The present-day business world is incredibly fast-paced and hasty. With things as they are, your company can’t hope to reach any form of success if it is unable to quickly get access to goods necessary for production and allow its employees to attain an optimal level of efficiency.
Neither of these requirements can be met without an efficient, streamlined, and cost-effective procurement process.
That puts procurement, which was until recently a process that could be performed at a much more leisurely pace, one of your biggest strategic priorities. Let us look at a couple of examples of how procurement and spend analytics software can benefit your company and allow you to always get the assets you need without delays and at the best possible price.
What is spend analytics, and how it is performed?
But, before we proceed to the actual examples, let us first quickly cover a couple of things about spend analytics and why this process is so vital for the survival of your company. So, spend analytics can be roughly defined as the foundational process that allows your procurement team to successfully lay out the steps in the procurement process, prioritize acquisition resources, and determine the biggest saving opportunities.
All the things we have mentioned above are much more complicated because the data necessary for spending analytics is not concentrated in one place but rather scattered across multiple departments, data streams, and platforms. One of the main challenges of spend analytics lies in compiling this critical information and putting it into one common format. That is one of the main reasons professional spend analysis in procurement usually uses a software platform to simplify this process.
Be that as it may, the very competitive state of the modern market and the fact that businesses never have a full grasp on enterprise spending, having a robust procurement and data analytics platform is on the way to becoming one of the most critical business processes in existence.
The benefits of utilizing high-level spend analytics for your business
And now, let us finally see how putting more effort into the spend analytics process positively impacts your organization’s finances.
Improving the spending visibility
First and foremost, lying down consistent and transparent spend analytics procedures does an excellent job of improving the visibility of your expenditures and giving you a better insight into the financial flows of your company. That, in turn, allows your internal teams to identify different procurement categories, maintain the optimal level of inventory, and of course, identify the spending habits and patterns (for instance, the seasonal and holiday fluctuations) and room for making savings.
Performing spending forecasting
Being able to abstract the spending patterns is not only crucial for managing your company’s finances at this very moment. The results of the efforts put into spend analytics also provide very valuable data your procurement teams can use to forecast future trends, engage in more comprehensive and long-term financial planning, and allow your company to close the necessary deals with suppliers before the items in question are still not in peak demand or even available in the market.
Ensuring better compliance
Poorly managed spending is a source of endless financial, logistical, and organizational issues. What most people fail to remember is that having a good grasp on where your company’s money is actually going is absolutely necessary for ensuring legal compliance. If left unnoticed, even the smallest slips and mistakes can cause tremendous legal issues, putting stronger pressure on your finances. Of course, your public image will also take a strong hit.
Being able to engage in supplier performance management
Eventual issues you might be having with your procurement practices and results don’t necessarily have to originate in your company. In some cases, you might just be working with the wrong suppliers. The results of your spend analytics efforts will allow you to assess their performance much more effectively and see if you are getting enough from the deal you have made. You will also get an excellent baseline for assessing your future partners.
Rooting out irresponsible spending
This so-called ‘maverick’ spending usually refers to the practices when employees of one company use the business’s resources to acquire goods outside the already agreed procurement policies or even for personal gain. Keeping in mind the volume of items that are being purchased every day, these small expenses can very easily slip unnoticed. Well, putting more effort into the spend analytics practices will do quite a lot of heavy lifting in rooting this problem out.
We hope this short breakdown help you get a better idea about what spend analytics is, how this critical practice benefits your procurement process, and, ultimately, what your company gets out of it in the end. Still, even someone with only general knowledge about the current state of the business world knows that, if one company wants to succeed, no resources can be wasted along the way. Putting greater focus on the spend analytics is a good first step in addressing this issue.