Procurement professionals are facing increasing pressure to manage company spend more strategically. 

Effective spend management isn’t just about tracking expenses—it’s about leveraging data, aligning with organizational goals, and driving value across the company. 

In this blog post, we’ll explore six actionable tips to help you transform your approach to spend management, making it more strategic and impactful. 

By the end, you’ll have the insights needed to optimize your processes and improve your company’s bottom line.

Let’s begin by looking at where it all starts.

Collect Spend-Related Data

The first step to enhancing your spend management is understanding how you’re currently spending money, and the best way to do this is to collect spend-related data. 

After all, procurement is much more than finding and purchasing affordable goods and services.

Tracking the way you spend allows you to: 

• reduce wasteful spend,
• improve your spending efficiency, and 
• prepare budgets and forecasts more effectively. 

However, research into spend visibility among organizations based in Europe’s economic capitals shows that 40% of respondents have very limited insights into where the money goes.

Illustration: Veridion / Data: Spendesk

To make procurement more strategic and avoid being a part of this statistic, start with collecting and contextualizing spending data.

Where do you begin?

For starters, it’s helpful to take a step back and review what spend under management (SUM) means for your company, especially since it’s often confused with other metrics.

Once you’ve determined how much of your total spending is (or should be) monitored and managed by your procurement team, collect the data based on:

• Location
• Department
• Spend category

Small, hard-to-track purchases that happen outside of defined procurement processes are usually the most damaging ones.

Luckily, by leveraging innovative spend management solutions, you can track all purchases and get a bird’s eye view of all spend data.

One such example comes from Jabil, a manufacturing giant missing out on vital insights before introducing a spend management solution.

Heidi Banks, Jabil’s Senior Director of Global Procurement, explains how recognizing the need to adopt technology became a turning point for the company. 

Illustration: Veridion / Quote: Coupa on Youtube

Relying on software tools enabled Jabil to identify weak points in their processes and monitor their spend, bringing a staggering $2 billion under control.

Follow their example, start using specialized solutions that track your expenditures and you’ll be able to enjoy similar benefits. 

Data is essential for making your spend management more efficient and strategic, and once you’ve collected it, it’s time to analyze it.

Conduct a Spend Data Analysis

The data you collect tells you everything you need to know about where your money is going, but it does much more than that.

As supply chain management expert and consultant, Rafael Vela puts it, an extensive spend data analysis also reveals weak points in procurement practices, helping you chart a map toward a more strategic future. 

Illustration: Veridion / Quote: LinkedIn

Interpreting spend-related data leads to opportunities for reducing risk, cost savings, and better supplier relationships. It can uncover unauthorized spending instances, suppliers who you can negotiate better terms with, and so much more. 

There are four stages to conducting a spend data analysis:

Data Collection	Collecting real-time data from all relevant sources, such as financial records, POs, and supplier contracts, to ensure a complete view of your organization’s spending.
Data Cleansing	Ensuring data accuracy and completeness by removing duplicate entries, correcting errors, and filling in missing information. Accurate data is crucial for reliable analysis.
Data Analysis	Analyzing cleansed data to identify patterns and anomalies. The process is enhanced using various tools and techniques, from visualization to statistical analysis.
Data Reporting	Compiling and communicating results and actionable insights to relevant stakeholders using real-time dashboards, reports, and presentations.

The final steps facilitate informed decision-making.

Spend visibility and its categorization is just one piece of the puzzle since a thorough analysis also gives insights into supplier and contract management, and overall financial performance. 

Source: Veridion

Once again, if you need help conducting the analysis, your best bet is to use software.

By relying on spend management software, analysts can easily leverage the latest advances in machine learning and artificial intelligence to get fresh data quickly.

Secure cloud platforms grant 24/7 access to relevant data, and empower your procurement team to:

• develop effective KPIs for tracking,
• perform price benchmarking and supplier analysis, and
• find ways to streamline purchasing processes. 

Once your spend analysis is complete, you’ll gain a detailed map of your spend management, enabling you to make plans for a more strategic procurement in the future.

Establish Clear Spending Guidelines

Strategic spend management is based on well-defined, reasonable guidelines for all spending activities within your organization.

Clear spending guidelines can correct some spending mistakes as they help bring clarity and organization-wide alignment. 

It’s simple: if you want everyone to follow the rules, they better be clearly spelled out. 

Although it’s important to account for different scenarios, spending rules shouldn’t be too complicated, and should aim to address these key questions: 

• What are we buying?
• At what price?
• In which quantity?
• Who are we buying from?
• Which departments are buying?
• On what terms?

Relying on data helps to establish clarity and standardized guidelines, but also review and upgrade existing practices.

For example, data on the duration of the procurement cycle can indicate a complex approval process, involving multiple steps and too much red tape which creates inefficiencies. 

On the other hand, a high percentage of maverick spending across different departments would suggest a need for stricter approvals and expense limits.

Establishing an approval structure, setting expense limits, and defining who the preferred vendors are and why make up the cornerstones of your spending guidelines.  

Source: Veridion

However, in line with the previously established value of simplicity, it’s essential to balance the amount of details while defining these key areas.

Even the simplest guidelines need to account for the needs of different departments and outline department-specific requirements if there are any.

On the same note, it’s important to outline the code of conduct in specific circumstances, dictated by the urgency of the request or the price tag of the purchase.

Small, low-value purchases might be exempted from some steps in the approval process while higher-cost items could require additional checks.

Remember: regardless of how you define your system, a spend management policy works only if it’s intuitive and accessible to individuals and teams who implement it.

Collaborate with Different Departments

When employees from multiple departments are already actively collaborating, and sharing data, and when everyone understands the big picture, spend management can become more strategic.

But if the opposite is true, the consequences can be devastating, from duplicate efforts and inaccurate reporting to an overall lack of visibility and cost control.

Illustration: Veridion / Source: Deloitte

Although Deloitte’s report puts focus on the partnership between finance and procurement, making strategic spending a reality requires you to sync all relevant stakeholders, departments, and employees.

Having all relevant parties involved avoids miscommunication and confusion about procurement policies and operational controls.

Moreover, there’s a distinct advantage to diversity of perspectives and expertise that results from including more people. 

That’s what David Food, a supply chain analyst, thought leader, and university lecturer, thinks.  

Illustration: Veridion / Source: LinkedIn

Cross-departmental collaboration matters because procurement strategies and policies need to be fully aligned with company-wide business goals while taking into account specific departmental needs.

There are a couple of ways to nurture this collaboration, including:

• establishing shared objectives and KPIs,
• promoting transparent communication, 
• leveraging technology for collaboration, and
• integrating procurement with other business functions.

Since every department buys things, procurement is the common thread connecting several functional areas, from marketing and finance to HR and R&D.

Source: Veridion

The extent and frequency of collaboration between different departments depends on multiple factors, including the nature of their operations.

To secure maximum benefits, prioritize the sync between key departments, such as procurement and finance, and then loop other departments in.

Nevertheless, enhanced collaboration between all departments brings company-wide benefits and alignment on spend management, so every step in that direction is worth it!

Evaluate Your Suppliers

Spend and supplier management are almost synonymous, which is why evaluating suppliers is another important element of moving toward a more strategic approach.

While spend analysis tells you how many suppliers you have and how much are you paying for goods and services, continuous supplier performance management means clearing up some common issues that influence your spending, such as double ordering or zombie spending.

Source: Veridion

In the process, you learn which supplier relationships to invest in and which to discontinue. 

Moreover, the benefits of taking a closer look at your supplier base go well beyond the short term.

By continuously monitoring supplier performance, you’re paving the way for:

• identifying hidden costs,
• utilizing the supplier base fully,
• boosting supplier performance,
• mitigating financial, operational, and reputational risks.

Pinpointing the best-performing suppliers can be done using a spreadsheet or asking department heads for feedback, but technology makes it much more efficient.

Software solutions can give you real-time insights into supplier performance based on costs, quality, reliability, and lead time.

But how do you stay up to date with any changes in your suppliers’ companies? 

They will not necessarily tell you about it. 

This is where Veridion, our own AI-powered procurement tool, comes in.  

Accurate data is crucial for effectively evaluating current and prospective suppliers across a range of criteria, and with our Match & Enrich API, you can easily keep track of supplier-unreported changes and increase your negotiation power.

Our vast global supplier database of nearly 80 million companies is updated weekly.

Source: Veridion

Supplier data changes, but there’s no need to base your decisions on outdated information.

By combining supplier performance tools with Veridion, you can stay on top of everything that’s going on in your supplier base. 

Diving deep into suppliers’ performance and using the insights to refine your processes is the way to ensure procurement excellence and strategic spend management.

Continuously Improve Your Spend Management Processes

Here’s the fact: there is always something to improve, and you can always do better. 

Therefore, consider spend management a living, breathing thing that needs regular check-ups and tweaks. 

Sometimes a new process works until it doesn’t because it needs to be adapted to new circumstances. 

But without regular revisions, you fail to spot these situations and make adjustments accordingly.

This is why it’s crucial to keep refining processes and updating strategies based on performance metrics, as well as stakeholder feedback.

Source: Veridion

Look for areas of improvement and strive to be better each year.  

The drive to improve results in digital transformation, competitive advantage and cost savings.

Conclusion

Optimizing your spend management means tracking every dollar and penny, and being prepared to introduce changes to your system.

Collecting, monitoring, and acting on data insights boosts spend visibility across departments, allowing you to stay agile and adaptable no matter the circumstances.

Investing in digital transformation is another big part of the equation, as software solutions boost automation and compliance, ensuring your spending occurs through the right channels.

Your spend management won’t get more strategic at the swish of the wand, but following these tips lets you clear up the toughest obstacles in your path to success.

When in doubt, turn to your data.

Good luck!