Spend Analysis: What is it & Why is it Important? GEP Blogs

Spend analysis projects fail because you need to understand your organization’s needs better. Without appropriate spend analysis tools or systems to support such a project, the validity of the spend analysis becomes questionable. One of the biggest reasons that most spend analysis projects fail is when organizations set unrealistic goals or rush into the project without proper planning. Planning plays a vital role in ensuring that your project is successful. Even beginning the process with a small data set (but complete and error-free) is bound to give you good results.

The outcome of the spend analytics approach

Companies often overlook “tail spend” – small purchases under $200K that account for a significant portion of total spend. With decades of experience supporting Fortune 500 automated spend analysis and Global 2000 clients across industries and categories, GEP delivers unparalleled expertise in third-party risk management. We help monitor and track the effectiveness of your risk mitigation initiatives in real-world scenarios. GEP SMART enables 360-degree, enterprise-wide spend visibility for stakeholders across every business unit or location. AI enables autonomous execution of low value, high volume bids and negotiations based on defined criteria.

● Spend Classification

Our spend analysis solution, Corcentric Analytics, requires minimal input from your team. We work with as little as supplier name and spend volume, drawing on our subject matter expertise to develop a complete view of spend. After our spend analysis is complete, you have much more than simply a clear view of your spend to identify savings opportunities – you have an actionable strategic sourcing path to achieve them. In essence, it provides a clear view of an organization’s spending patterns and uncovers hidden opportunities for cost optimization. Unlike most other spend management providers, we go well beyond sharing spend analysis reports with our clients.

Process Optimization Services

Spend analytics enables sourcing professionals to identify trends, market changes, performance issues, consolidation opportunities, and sourcing potential. It can be used to identify new sourcing categories, segment suppliers, and narrow down key suppliers for development programs. Companies can consolidate purchases with high-performing suppliers, negotiate better terms, and reduce reliance on underperforming ones.

Why Spend Analysis is Crucial in Today’s Business Environment

• They can be used to visualize spend by supplier, with larger bubbles representing higher spending.
• The platform’s ability to identify spending trends, facilitate cross-departmental collaboration, and support decision-making proved invaluable for zero-based budgeting initiatives.
• Firstly, lack of data visibility into the vast number of transactions makes it difficult to monitor this spend.
• Even when you have basic spend reporting in place, unreliable spend data can cause problems.

Spend analytics tools, like GEP SMART™, use AI to process large amounts of data efficiently and accurately. By understanding your spending trends, you can identify opportunities for savings and improve your procurement strategy. In conclusion, the role of spend analysis in strategic sourcing is both vital and transformative.

However, in reality, spend analysis services use a combination of machine learning and human intervention to monitor transactions. This means that while the algorithms are working in the background to flag suspicious activity, a team of experts is also reviewing and verifying these transactions on a regular basis. This two-pronged approach can help reduce false positives and increase the accuracy of the system. Beyond the direct payments, outsourcing brings a host of indirect costs that can derail budgets if unaccounted for. These include internal overhead to manage the vendor relationship such as project leads, legal reviewers, finance approvers, and quality assurance specialists.

• Enterprises typically discover significant savings potential in tail spend management, where artificial intelligence simplifies intake processes and streamlines negotiations.
• It provides a clear view of an organization’s spending data and helps identify areas where savings can be made.
• Spend analytics used to be about collecting data and running basic reports.
• GEP SMART is a major step forward from basic spend analysis platforms.
• Integrating purchase-order, invoice, accounts payable, and general-ledger accounts data creates a multidimensional view of external spend.
• Cleansing spend data detects inaccuracies and removes corrupt records and redundancies.

Therefore, you must gather the data from all sources available to your business. It is one of the significant steps where the spend data is categorized cleanly into groupings that make sense to the business. For instance, you may label the spend data of suppliers based on purchase information, the frequency of purchases, payment details, Medical Billing Process and so on. When you buy from suppliers or vendors outside the existing procurement policy, you do not benefit from the supplier discounts or specific terms and conditions you negotiated for the business. Also called rogue spend, an analysis of such procurement cost will give you an idea of where you may need to negotiate or re-negotiate terms.

Before any budget figures are calculated, executives must ensure that the outsourcing initiative supports the company’s broader business goals. Leading providers like Sievo stand out in the market with extensive industry experience, year-after-year industry recognition, and commitment to joint-innovation with top enterprise clients. BI tools are scalable, accommodating the growing data needs of organizations of all sizes. They provide flexibility by allowing users to customize dashboards and reports based on specific procurement needs, which helps in tailoring analysis to different stakeholders. This chapter explores the different ways to approach benchmarking in spend analysis, the retained earnings balance sheet value of peer-based Community Data, and how you can use these tools to fuel smarter, more strategic procurement decisions.

The company has a well-earned reputation for developing procurement and spending dashboards using multiple technologies and platforms, ensuring that clients receive the best user experience and insights. In essence, spend analysis acts as a compass for organizations, guiding them toward more strategic, data-driven decisions. It shines a light on hidden opportunities and potential risks, empowering organizations to make choices that drive cost savings and operational efficiency. Advanced spend analytics software platforms should be able to integrate external data sources to provide real-time insights into supplier financial health, compliance status, and geopolitical risk exposure.