Spend Analytics Through A Source-To-Pay Solution
SPEND ANALYTICS DEFINITION
todays competitive marketplace has created the need for organizations to carefully manage their spending. Having the ability to understand and analyze where and how money is being spent allows an organization to reduce costs, take advantage of new opportunities, and realize competitive advantage. Utilizing source-to-pay solution can provide an organization with the tools necessary to gain insight and intelligence into the entirety of the organizations spend.
Organizations that have investigated their spend have oftentimes found significant opportunities to reduce costs, enhance efficiency, and increase profitability. The ability to gain comprehensive view of spend is enabled by source-to-pay solutions, which packages solutions for strategic sourcing, accounts payable and financial data analysis. One of the key benefits of these solutions is the ability to gain in-depth data-driven insights from multi-sourced financial information. With these solutions, an organization can track and understand their spending patterns and trends, revealing opportunities for savings and process improvements.
Step One: Determine Your Spend
The first step in leveraging source-to-pay solutions is to determine and categorize an organizations spending. Both internal and external needs should be identified, including departmental needs, trending purchases, goods and services in high demand, key vendors, and possible non-value-added purchases. It is also important to track purchasing carries over time, as well as any seasonality in purchasing amounts.
Step Two: Set Parameters
Once an organization understands their spending patterns and trends, they can set parameters and goals. Establishing targets should be done cooperatively, utilizing input from all stakeholders to ensure that the goals are realistic and achievable. Targets should focus on spending control, identifying areas of improvement and cost reduction, and ways to enhance processes and controls.
Step Three: Track Performance
The next step is to track spending performance and measure against internal and external benchmarks. It is important to note that visibility into actual spending is essential in order to properly track and measure performance. In order to ensure up-to-date data, purchasing transactions originating from every location should be included.
Step Four: Perform Root Cause Analysis
Once an organization has tracked and measured spending performance, it is important to identify the root causes of overspending and underspending. This type of analysis is important for highlighting systemic problems and developing solutions.
Step Five: Assess Overall Spend
Once an organization has identified the root cause, it is important to assess overall spend. This can be done by analyzing current trends, measuring actual spend against benchmarks, and evaluating return on investment.
Step Six: Initiate Solutions and Enhance Processes
Once an organization has evaluated spending performance and taken steps to correct any potential problems, it is advisable to initiate solutions aimed at eliminating these problems and increasing efficiency. These solutions could involve consolidating suppliers, negotiating attractive pricing, and utilizing automated processes.
Conclusion
Source-to-pay solution offer organizations powerful tool for analyzing their spend. Through the utilization of the above-mentioned steps, organizations can leverage the capabilities of these solutions to gain comprehensive view of their spending, identify opportunities for cost reduction and improvement, and ensure an optimal return on investment. In the end, gaining visibility and control into an organizations spending can provide significant advantage and help them realize their goals.
