Spend Analytics Offers Huge Benefits During a Crisis and Beyond
Knowing what you spend, when you spend, and where you spend it is vital information for every business. What you do with the data can provide both long-term and short-term value…if you know how to use it. That requires a much greater alignment between procurement and finance than many companies currently have.
During times of disruption, like we are experiencing now, the ability to access and optimize data is increasingly important, not just for Procurement but for the entire organization. However, in looking reactively at the short-term crisis, CFOs may be overlooking the value of spend analytics to the organization’s future performance.
Corcentric, in conjunction with CFO.com, illustrates that value in a white paper, “Why CFOs Can’t Afford to Ignore Spend Analysis,” which shows that organizations with better spend analytics have more efficient and effective procurement processes as well as better supplier relationships. Once finance gets an accurate view into procurement’s spend, it can then look at ways to consolidate both spend and suppliers and that can end up sending significant savings to the bottom line. As the white paper notes, according to benchmarking firm, APQC, “an organization with a spend analysis program and $5 billion in revenue will spend $11 million dollars less on procurement activities compared to a similarly sized organization without a spend analysis program.”
However, more than just a matter of savings, organizations with robust spend analysis programs, can leverage the data gathered to improve decision making while also being able to proactively respond to trends affecting markets domestically and globally. Organizations can use the data to identify opportunities that they might otherwise not be able to envision.
The crisis is now…how does spend analysis help?
All organizations should have long-term goals…and spend analytics can help realize those goals, as I stated above. However, we cannot ignore where we are right now. So what is the value of spend analysis in the midst of a crisis…especially a crisis that has no strict end date at this point?
We have seen that different industries are facing a variety of issues and problems. For the medical community, it is a shortage of PPE. For retailers, it may be a matter of simply holding in place until shutdowns end. Companies need to use data to identify those areas where they can cut their own spend (especially discretionary), renegotiate payment terms and cycles, and identify essential suppliers in order to strengthen relationships.
According to a Forbes article, “How COVID-19 Is Changing Spend Analytics,” “Businesses are seeing analytics and BI as the radar they need to plan and execute strategies essential to their survival.” The article cites a survey from Dresner Advisory Services which found that “data-driven decision making is a must-have for businesses to survive and eventually grow again.” For those companies that have not recognized the necessity of collecting and analyzing spend data, COVID-19 provided a jaw-dropping wake-up call. So many companies had to quickly transition their workforce from office to home; imagine trying to handle procurement issues without real-time and historical data at your fingertips. That is why companies that had their cloud solutions and analytics platforms in place are now able to navigate their next steps with greater accuracy than those still relying on legacy processes.
What is clear is that improving spend analysis puts companies in the position, during major disruption, to take the necessary reactive steps to answer immediate needs; but even more important, it also gives companies the information to identify trends in time to take a proactive approach that positions the company for the future.
See how your company can benefit from investing in spend management analytics by downloading the white paper.