What is spend management?

Spend management is the practice of managing all supplier relationships and company purchasing to identify every dollar spent and get the most out of it.

Spend management overview

Effective spend management integrates and automates all spend-related activities from source-to-pay so that buying happens as planned and suppliers get paid in compliance with contracts. By taking a big-picture view of spending, more addressable spend can be brought under management, driving more organisational value. The value is derived from:

 

  • Improved process efficiency

  • Lower supply costs and risks

  • Better collaboration between trading partners and cross-functional teams

  • Greater focus on more strategic activities

What is the spend management process?

Spend management begins by digitally transforming sourcing, contracting, and purchasing, along with processes for managing suppliers, invoices, and payments.

 

Source-to-pay functions are then consolidated into one simple, intelligent process carried out on a single, cloud-based platform integrated with a global supplier network. This makes it possible to gather and analyse all spend data, gaining insight into how much a company is spending, how often, and with whom, across the entire organisation.

What are the benefits of spend management?

Using modern spend management software, insights are turned into action in an interconnected, end-to-end process.

  • Sourcing is performed from a stronger position to negotiate better prices from suppliers

  • Contracts are written in real time then stored in a centralised repository to facilitate visibility and compliance

  • Purchasing is made easy by guiding employees to buy from preferred suppliers at negotiated prices

  • Supplier lifecycle and performance is managed with a 360-degree view of reliable, up-to-date data

  • Multitier supplier visibility mitigates supplier risk and potential threats to operations, image, and revenue

  • Invoice capture, workflow, and approval are automated to eliminate exceptions and ensure compliance with contracts and purchase orders

Collaborating with suppliers, payments are managed to increase free cash flow, improve working capital, and capture early-payment discounts

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Frequently Asked Questions

Supplier management is an essential component of procurement. It involves overseeing and coordinating interactions with all of the vendors that supply goods and services to a company. It aims to create positive and productive relationships with suppliers, ensuring that they meet the company’s standards and expectations in terms of quality, cost, and delivery times. In the context of category management, supplier management becomes even more significant as it helps to build strong relationships with suppliers within specific categories, leading to improved efficiency, reduced risk, and potentially better pricing and terms.

Spend analysis refers to the process of collecting, cleansing, classifying, and analysing expenditure data with the purpose of reducing procurement costs, improving efficiency, and monitoring compliance. It helps organisations understand where their money is being spent and identify opportunities for cost reduction and process improvement. In the context of category management, spend analysis is vital as it helps organisations make data-driven decisions, optimise their spend across different categories, and negotiate better terms and conditions with suppliers.

Supplier risk refers to the potential negative consequences that can occur due to a supplier’s actions or failures. This can include risks related to quality, delivery, financial stability, compliance, and reputation. Managing supplier risk is crucial in procurement to ensure the continuity of supply, to protect the reputation of the organisation and brand, and to avoid any potential legal or financial repercussions. In the context of category management, understanding and mitigating supplier risk within specific categories helps in building resilience in the supply chain, ensuring stable and reliable supplier relationships, and protecting the organisation from potential disruptions or problems.

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