Again, INSIA helped Crescent Foundry reduce data errors by consolidating fragmented data from systems like SAP Business One, MS SQL, and spreadsheets into one platform. This shift enabled more structured data entry and ensured accuracy by reducing manual intervention. Crescent Foundry achieved a 50% faster time to insights and a 40% reduction in reporting costs. The term «spend visibility» is often mistaken for «expense tracking,» but spend visibility is much more than just monitoring expenses.
What is spend cube analysis in procurement?
- In today’s data-driven business landscape, procurement teams must deliver strategic value while maintaining cost efficiency.
- Datasets are selected based on predefined parameters, business targets, or KPIs.
- Integrating financial systems such as QuickBooks, Xero, and Netsuite ensures smooth data flow between platforms, synchronizing records and reducing discrepancies.
- It shows category differences in invoice/PO quantities and amounts, helping to spot discrepancies between business units or suppliers for process optimization.
However, each process will use your company’s spending data to achieve different goals in the budget management process. Manufacturers use spend analysis to review all their purchases and identify the best opportunities to save time and money by renegotiating costs with suppliers or redesigning products. Spend analysis not only helps companies reduce the cost of existing components (VAVE) but also lowers manufacturing cycle time by streamlining sourcing decisions.
- That’s why it’s important to collaborate with others, track key KPIs, and regularly update spend data.
- Tail spend, typically consisting of low-value, frequent purchases, often goes unnoticed but can represent up to 10-20% of total spend.
- So, as soon as the project’s objectives are final, you must identify all the single sources for collating spend data.
- At last, it’s time to measure the spending data against KPIs that were chosen after setting up company goals.
- Strategic Procurement professionals know their team needs accurate, granular, high-quality data to analyze.
Subscription management guide: Stop wasting money on unused software
Lack of support from top-level management can result in limited resources, inadequate funding, and a lack of prioritization. Identify areas of non-compliance spending against legal, regulatory, internal, environmental, social, and governance policies. It can help with the evaluation of suppliers for their compliance effectiveness and the percentage of compliance payroll adherence of the organization too. Given that there is an increase in sustainability concerns from both producers and consumers, this might be very crucial for certain organizations.
Real-Time Spend Visibility
Each of the units is categorized separately in suppliers of the products, corporate business, and item’s category. Subcategories are also part of these three units for targeting the different areas and types of organizations and cost centers. As a sourcing manager, the primary driver for conducting a spend analysis is to meet your cost-reduction goals. A spend analysis helps you achieve those goals by identifying cost outliers – the most promising parts on which to focus your cost reduction efforts.
- For smaller organizations, lighter options like Excel or BI tools may be a more practical starting point until their procurement needs grow.
- Therefore, it’s strategically important for companies to identify any compliance requirement that must be met during the procurement process.
- However, he further notes that, by analyzing your tail spend, you can spot these small but numerous transactions and find ways to consolidate them with fewer, more strategic suppliers.
- You can also improve supplier relationships and optimize your buying strategy.
- So explore which processes of spend management you could automate and which tools would help you out.
- Here again is where enterprise resource planning (ERP) software and other programs can be helpful.
Extract and Consolidate Spend Data
This includes understanding who is spending, what they are buying, how much they are spending, and with which suppliers. Performing a regular and thorough spend analysis based on complete data can help you always have an answer to this question. This could include revising procurement policies, negotiating new contracts, or automating repetitive tasks. ♦ Procurement adapts sourcing strategies to leverage emerging opportunities, such as sustainable suppliers or cost-efficient technologies. ♦ Procurement depends on performance data to reward top suppliers, renegotiate terms with underperformers, and mitigate supplier management disruptions.
APQC’s research shows that nearly 70 percent of responding organizations conduct spend analysis and are reaping significant benefits for it. For example, tail spend analysis focuses on purchases that are often ignored due to their lower value overall, but typically reveal a lot of wasteful spend and inefficiencies. Consolidating the spend data can be challenging for businesses as the information is spread across multiple languages. Enhance your proficiency in Excel and automation tools to streamline financial planning processes. Learn through real-world case studies and gain insights into the role of FP&A in mergers, acquisitions, and investment strategies.
If you’re not ready to invest in spend analytics software, you can regularly update a spend cube using commonly used business intelligence tools automated spend analysis like Power BI or Tableau. Gain a comprehensive understanding of spending patterns, leading to better financial planning and control. It provides a comprehensive view of the metrics that drive improved cost savings, process efficiency, and supply chain performance. Spend analysis is a key component of effective financial management and procurement strategy building. This process helps procurement identify areas for improvement and uncover potential savings by consolidating suppliers, negotiating better terms, and eliminating unnecessary expenses.
Payment Term Spend Analytics
- Most systems provide configuration, customization, or creation of dashboards, depending on your needs.
- Standardizing and optimizing supply chain processes can improve financial and operational performance.
- By gaining visibility into total spend, cleaning and classifying procurement spend data, and applying the right tools, businesses can make smarter decisions, cut costs, and reduce supplier risk.
- You should try to standardize the data in such a way that will easy to view.
- Traditional methods—like one-off spend cubes or backward-looking dashboards—often fall short of providing the forward-looking insights you need.
- It is a vital part of procurement because it helps reduce a project’s overall cost.
An accounts payable (AP) ledger, sometimes called a creditors’ ledger, shows the past transactions between a company and its suppliers. It includes information such as amounts owed, dates, and other details relevant to the repayment of short-term liabilities. Having the right financial professionals on your team is critical to securing your company’s bottom line. Foreign Currency Translation Consumer spending data is collected by the Office for National Statistics and is published regularly. Consumer spending trends and consumption patterns from January to March 2022.
Dashboards and reporting tools deliver up-to-date information for stakeholders. These should be refreshed regularly for ongoing visibility and risk mitigation. Procurement data rarely speaks for itself, which is why strong visualizations still make a difference.
Spend cube analysis is a powerful method for gaining insights about what you spend on, who you spend with, and who does the spending. When executed well, it can help procurement teams on the path to data-driven decision-making and strategic sourcing. Spend cube analysis can help you keep track of your procurement team’s performance over time and prove that your strategies are working. A spend cube that is developed in partnership with corporate finance can provide a baseline of procurement performance metrics that both parties can trust. To improve even more, use third-party benchmarks to enrich your data and make comparisons to businesses in your industry or of similar size.
