Conducting spend analysis provides valuable insights into the way your organization spends money and helps you identify cost-saving opportunities, no doubt about it.

However, as you have probably noticed, the process can be pretty daunting.

Just think about all the work that goes into it: from data collection and cleansing to categorization, analysis, and interpretation.

Luckily, there are various solutions out there that can support you every step of the way and make spend analysis more efficient.

Here they are.

Enterprise Resource Planning (ERP) Systems

An enterprise resource planning (ERP) system is a staple organizations use to streamline and manage their day-to-day business activities.

It unites various functions within the organization—from finance, sales, and HR to procurement and supply chain—into one system, making it the single source of truth for organizations.

And although it is not a procurement tool per se, an ERP can be of great importance for efficient spend analysis precisely because it ties different business processes together and consolidates the data associated with them, as the illustration below shows:

Source: Brightpearl

This means that the procurement team gets real-time insights into the spending patterns of all different operations within the organization.

This, in turn, makes it easier to identify opportunities for cost savings and mitigate financial risks.

John Knight, senior consultant with over 18 years of experience in ERP software, explains:

Illustration: Veridion / Quote: Supply Chain Digital

Let’s say that there are geopolitical tensions in the region where your key suppliers of raw materials are located.

You’re worried that this is going to affect the prices of the materials, so you need to find a way to prevent the potential price hikes from affecting your organization’s finances.

In this scenario, you can turn to your ERP for help.

You can look through your contracts with the suppliers in question and analyze your historical spending patterns to predict your future spend.

After analyzing data, you might conclude that it’s in the best interest of the organization to mitigate the risk by switching suppliers, saving you money in the long run.

All in all, the sheer amount of data stored in your ERP can be incredibly valuable for analyzing and optimizing how your organization spends money.

However, although many ERPs do contain spend analysis modules, many procurement teams still prefer to use standalone software solutions specifically tailored to spend analysis.

Spend Analysis Software

Spend analysis software helps businesses automate the collection, cleansing, categorization, visualization, and analysis of spend data in one central location.

It pulls data from multiple sources, such as:

• ERP,
• third-party datasets,
• e-procurement tools,
• spend management platforms,
• and contract management systems.

This gives procurement professionals the most comprehensive picture of spend, enabling them to optimize their procurement strategies.

And, according to Introspective Market Research, the popularity of this kind of software is projected to grow over the next several years.

More specifically, from $1.9 billion in 2021 to $5.4 billion by 2028, at a CAGR of 16%.

Illustration: Veridion / Data: Introspective Market Research

What could be the reason behind this?

For starters, it might just be the fact that tools like ERP—while helpful to the process of spend analysis—have a broader functionality and, therefore, provide less comprehensive spend-related insights.

Spend analysis software, on the other hand, is fully focused on analyzing spend data and deriving insights from it.

Here is how Sievo, one of the most well-known spend analysis tool providers, explains what their software can do for its users.

Source: Sievo

On top of that, they say that using their spend analysis solution can help organizations realize savings of up to 11% of their annual spend.

Just as importantly, using dedicated spend analysis software saves you and your procurement team valuable time by automating the task of cleansing and categorizing your spend data.

If done manually, this task can get time-consuming and resource-intensive, not to mention prone to human error.

However, all these software capabilities come at a price, which can be quite steep if you’re a smaller organization and/or on a limited budget.

If this is the case, you may want to consider a simpler solution, such as a combination of your ERP system and a business intelligence (BI) tool.

Business Intelligence (BI) Tools

Business intelligence tools, also known as BI tools, are used to visually present data and make it easily understandable and actionable.

Just like ERPs, they are not tailored specifically for the purpose of spend analysis and have a broader range of applications.

Despite this, when integrated with an ERP or your procurement software, they can be a powerful tool for visualizing, understanding, and tracking spend data.

While the ERP collects raw data from across different functions within your organization, BI tools pull that data, analyze it, and create custom reports and dynamic visualizations, making once-complex data easy to understand.

And when you have a visual of all key data right in front of you, as you can see below, identifying trends, anomalies, and inefficiencies suddenly becomes much easier.

Source: Simfoni

In the past, generating graphs, bars, and charts was a challenge for non-technical employees.

But modern data visualization tools changed that, empowering everyone within the organization—including procurement—to present data in a simple way and really make use of it.

As Phil Simon, author of the book The Visual Organization: Data Visualization, Big Data, and the Quest for Better Decisions, points out, using BI tools for data visualization is no longer an unattainable goal.

Illustration: Veridion / Quote: Forbes

In other words, contextualizing and interpreting data with the help of such tools has never been easier.

One of the most well-known BI tools is Microsoft Power BI.

Source: Microsoft

In this cloud-based, AI-powered platform, you can create datasets from any source, turn this data into visuals and reports, and finally integrate it with other Microsoft 365 tools you use.

Additionally, Microsoft Power BI stands out for its user-friendly interface, customizability, and affordability, all while addressing a common concern that comes with using BI tools: maintaining data security.

Steve Farr, Senior Manager of Product Marketing at TIBCO Software, a provider of BI software, shares an important insight regarding this:

“Don’t make the mistake of forgetting about data governance when selecting your business intelligence solution. Giving all the data to all the people and just letting them explore is unwise. To protect the company and your customers, make sure your new BI system works in accordance with your company’s data security policies and legal obligations.”

Microsoft understands this and highlights the importance that data governance, security, and compliance play for them—and you.

So, should you invest in a BI tool for the purpose of spend analysis?

If you have sources to draw data from but need help making sense of it, and you don’t feel that a dedicated spend analysis software makes sense for your organization, the answer is yes.

A secure and user-friendly BI tool can truly be your greatest asset for gaining actionable insights from spend data.

Spend Management Software

Another type of tool essential for efficient spend analysis is spend management software.

This software automates the consolidation and tracking of all expenditures, and, ultimately, gives you insight into your organization’s spending patterns.

Why does this matter?

Well, without access to detailed spending information from different departments and locations, analyzing expenses, identifying inefficiencies, and making strategic decisions becomes challenging.

With this data, however, you gain a clear picture of spending.

For instance, your spend management software might reveal that your organization is overspending on shipping because various locations are purchasing the same goods from different suppliers.

This revelation creates an opportunity to aggregate spend, negotiate bulk discounts, and significantly reduce shipping costs.

But all of this requires you to first find good spend management software.

And according to the IFP Spend Management Pulse Report, this seems to be more challenging than you’d expect.

Namely, 28% of the surveyed professionals stated that it is precisely ineffective software that makes spend management difficult for them.

Illustration: Veridion / Data: Payhawk

If anything, this shows how important it is to carefully choose software, as opting for the wrong one can cost you more than just the money you paid for it.

So, what should you look for in spend management software?

Some of the desirable features include:

• Invoice processing
• Integration capabilities
• Comprehensive dashboard
• Advanced reporting and analytics
• Automated workflows and approvals
• Real-time expense tracking and management

Procurify is a good example of spend management software that boasts all of these features, and more.

Source: Procurify

The takeaway is clear: robust spend management software is key for efficient spend analysis.

Since 41% of business professionals see spend data analysis as the biggest priority for improving spend management practices, finding the right software is even more important.

So, take the time to research and choose the one that best fits your needs.

Supplier Discovery Platforms

Let’s take a step back from the tools you’d typically think of when considering spend analysis.

Yes, spend management tools, ERP systems with BI tool integrations, and dedicated spend analysis solutions all play an important role in observing and analyzing spend within your organization.

But there are other solutions out there that can take your spend analysis efforts to the next level, like supplier discovery platforms.

While the tools we’ve discussed so far are focused on analyzing your organization’s existing spend, supplier data platforms offer a different angle.

Namely, their purpose is to help you strategically select the best suppliers and, this way, optimize costs and improve procurement performance.

Niraj Chatwal, Data Strategy and AI Leader at MorganFranklin Consulting, firmly believes that having high-quality data on suppliers—both existing and potential—is the foundation for efficient spend analysis.

Illustration: Veridion / Quote: Supply Chain Management Review 

Chatwal also highlights the importance of consistently validating and refining the data you have on your suppliers.

Why?

Because this helps ensure that you’re truly working with the best suppliers, getting the most favorable conditions, and not putting your organization at risk.

Of course, manually scouring the Internet for suppliers that will meet your needs and requirements perfectly and will not pose a financial and reputational risk for your organization is challenging, to say the least.

That is exactly where supplier discovery platforms, such as our Veridion, come in.

Source: Veridion

Veridion replaces the tedious and time-consuming task of identifying suppliers with fast and efficient service.

All you have to do is input supplier criteria into our supplier discovery platform, and Veridion will do the rest.

Take a look at how that works in the short video below:

Source: Veridion on YouTube

Besides discovering new suppliers, Veridion also helps you validate the data on your existing ones.

It’s simple: you tell us the name of the supplier in question and the country where they are headquartered or operate, and we’ll provide you with a rich and accurate company profile.

This will help you validate the accuracy of supplier-related costs, and your spend analysis is going to be based on correct, up-to-date data.

Although supplier discovery platforms might not be the first type of tool you think of when considering your spend analysis needs, it is clear that they can take your efforts to the next level.

They will help you identify potential cost savings and make sure that your spend analysis is based on accurate supplier data, ultimately making your entire procurement process more informed and strategic.

Contract Management Software

Contract management software is a centralized repository for contracts, where you can manage the entire contract lifecycle—from its creation to renewal.

Essentially, this software keeps track of the contract terms and ensures that both you and your suppliers are compliant with the agreed-upon conditions.

As such, it helps protect your organization from the consequences of non-compliance and maverick spend.

Let’s zoom in on maverick spend in particular.

By providing insight into the terms and conditions of all supplier contracts, contract management software helps you ensure that all the purchases your organization makes are indeed aligned with them.

If not, as Dr. Graham Smith, formerly a supply chain management consultant, explains, the solution should alert you about the violation and help you prevent any further unauthorized spending.

Illustration: Veridion / Quote: LinkedIn

Promoting this adherence to contract terms ultimately helps optimize your procurement efforts and control costs, and solid contract management software is a tool that will help you get there.

DocuSign is one popular contract lifecycle management software (CLM), and it comes with features such as:

• E-signatures
• Document repository
• Easy contract creation
• Automated contract workflows
• AI-assisted negotiations capabilities

Thanks to these capabilities, it becomes easier to understand contract risks and obligations, as well as perform accurate spend analysis, and reduce procurement costs.

And to make this solution even more powerful, you can integrate it with your other tools—such as ERP.

Illustration: Veridion / Quote: DocuSign

Overall, contract management software is yet another great source of data that can elevate your spend analysis.

It will inform you about your organization’s contract compliance, help you prevent discrepancies, and enable you to identify cost-saving opportunities.

And isn’t that what spend analysis is all about?

Conclusion

Yes, the process of analyzing spend within your organization can get overwhelming due to the sheer amount of data you need to work with to keep it accurate.

However, we hope that this article has shown you that there are various tools and tactics you can use to make the process more manageable and efficient.

Whether you choose to invest in dedicated spend analysis software or you decide that a combination of different tools serves you better, the bottom line is always the same:

Effectively managing and analyzing your spend carries a plethora of benefits, and helping yourself with tools is the best way to reap all of them.