
The process can typically be broken down into four main stages:
- Data collection: This involves gathering data from spend categories within your organization, such as procurement systems, accounts payable systems, and credit card statements.
- Data cleansing and categorization: This part of the spend analysis process uses a specific taxonomy to organize data while removing duplicates, eliminating errors, and ensuring data sets use the same units of measurement.
- Data analysis: Using data mining tools, statistical analysis, and machine learning, spend analytics enables you to identify patterns, trends, and outliers within your strategic spend management.
- Reporting and visualization: Finally, the results of the purchasing cost analysis are presented to stakeholders in a clear and easy-to-understand format.
Streamline the process of collecting, categorizing, analyzing, and reporting spend data with comprehensive spend analytics from Velocity.Explore our methodology to learn more.
The Benefits of a Spend Analysis
With this understanding, let’s dive into some of the most impactful spend analytics benefits.
Discovering Wasteful Spending
An effective spend analysis allows you to gain insight into all of your spend data, including that which is not regularly reviewed. It becomes possible to identify areas where you can reduce costs, such as eliminating unnecessary or extravagant purchases or identifying better suppliers.
Let’s take a look at a hypothetical. During a spend analysis, you find that your employees spent a lot of money on first-class flights when business-class flights would have been sufficient. So, you decide to change your travel policy and limit travel expenses to business class in the future. Because of your thoroughness, you found significant savings opportunities.
Procurement departments can also use spend analytics to track purchasing processes for various products and services and identify where they can be streamlined. For instance, if your organization realizes it has multiple providers for the same product or service, you can consolidate your supplier relationships to reduce costs. By identifying these redundancies, you can not only avoid paying extra but also reduce the complexity of your procurement processes and minimize the risk of errors.
One of the most significant spend analytics benefits is its ability to provide critical insight into your spend management strategy and identify issues in real time. Hypothetically, you may find that your procurement process consistently takes longer than expected because certain approval processes, like purchase order approval, are inefficient. A purchasing cost analysis enables you to identify these bottlenecks and make strategic changes to your procedures in order to improve efficiency.
Enhancing Strategic Sourcing Opportunities
By analyzing historical purchasing trends and anticipating future needs, you can capitalize on strategic opportunities to achieve great cost savings through spend analytics. From bulk order discounts and special deals offered by vendors to anticipated future price increases, you can use spend analytics to identify the best value for your department’s current and future needs.
Using Internal Resources More Effectively
Spend analytics enables source-to-pay organizations to allocate their internal resources in a more cost-effective manner. By examining your purchasing data, you can quickly identify where you’re spending too much time or resources. You can also identify areas where you may need to invest more of your resources to achieve better results.
For example, manually processing invoices is extremely time-consuming and prone to human error. By investing in an automated invoicing system, you can save time and resources and enable your staff to focus on more business-critical tasks. With less time spent pushing paper, your source-to-pay organization can hone in on innovating and delivering exceptional results.
Greater Opportunity to Impact Savings Targets
Another important spend analytics benefit is its ability to keep you on track toward achieving your financial goals. Because it provides exceptional visibility into your procurement department’s financial performance, you can check in periodically to ensure you’re working toward success. This enables you to refine your procurement processes and cut out inefficiencies continually.
Find an Effective Spend Management Solution With Velocity Procurement
If you’re looking for an effective spend management solution that can help you gain better control over your finances, look no further than Velocity Procurement. Our team of experts is dedicated to assisting source-to-pay organizations in gaining a deeper understanding of their spending patterns and identifying opportunities for cost reductions.
At Velocity, we use advanced analytical tools to assess your purchasing data and help you find ways to align your people, processes, and technology with your overarching financial goals. We know that every organization is unique and has specific procurement processes that need to be accounted for in a spend analysis. We work closely with you to understand your business model and develop a customized spend strategy that supports your organization.
Want to learn more about how Velocity can help you realize the many benefits of spend analytics? Reach out to us today, and let’s have a conversation about your financial goals.