Using Automation Software for Improved Procurement Spend Analysis
Procurement plays a vital role in company success through spend management. By leveraging procurement data and optimizing the procurement process, companies can improve cash flow, cut costs, and collect useful financial data. The process of collecting and analyzing the data related to procurement is called spend analysis.
Spend analysis involves collecting data from the entire procurement process. That includes data related to how your company manages procurement as well as where the money is going. That insight can be leveraged to solve problems, improve efficiency, and support company-wide financial strategies.
If you’re tracking Key Performance Indicators (like we discussed in a previous post), then you’re already collecting data essential for meaningful spend analysis. Automating your procurement department with a robust eProcurement software solution is also an important step in making spend analysis easier and more useful.
Start With Automated Data Collection
Automation software that enables robust spend analysis plays a key role in supporting a company’s overall financial strategy. At the beginning of this year, Gartner released the results of a survey identifying the top 10 priorities for CFOs in 2023. Those top priorities included developing a strategy for forecasting and budgeting, as well as improving budgeting efficiency. High-level financial transformation is a big goal, and many CFOs see digital transformation as essential.
Companies often struggle to achieve visibility into procurement. Business process automation (BPA) software makes it much easier to track, manage, and analyze procurement data. The software system automatically collects data related to procurement and makes that data easy to access. The software also updates in real-time, ensuring you always have access to the most recent data.
Spend analysis begins with collecting reliable data, and automating procurement is the easiest way to get timely, accurate, and easily accessible procurement data.
Access Reliable Data
One of the great things about procurement software is it collects all the data related to procurement in one place. You won’t need to pull procurement data from several different locations. It’s all right there in the centralized software platform. You’ll have access to supplier information, purchasing requests, POs, and other paperwork; all the records for the procure-to-pay cycle.
Before performing spend analysis, you need to make sure the data you’re working with is accurate and complete. That involves double-checking data for errors and consolidating data from different sources. Automated procurement software does most of that for you. You’ll just need to check for maverick purchases (which can be reduced and sometimes eliminated by automation) and any paper files that didn’t make it into the system.
You also might find that there is some redundant data or data that isn’t in the format you expected. Working with your BPA software provider can help fix that. At NextProcess, the software is highly configurable. We’ll work with you to customize it to fit your exact needs and become more and more efficient the longer you use the software.
Objectives and KPIs
Now that you have the data, you need to decide what to do with it. Spend analysis goes more smoothly if you have an objective in mind. For example, let’s say you want to improve your supply chain and supplier management. You’ll analyze data related to supplier performance, the percentage of orders from each supplier, and policy compliance. Linking the data you gather about spend with your suppliers gives you a better picture of your supply chain.
In addition to identifying objectives, you’ll also want to decide on which Key Performance Indicators (KPIs) to track. KPIs give you something to measure your data against, so you can track performance and changes.
Continuing with our example about supplier management and the supply chain, you might decide to track the percentage of orders from each supplier as a KPI. Common advice for companies states that 80% of your purchases should go through 20% of your suppliers. You could use that 80/20 rule as a benchmark, or you might set a different benchmark for this KPI. It depends on your industry and the number of backup suppliers you might need for key supplies.
Categorize and Analyze
Once you identify your objectives, analyze the data and compare it to KPIs. This step will be easier if you categorize your spend data first. Tools in the automation system can help with this, making it easy to customize categories, link data to specific suppliers, and generate reports.
Analyzing data and evaluating company spend compared to KPIs provides key insight into company spend. Your procurement department will get a better understanding of how they’re performing. Procurement will also have data-backed information about spend to share with the rest of the company.
Benefits of Spend Analysis
Spend analysis isn’t a one-time thing. As your company continues to leverage the benefits of automated data collection, performing regular spend analysis puts that data to work for your company.
With regular spend analysis, you’ll get improved visibility into the whole procurement process. Actionable insights into spend can lead to cost savings, improved supplier management and relationships, and data-driven sourcing. You’ll also have the information needed to work on reducing risks and strengthening the supply chain.
Ongoing spend analysis and KPI tracking lets your procurement department benchmark its performance. That data can drive streamlined procurement, as well as other data-informed, strategic decisions. Spend analysis data can also highlight procurement’s role in supporting high-level strategic goals.
With NextProcess’s procurement solution, you’ll have the tools your company needs to collect robust data that supports spend analysis. The software solution is customizable to fit your exact needs and provides user-friendly features to streamline the whole procurement process. The system is easy to use for purchasing, data collection, and supplier management. It also makes accessing collected data very easy, supporting regular spend analysis. Contact us today to learn more or schedule a free demo.