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What’s hidden in your spend data?

There is a clear connection between the data your company generates and how your spend is managed. Automating your entire transaction process — from when a purchase order is issued to when an invoice has been paid — leads to greater efficiency.

Perhaps the best place to start analyzing data is with what is known as maverick spend or indirect spend. These are things that are not typically tied to purchase orders. Most businesses use purchase orders with their direct spend — those items you need for your primary business. So, for example, if I am a greeting card company, I am obviously going to be purchasing a lot of card stock and ink for my business. That’s considered direct spend. Items like office supplies and even expense reports are indirect spend because they aren’t used to make the products a company produces.

By analyzing your maverick spend, you can begin to understand what categories or vendors may be having unexpected spikes in spending. For example, if you have office supply invoices totaling $5,000 for a given month, but expected it to be less, you need to start drilling down to see what that spend is being purchased, at what cost, from what vendors, and by what employees. What you might find is that you need to put policies in place governing certain spend categories or perhaps select a preferred vendor who you can put together a program with and negotiate payment terms, service levels, discounts, rebates, etc.

You also can use data to help manage your direct spend more efficiently. For any given item, you may have multiple approved vendors. Digging into the data will show what you spend with each vendor. You may find that you are not reaching spend levels you need with certain vendors to achieve desired discounts and rebates. Or you may discover with some vendors that you are exceeding your spend levels and may be able to then renegotiate more favorable terms, discounts and rebates.

Analyzing spend data will increase visibility into your contracted spending thresholds/targets to ensure you are achieving the discounts and rebates you are expecting and entitled to from vendors.

Another area where analyzing data can help is in detecting internal fraud. Unfortunately, stories abound of trusted employees who set up fake vendor accounts, creating purchase orders which are then used to funnel funds from the company to their own accounts.

Automation puts the data at your fingertips. All you need to do is spend some time learning what the information is telling you so you can take the necessary action.

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