Every business strives to reduce their operating costs as much as possible while maximizing profit potential, but making it happen is no cakewalk. While it’s easy to apply strategies that might work for others in hopes of attaining better results, there’s no guarantee that you’ll enjoy the same benefits. In fact, businesses that don’t harvest and analyze their own data insights are liable to make ill-informed decisions.
There comes a time to put the noise of the rest of the world aside and focus internally, consulting the expenditure data you have available to make more effective changes. In that sense, optimal spend management isn’t going to happen without dedicated spend analysis. It takes a winning combination of intuition, a clear end-to-end viewpoint and the right technology to make informed decisions on what to invest in and claw back on.
In short, having a precise aim in a well-lit environment makes more sense – and is more useful – than shooting in the dark. Hit your spending targets by making data-driven decisions!
Spend Analysis Dashboards Save the Day
Procurement-focused solutions are ideal for eagle-eyed business spend management, collaborative data analysis, and strategic planning. This also translates to a clearer view of where exactly your quarterly budget is allocated. Every decision you make in terms of procurement optimization – monitoring vendor compliance, streamlining supply chains, and updating processes – can contribute to increases or reductions in associated costs.
Spend analysis dashboards – and thorough spend intelligence, by extension – can save the day in this respect. The more informed you are of where every cent is going, whether expenses are justified, and if there’s room for improvement, the easier it is to take a step back and look at the bigger picture. Having the facts on hand, plus being able to relay them to and collaborate with other team members on an optimization strategy, are some of the most significant benefits of spend analysis solutions that are personalized for your operations.
The Right Procurement Analysis Tools for the Job
Let’s strip things down with two critical definitions:
Procurement is external; to make the deals and establish a potential profit flow.
Spend analysis is internal; to ensure those profits happen.
No two businesses operate the same way, but these two processes always go hand in hand. Some companies need to maintain compliance with strict governmental and supplier agreements while others can operate in a more freeform manner – it all depends on the nature of the operation in question. Therefore, a personalized spend analysis dashboard paired with state-of-the-art procurement software is your collective best bet for smarter cost reduction.
Just as an example, let’s say that your company is planning on launching a breakthrough product next fall. Here’s a rough spend categories list to consider for such a project with some of the possible required processes and cost drivers:
- Recruitment and manufacturing capacity/training expenses
- Assembly equipment procurement
- Establishing supplier/vendor relationships
- Material and component costs/availability/wholesale rates
- Product/material waste tracking
- Market research and product refinements
- Manufacturing, storage, marketing, and shipping costs
- R&D budget and timeframe
- Testing and QA process refinement
- Maintaining compliance and obtaining certification to sell in specific markets
- Supplier/vendor contract renewals and rate negotiations
Sounds exhausting, right? In order to up your spend analysis and cost reduction game, you need to cover all the angles and not overlook any critical information. Circumstances can vary depending on how you have things set up, of course, but an effective and clear way of tracking spend, paired with the right procurement analysis tools, can make this a practical venture. In short, doing your homework means getting a better final grade, helping you avoid pitfalls such as maverick spending, bad suppliers, and not having critical information when you need it.
6 STEPS OF THE SPEND ANALYSIS JOURNEY
There’s a whole lot of information out there to absorb when it comes to optimal spend analysis, so let’s simplify the essential steps to help you achieve optimal spend intelligence. We like to call this the spend management journey, consisting of core processes that contribute to deeper insights and more informed budgeting. Here are the steps at a glance:
- Identify spend sources and organize them into basic groups.
- Extract relevant spend data and consolidate it into a centralized database.
- Independently or in a cloud-enabled collaborative capacity, comb through the spend data, group by group, to identify inaccuracies or discrepancies.
- With the help of spend analysis dashboards, set a standard of data quality to improve raw information and make it more useful.
- Organize your suppliers and repeat the above steps for their data, ideally placing them into subgroups for a clearer understanding of each group.
- Perform a thorough spend analysis of this newly organized and cleaned-up data to verify where there are cost overruns and opportunities for improvement.
This journey can be useful in many ways, such as for identifying supplier relationships that need to be balanced for fairness, opening up the potential for further cost savings. When it comes to making spend analysis and cost reduction improvements in an administrative capacity, this optimized data can also be used to make more beneficial company policy adjustments to support new strategic initiatives. After all, decisions such as increasing contract agreement renegotiations shouldn’t be taken lightly – you need to be informed in order to be effective!
YEARNING FOR OPTIMIZED SPEND ANALYSIS AND COST CONTROL? GET STARTED WITH TRADOGRAM!
With cloud-integrated procurement analysis tools, smarter spend analysis dashboards, and reams of digital data available at your fingertips, it’s never been easier to cut costs in an informed, proactive manner. Drive your decisions with carefully organized, optimized data to improve everything from supplier relationships and rates to internal process effectiveness, compliancy, and more.
Spend analysis doesn’t just improve cost control; it acts as a foundation on which you can redefine your strategic direction. To start your own spend management journey, reach out to us today.