Unlocking The Value Of Indirect Spend Classification Using Source-To-Pay Solutions


Indirect businessespend carries large potential savings for organizations. Organizations have begun to take data-driven approach to analyze and manage the indirect spend, leading to increased cost savings and improved efficiency. Indirect businessespend requires meticulous classification to identify spend categories and potential recommended vendors. An important concept in the successful management of indirect spend is ?Indirect Spend Classification? (ISC). ISC allows organizations to better understand the sources, variances and building blocks of the overall indirect spend structure.

ISC solutions have an edge over other solutions as they are designed to help organizations gain better transparency into their indirect spend in way that supports their long-term efficiency initiatives. The objective of this article is to highlight the importance of ISC in organizations and to provide step by step guide for deploying suitable source-to-pay solution for ISC.

What is Indirect Spend Classification?

Indirect Spend Classification (ISC) is category of software that helps organizations to categorize and manage their indirect spend by applying data-driven methods. It helps organizations to structure their overall indirect spend, from categorizing expenses by vendor to tracking pricing trends. ISC solutions offer great deal of visibility into the organizations expenses and associated vendors which is vital for accurate budgeting, forecasting and vendor selection.

Reasons for Using Source-to-Pay Solution

Source-to-pay solutions streamline the complex procurement process by automating workflows. These solutions enable organizations to reduce time-consuming paperwork and manual processes while managing their vendor selection. Robust ISC solutions enable organizations to gain greater insights into their spend landscape and to make well-informed decisions. The below are some of the advantages of using source-to-pay solution:

1. Increased Efficiency: Source-to-pay solutions enable organizations to improve efficiency by reducing manual processes and paperwork.

2. Improved Compliance: Source-to-pay solutions enable organizations to maintain efficiency and compliance with the latest regulatory changes.

3. Cost Savings: The integrated materials management system helps to identify and leverage savings opportunities.

4. Vendor Categorization: Automated ISC solutions enable vendors to be grouped and tracked in order to make better decisions.

A Step-by-Step Guide for Deploying an ISC Solution

1. Research different solutions available in the market for ISC. Consult with members of the finance and procurement team to analyze the needs and requirements of the organization.

2. Compare the features and functionalities of the various solutions and identify the solution which suits the organizations needs the best.

3. Prior to deployment, analyze the daily workflow requirements, mapping out the stages and processes involved in the ISC process.

4. Set up the necessary technical infrastructure for the chosen solution. Includes procuring the necessary hardware, software and network components for the solution to be installed.

5. Map out the processes which will be automated, and identify the respective rules for automating the different processes. This includes procedural rules, rules for vendor categorization, budget plans etc.

6. Train the relevant staff on the usage of the system, important note here is to understand and adhere to the company policies on information system usage.

7. Monitor the performance of the system and take periodic feedback from users to check the effectiveness of the system in order to identify any modifications needed.


Indirect Spend Classification is an important part of the modern procurement environment. mature ISC solution helps organizations to get greater visibility into the spend management and leverage the data to identify cost-saving opportunities. The step-by-step guide outlined in this article is designed to provide organizations with an approach for deploying source-to-pay solution for ISC. The success of the implementation of the solution is dependent on the accuracy and thoroughness of the data and the rules associated with the mapping of the ISC processes.