Why is spend under management important?
- 22 Dec 2021
- Spend Management
Spend under management is the area of spend in an organization managed by the procurement team and AP professionals. Together, procurement and accounts payable access the most viable suppliers and terms to improve production and increase profitability for the business.
Analyzing how spend under management is handled helps companies control costs and boost productivity rates. Sourcing strategically is critical to ensure timely delivery of supplies and keep production on schedule. Discover why spend under management is important and how to stay ahead of the curve, especially when the team will work from home.
What is spend under management?
Because of vastly differing supply chains and procurement processes, no universally accepted definition exists for spend under management. Additional confusion arises based on how organizations apply the term to gauge the procurement team’s performance. We believe it is fair to say, spend management refers to the area of spend handled by procurement and AP.
Robust procurement processes enable significant savings for the organization. In addition, companies gain a competitive advantage in an evolving business world through the well-researched selection of suppliers, ongoing monitoring of current vendor activity, and continued negotiation of contracts and pricing.
What is considered spend under management?
Going beyond the basics, consider the types of spend that potentially constitute spend under management, including:
- Spend under contract
- Spend under a sourcing plan
- Spend going through procurement
- Spend strategically reviewed
- Spend proactively reviewed by procurement to ensure the use of all contracted rates, terms, benefits, and SLAs
Spend under procurement is the percentage handled by the procurement team. In addition, spend under contract often does not consider alternatives per the terms of the agreement to ensure compliance. As a result, these spend types differ from spend under management, which is strategically managed spend.
What defines a top-performing procurement team?
A top-performing procurement team is determined by spend under management KPIs and how much savings is achieved when evaluated by the C-suite. To gauge its progress, top performers can reach 75 to 85 percent of spend under management through thoughtful supplier management and intelligent automation. Strategically managed spend includes:
- Spend analysis to figure out where an organization spends money
- Performing regular evaluations of top suppliers to ensure they are competitive
- Reviewing contracts with lead time before expiration to consider viable alternatives
- Use metrics to define organizational spending and performance
- Collaborate to determine where value can be added to purchase decisions
Focusing on spend under management reduces costs, improves collaboration between vendors and buyers, ends maverick spending, and improves overall productivity and efficiency. Automation eliminates time-consuming manual processes that slow down crucial decision-making processes and are subject to human error. Plus, determining the percentage of spend under management shows the increasing value added by the procurement team’s efforts combined with the power of cloud automation enabling them to work from home.
Ways to increase spend under management
Decreasing costs and reducing risk is why it matters to increase spend under management. Plus, automation reveals real-time data that proves procurement’s value to the overall organization. Ways to increase spend under management include:
- Streamline overall processes through the intelligent use of automation
- Improve visibility by reviewing spend categories, what is purchased, and which suppliers are chosen
- Routinely evaluate supplier performance to ensure they are trustworthy with fair prices and a quick turnaround and monitor quality, look for continued improved terms, and mitigate risk
- Keep track of addressable, impactable, and unmanaged spend
- Collaborate with team members to improve processes and solutions through the use of cloud automation to support people who work from home
- Use technology wisely to eliminate manual processes and streamline procedures, including vetting and onboarding vendors, and support those who work from home
Not all spend under management is equal, and automation helps procurement and the C-suite work together to detect where to make crucial changes swiftly. Additionally, cloud automation supports remote workers to ensure productivity at all times - regardless of location or global circumstances.
Increasing spend under management helps increase the bottom line. Cloud automation provides critical data in real-time, supporting meaningful collaboration between procurement and the C-suite to negotiate the best possible vendor terms. Plus, automation supports remote work to ensure ongoing productivity at all times for those who continue to work from home.