Asking the Right Questions in Spend Analysis

If you notice with spend analytics, the root word for this process is ‘analytics’ or ‘to analyze’. Therefore, one integral part of the equation in spend analytics always has something to do with asking the right questions. 

Spend analysis usually takes care of the questions asked for the entire process. To get valuable data from spend analysis, all purchase history data should be taken and checked at all angles according to an organization’s expenditures. This includes considering products, prices, suppliers, quantities, business units, and payment terms.

With the help of the following guiding questions, spend analysis can help a company look back at past performances and help it create an assessment of future performance, as well as different trends for checking. Some of the basic questions used for performing spend analysis include the following:

• What are we buying?
• How much have we bought?
• How much have we paid?
• Who is buying?
• Who are we buying from?
• How often do we buy?
• On what terms did we buy?
• Are we getting the items promised?
• When were the items delivered?
• Where were the items delivered to?
• How does the data compare to previous years?

Why is Spend Analytics Important?

When you get all data available for budgeting and analyzing how much money your company spent on a particular procurement, what you get are ideas that will not just help your company grow but will also help your company save more money for future endeavors.

This is just one of the many benefits that a company can get when it invests time and money on spend analytics. While the programs used for most of the core functionalities of spend analytics costs a bit of time, money, and effort to master, it will be all worth it when your company starts saving thousands of dollars because you and your procurement team are able to purchase materials that are cheaper and relatively higher in quality.

Other benefits of investing in spend analytics include the following:

• Increased visibility on category sourcing patterns
• Gain insights for strategic sourcing
• Better oversight of supply chain processes
• Reduction in supplier risk
• Nurture effective supplier relationships

What Happens During Spend Analytics?

While most of the processes during spend analytics happen inside the procurement software or data, it’s also important to learn about what happens whenever data is processed with the help of spend analytics.

Spend analytics help optimize the procurement performance of any organization through integrating information from any sourcing data. It is then sorted and cleaned for accuracy and categorized to item level. This helps operational managers, procurement professionals, and the business itself because the sorted data can help make better, actionable decisions. Even more so when the company also makes use of spend analytics software that features better data classification.

When spend analytics occurs, the following factors should always be tracked and analyzed:

1. Procurement Data retrieval

2. Validating that the data is complete and accurate

3. Data cleanup

4. Normalizing suppliers

5. Placing the data category into a deep, standardized taxonomy

6. Enriching data with metrics and benchmarks

7. Analyzing the data with an analytics solution that provides good visibility and instant insights

8. Identifying potential savings opportunities, creating options for contract creation or re-negotiation, and process efficiencies.

To receive more value, work hard to get accurate, granular data from your records. With the help of an AI-powered platform, data cleansing and categorization time dramatically decrease while data accuracy increases. 

SaaS procurement analytics can also provide analysis solutions that automatically identify common cost-saving strategies, such as vendor consolidation, volume discounts, and purchase price variance.