How to Achieve Spend Visibility in Procurement

Spend visibility enables organizations to transform knowledge of procurement behaviors and habits into high-performance and cost-saving strategies. Mistakes such as accidental budget overspends may go unnoticed without adequate visibility into spending. Increased inventory and purchase order management costs can impact working capital due to impaired spend visibility. Companies take advantage of supply chain and procurement spend visibility to create agile processes that enable them to respond to opportunities for innovation and growth.

What is Spend Visibility

As the term implies, spend visibility goes beyond simply tracking spending. It involves precise monitoring, tracking, and control over all your business transactions. When done right, it gives a holistic yet detailed picture of how finances move through your company. Spend visibility implies insight into the procurement cycle through a clear and organized system of records. With spend visibility, a company should have a history of every order from inception until the contract is completed and the last payment received in the bank account. It gives the story behind each business transaction.

What are the benefits of improved spend visibility

A single source of truth allows teams within an organization to communicate more effectively. A common system used by every team that gets updated automatically ensures everyone has access to the same information improving performance and reducing errors that can increase costs.

When you group data based on role (supplier- or buyer-generated) and have real-time access to the data, you can draw quick conclusions, such as identifying which suppliers are underperforming.

Spend visibility creates numerous possibilities by comparing spending by department, category, codes, or suppliers. You gain instant access to which categories your team spent more money on than expected in any given period. Additionally, comparing suppliers allows you to bundle products or services that can be provided by the best-performing supplier while increasing your bargaining power.

With spend visibility, you gain a clearer picture of events across your organization, identify potential areas of overspending and gain knowledge on managing contracts more effectively.

How to improve visibility into spending

Visibility into organizational spending requires more than simply tracking corporate spend accounts. Instead, it involves continuous collection and analysis of all spending data to improve organizational performance. There needs to be consistent accountability for your organizational spending throughout the company, with constant monitoring of both direct and indirect expenditures. By incorporating a transparent spend management system across your teams, you will have a full view of how money moves through your organization.

To achieve true spend visibility, here are a few things you should consider the following:

Make it easy to track spend

Give your organization the tools to easily and efficiently record the data required to gain an overview of spend. If the process is cumbersome or poorly defined, teams within your organization may not adopt it.

Introduce a buying license

Procurement professionals who control organizational spend are constantly fighting business transactions that occur under the radar. Create a corporate policy that limits spending authority while defining roles and processes to ensure stakeholder buy-in.

Use a modern purchase order system

It seems obvious, but many organizations fail to follow a robust purchase order system. Spending visibility is almost impossible to achieve without a modern purchasing system. Purchase order software integrated into your other accounting and procurement systems can help you keep track of all purchases, enabling better order management and fulfillment.

Conduct a complete spend analysis

To realize spend visibility, you must collect and categorize your spending data. The importance of this step cannot be overstated. In fact, it may be the most critical step necessary to improve visibility.

Invest in spend analytics software

In our increasingly digital world, spend visibility is more easily achieved by embracing spend analysis software with automation and machine learning features. You can eliminate manual tasks and save tens of hours monthly by implementing good spend analytics software.

Analyze intent and driving factors behind spend

Around 80% of organizational spend comes from uncontrolled buying. Maverick buying behaviors and attitudes often need to change more than processes. However, both will need to change simultaneously to ensure more efficient procurement processes are adopted.

Planning for the future with spend visibility

Every organization needs to understand where they are spending the most money. However, the reality is different, as organizations seldom engage in spend analysis activities that create value from spend visibility. By improving your spend visibility, you can unlock insights into high-performing activities, strengthen your procurement processes, reduce costs, and respond faster to new business opportunities.

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