Spend analysis is the process of reviewing enterprise spend data to identify areas where costs can be reduced, efficiency automated spend analysis can be improved, and procurement strategies can be optimized. One of the biggest challenges in spend analysis is organizing and categorizing procurement data efficiently. With automated spend categorization, businesses no longer need to manually sift through invoices, spreadsheets, and purchase records. The software automatically classifies and normalizes data, making it easier to track trends, compare supplier performance, and enforce procurement policies without time-consuming manual intervention.

Utilize software for data analysis

The software can quickly identify price variations across suppliers, highlight contract compliance issues, and reveal consolidation opportunities that might not be obvious through manual analysis. Advanced algorithms identify potential opportunities for spending optimization with predictive spend modeling and automated savings opportunity identification. The real-time visibility offered by automated systems transforms how organizations approach procurement process. Through expert-led data cleansing, normalization, and AI-driven spend categorization, organizations gain 360° visibility into procurement trends.

Popular KPIs in spend dashboards

• This change in tone makes rapid repricing and renegotiation of agreements—a likely short-term focus for procurement as the economy restarts—significantly easier than in a typical zero-sum, win-lose negotiating environment.
• In this guide we go through everything you need to know about spend analysis.
• The acquisition by Microsoft during this period also enhanced the solution’s scalability and integration with other enterprise tools.
• Decentralized procurement processes result in compliance gaps and maverick spending.
• When you connect data that was previously separated, you see the full picture of procurement performance.

This will help with identifying needs and forecasting better saving opportunities. Now that we’ve understood the why and the what behind spend analysis, let’s get started with the where- “Where to start? Normally, spend analysis data sources would be related to finance, especially purchase orders. Speed analysis can help firms follow incremental savings strategies, meet cost reduction goals, and strengthen supplier relationships. A minor disturbance in the supply chain can lead to the unavailability of essential materials. Spend analysis enables you to identify single-sourced items and create multiple supplier bases.

What is spend analysis software?

Employ cutting-edge technology and advanced software to accelerate data processing, discover information, and maximise accuracy. Assess and compare your spending patterns and trends with industry benchmarks to uncover areas of overspending. Companies that decide to eliminate certain expenses can use the cost reduction KPI. It involves a comparison of spending between periods before and after elimination to see whether cutting expenses was effective. Once you have the relevant data, use a centralised system to consolidate and store it. The database should contain your spending petty cash with crucial information, such as supplier names, departments that placed orders, and prices.

Spend analytics software, is usually connected the various data sources within ERP systems, the challenge most companies have is to connect and unlock access to company wide Spend data. For example, in a recent spend analysis use case or case study, a manufacturing company in the UK acquired three new smaller business to add to its portfolio. The Challenge for the Procurement team was how to extract these new companies into one company wide procurement spend profile. Spend analysis software is any automation tool or software solution that helps you conduct spend analysis quicker, more effectively or repeatedly aided by purpose-built technology. At Art of Procurement we track over 25 different procurement analytics software providers from emerging best-of-breed tools to full-suite solutions for large enterprise organizations. Spend analysis is the process of collecting, classifying, and analyzing spend data to identify patterns, trends, and opportunities for improvement.

• Purpose-built automated spend analysis software delivers proven advantages that make it the smart choice for organizations seeking immediate results without internal complexity.
• Spend analysis isn’t just about cost savings—it’s the essential data infrastructure that makes AI in procurement possible.
• While there are challenges in spend analysis, a well-planned and executed process can optimise your spending.
• The information in a dashboard can be high-level data, or it might be broken down into more specific classifications such as location, department, expense category, or vendor.
• All three of them are the most commonly used BI tools in the market, and only a further detailed check into the current data architecture, can a choice be decided.
• Raw spending data requires extensive cleaning to ensure accuracy and usability.

Such an implementation without the right knowledge can lead to lower adoption rates, ineffective interpretation, lack of scalability, and higher costs of infrastructure. The difference between an average organization and the best-in-class organization, especially for the ones with low Remote Bookkeeping margins and higher costs is highly dependent on the spending patterns. The average organizations manage only 55-60% of their spending, whereas best-in-class performers manage close to 85%. Though it might look small, bringing in incremental changes of even 5-10% – can bring an overall savings of up to 1-2% for the organization.