Spend analysis software reviews past purchases in order to find ways to save in the future. Sometimes referred to as spend management solutions, the software looks at the three fundamental parts of spending: visibility, analysis, and process. Then, the spend analytics show how your business can improve. In short, your collected spend data can reveal savings opportunities.
There are many great benefits to utilizing a spend analysis software, one of the first benefits of using spend analysis software is the ability to generate spend cubes. As the name suggests, spend cubes are three-dimensional graphics for measuring spending habits. This is one of the most effective visualizations available for reviewing three factors:
. Corporate business units
. Category of item
The cube uses the collected data from these to show the overall price and volume of items purchased. By utilizing such a visual manner, you can instantly see opportunities for savings. Even better, you can then showcase these savings in presentations in an easy-to-follow format for management and other C-suite executives.
Spend Analysis has some overlap with procurement software, though they have different functions. Procurement looks at individual order information. Spend analysis software is designed to improve your overall return-on-investment (ROI) by making it easier to review your spending habits across all vectors. And the right software can improve other areas of the company like budgeting, product development, and the management of inventory, suppliers, and contracts.
Here are 6 functions of spend analysis software that you can find out below:
- Spend categorization: Organize your spending based on different categories, such as money for vendors, suppliers, materials, labor, or other uses.
- Supplier classification and normalization: Classify and normalize your suppliers to keep better understand what services and products they offer to your business.
- Procurement records: Track all key order information, such as the vendor, purchase quantities, item or service purchased, delivery timeframes, and, most importantly, payment terms and costs.
- Real-time Analysis: Review your spending habits in real-time to see where the bulk of your budget is going.
- Visible reporting: Generate spend cubes, graphs, charts, or other visualizations to represent your historical or real-time spending data.
- Artificial intelligence and machine learning: Spend analytics solutions utilize artificial intelligence tools like machine learning to provide advanced analytics which can respond to changing situations.
Strategic Sourcing for Better Savings
There’s more to supplier management than just keeping track of contact information. Where you buy is just as important as what you buy. And you need to know who can offer the best deals. Spend analysis software has tools to help you review supplier relationships or contracts and see which ones aren’t beneficial to you.
The first step is to figure out your company’s ideal budget by reviewing historical spending patterns. By knowing what your company can afford, you can start to establish better supplier relationships. You’ll have better negotiating leverage with your current supplier since you can begin looking for new suppliers who will offer lower rates. Your suppliers would rather keep your company as a client by offering an adjusted price than risk losing you to someone else.
Cycle Time Reduction
The procurement spend analysis process doesn’t pay off until you have completely finished a customer request, whether it’s an order for new products or a service request. Spend analysis software shows where your company could improve in order to obtain a higher ROI. Cycle time reduction is just one way your company can change. How? Real-time and historical data analytics can help you see where there are delays along the supply chain.
For example, you may realize one of your suppliers is charging you at a higher rate which means you have to wait to reorder stock. This results in a slower procurement process. By finding these issues with spend analysis software, you can focus on changing these factors to then reduce your overall cycle time. Your procurement team can even test multiple solutions to find the one that offers the most cost savings benefits to your company.
Higher ROI from Your Business Decisions
Of course, the biggest benefit of spend analysis software is finding ways to improve your company ROI. Before you make any important procurement decisions, review your choices with spend analysis software. You can make more informed, actionable decisions when you have all the data laid out before you.
Additionally, spend analysis software includes savings measurement tools. After making changes to your procurement process and reducing your cycle time, you can measure the actual savings you accomplished. When it’s time to report on company earnings, you can demonstrate your exact savings to C-suite executives and board members.
Who Should Use Spend Analysis Software?
Spend analysis systems are most often used by chief procurement officers (CPOs) and chief financial officers (CFOs). However, the software is also beneficial to smaller companies who do not have dedicated C-suite officers. Company presidents, managers, accountants, and anyone in charge of decision making can benefit from spend analysis systems.
When paired with an accounting software, SaaS or on-premise spend analysis solutions can overhaul how your company manages its finances completely. Spend visibility tools make it easier than ever to showcase what’s working and what isn’t.