How to build a solid spend management strategy

Introduction

Spend management is a key element of any company’s procurement process. It helps you understand your spending, identify opportunities for improvement, and identify risks as they relate to procurement operations. In this post, we’ll discuss how to build a solid spend management strategy by taking these five steps:

1. Understand the risks

To build successful spend management strategies, you need to understand the risks of each of these areas.

  • Overspending: This is when your organization spends more than it should on things like training, infrastructure and security. It’s also common for organizations to under-spend in these areas because they’re afraid that they’ll run out of money if they pay for more staff or equipment. But this can lead to increased costs down the road as well—such as higher employee turnover rates resulting from unhappy employees who feel like their job isn’t valued by their employer.
  • Under-spending: When an organization spends less than it should on innovation and training but still manages its budget effectively (or better), this may indicate that there’s something wrong with how it does business overall; maybe there aren’t enough funds available for both innovation and training. Or maybe there aren’t enough people who understand what needs improvement? The best thing about having a solid spend management strategy is knowing exactly where every dollar goes so that nothing gets wasted on unnecessary spending or unnecessary costs associated with poor performance during execution periods (e-commerce sales decline after launch)

2. Build a holistic view of your spend

  • Understood the importance of a holistic view of your spending: You need to have a single source of truth for your spending data, and you should use it across all teams. This will allow everyone in your company to see the same numbers about how much money you’re spending and on what.
  • Built a holistic view of your spending: In order to build this single source of truth, it’s important that everyone understands how they’re spending their money—and what those costs are responsible for accomplishing.
  • Defined metrics: Once you have all these pieces together in one place (or multiple places), it’s time to start defining some metrics around each area so that we can measure success when it comes time for us to make decisions about where our resources should go next year or month-to-month throughout 2019!

3. Visualize your spend

If you’re not sure where to start, consider using a spend management tool. A tool can help you visualize your spend and understand how much money is coming in, going out and what’s left over at the end of each month.

Visualization is an important component of any strategy for managing your business’ finances. It helps you see patterns in your spending behavior so that you can make better decisions about whether or not something needs improvement or how much more money should be allocated towards improving it.

4. Analyze spending patterns

Once you have a baseline of what your company spends, it’s time to analyze the data. Here are some tips for doing so:

  • Use trends over time to identify spending patterns that may be affecting your spend. For example, if you see an increase in travel expenses around the holidays, there’s probably something about your business model or strategy that makes this behavior more likely. You can also look at seasonal changes—for instance, if sales drop in Q4 but don’t dip as much as they do during other quarters of the year (which would suggest seasonal factors), then maybe that’s something worth investigating further.
  • Identify trends across different departments or divisions within your company. If one department seems more likely than another to spend money on certain things (like marketing), then perhaps those areas should be monitored closely for patterns too!

5. Embrace data-driven collaboration

Collaboration is the key to success, and data-driven collaboration is the future.

If you want your team to be successful, you need a spend management strategy that incorporates data-driven collaboration. The best way for teams to collaborate is by sharing data about how they’re doing with each other. This can improve their ability to make informed decisions and increase their efficiency as well—and if it doesn’t work out, at least there won’t be any hard feelings!

Spend management is key to optimizing the performance of your company’s indirect procurement process and driving value across the enterprise.

Spend management is key to optimizing the performance of your company’s indirect procurement process and driving value across the enterprise.

To do this, you need a strategy that focuses on four key areas:

  • identifying cost-effective suppliers
  • developing supplier relationships that deliver value for both parties
  • promoting best practices among suppliers in order to drive down costs and improve quality control standards
  • tracking performance against contract terms and conditions

Conclusion

Now that you have a solid understanding of the different ways to manage spend, it’s time to get started. With these principles in place, your company will be able to more effectively manage its indirect procurement processes and drive value across the enterprise. And now that you know how important it is, there’s no reason not to start today!