Is your organization spending its dollars as efficiently as it could be? You won’t know the answer to that question unless you perform a spend analysis.
At a very basic level, spend analysis is the process of gathering and analyzing an organization’s expenses in order to determine how investments can be made more efficiently while lowering costs and ensuring compliance.
Companies can use the information they glean from spend analyses to increase cost savings, improve processes, establish better relationships with vendors, and mitigate risks—but only if they’re leveraging the latest tools on the market to conduct the analysis.
If your company is still tracking its spend via spreadsheets, you won’t be able to conduct a robust spend analysis—it’s that simple. This means you won’t be able to gain a number of insights that your competitors have adopted new tools are most assuredly leveraging.
These insights include:
- How much maverick spend your company is incurring. No matter how much your organization tries to rein in maverick spending (i.e., unauthorized purchases), it’s safe to say many transactions slip through the cracks. According to one report, 54 percent of employees have admitted to going rogue at one point in time. If you don’t know that these maverick purchases are being made in the first place, how will you be able to track them in a spreadsheet? By leveraging a modern procurement platform, however, you are able to gain better insight into any rogue spending that may be occurring. Keep in mind that a 5 percent to 10 percent reduction in maverick spending can end up saving the average large organization millions of dollars.
- Inefficiencies that are slowing down procurement. Collectively, organizations lose as much as $1.5 billion and 32.3 million man-hours each year due to inefficient procurement processes. In fact, nearly 70 percent of procurement professionals believe that the systems they rely on do not make them more productive. Stagnant spreadsheets won’t make it easy to figure out where these inefficiencies are taking place.
- How much fraud is taking place. Rogue spending is one type of fraud that spreadsheets won’t illuminate. But there are other types of fraud that can go undetected, too. For example, let’s say one of your employees is given the OK to buy a new laptop, and management has set aside $800 for that expenditure. After doing some research, the employee finds a suitable laptop that costs $600 and decides to pocket the difference. Such an occurrence—and others like it—will be nearly impossible to detect on a spreadsheet.
- Where the bottlenecks in your procurement process are. Does your company require three people to sign off on a purchase order before it’s sent to a vendor? If so, what happens when one of those three people is across the country on vacation? Are you forced to wait until he or she returns to move the requisition process forward? Using spreadsheets to track your spend makes it difficult, at best, to figure out where the bottlenecks in your procurement process are.
- If you’re getting the best deals on products and services. When you’re tracking your spend with spreadsheets, you’ll be able to get a pretty good idea of how much money you’re spending and which vendors you’re cutting checks to. But how will you be able to know if you’re getting the best deals? How will you be able to tell if you’re being offered the best payment terms? Using a platform that gives you more visibility into your procurement will help you ensure that you’re not spending a dollar more than necessary in order to acquire the products and services you need to grow your business.
The good news is that by investing in a modern e-procurement platform, you’re able to gain deeper insight into your spend. Such platforms shine a light on every corner of your procurement process, enabling you to easily identify which areas need some extra attention.
To learn more about why your organization should strive to achieve 100 percent visibility into procurement, check this out.