Why Should Spend Analysis be a Part of Your Regular Procurement Activity?
Knowing your spending's and controlling it is crucial for any business, but was majorly neglected by the organisations. Still, COVID 19 crises have made almost everyone realise the consciousness needed in spending. Spend analytics has helped organisations (that used it) survive through many situations in the past. Still, COVID 19 is a crisis without a definite end date, and almost all the businesses that haven't leveraged spend analytics in the past are feeling the heat of unmanaged spending.
You might be thinking about what exactly is spend analytics or spend analysis?
So Spend analysis is the process of reviewing present and past corporate spending to recognise cost reduction opportunities, improve strategic sourcing, and reduce procurement costs.
Why should Spend Analysis be a part of regular procurement activity?
Analysing spend data is the most important aspect of procurement spend analysis. Data analysis software showcase your business's purchasing patterns recognises potential savings opportunities and helps meet compliance standards. In all of the procurement, spend analysis is perhaps the most versatile analysis.
- Greater Visibility on Expenses
Businesses can obtain a greater understanding of the costs of materials and services, expensive suppliers, and those suppliers that are meeting or not meeting expectations with the help of spend analysis and can rearrange their procurement processes as per the requirement.
- Direct Saving
Through spend analysis, organisations gain insights into both their spending patterns and supplier profiles. Companies have also realised incredible savings by negotiating volume discounts, switching to preferred suppliers, and reducing waste from overbuying. By keeping track of activities as part of a spend analysis initiative, companies can also avoid duplicate payments because of the suppliers issuing multiple invoices for the same order.
- Risk Management
Regular monitoring of your suppliers' actions and your dealings with suppliers will help you improve your risk management. Through spend analysis, you can monitor your dependency on particular suppliers through the level of transactions with them while keeping track of their credit score and annual revenue.
Your business might require by industry or government law to comply with specific procedures and audits. With all relevant data, from buying history to supplier information, stored and readily available in your centralised database of a company, you will have to make sure that your employees stick to the company's policies and any audits will be relatively straightforward.
- Leaner Procurement Functions
The lower costs among companies with spend analysis programs could be related to leaner procurement functions resulting from these programs. Because spend analysis provides knowledge into procurement activities and expenditures in an organisation, it permits the organisation to recognise cost reduction and process improvement areas. In turn, this could result in a lower overall cost to procure goods and services.
Cost reduction has become a huge priority for businesses, and a crucial role is played by technology. By executing a procurement solution that involves spend analysis, companies can start to assess their spend activity in real-time and begin making necessary changes to their procurement process.