If you’re struggling to control your company’s spending, it’s because you lack real-time visibility, budget controls, and quantifiable metrics. 

Procurement spend analysis provides accurate spend data to help you uncover hidden costs, plan budgets, and make smart decisions for future spending. 

In this article, we’ll discuss procurement spend analysis, why it is important, KPIs you need to track, and best practices to implement a spend analysis strategy effectively.

What is Procurement Spend Analysis?

Procurement spend analysis is the process of collecting, cleansing, categorizing, and analyzing procurement data to gain clear visibility into a business’s spending patterns. 

The process involves turning raw data into actionable insights so your procurement and finance teams can make smarter, data-driven decisions. This helps you reduce costs, improve supplier relationships, and allocate budget across departments. 

Procurement spend analysis is divided into four main steps:

• Data collection: Gather spend data from multiple sources such as ERP systems, invoices, purchase orders, and expense reports to create a centralized dataset.
  
• Data cleansing: Remove duplicates, correct errors, and standardize supplier names for data accuracy.
  
• Data classification: Categorize spend into meaningful groups like suppliers, departments, or product categories for better visibility and analysis.
  
• Data analysis and reporting: Analyze the cleansed, categorized data to identify trends, uncover savings opportunities, and generate reports for strategic decision-making.

Why is Procurement Spend Analysis Important?

Procurement spend analysis gives companies control over their purchasing data and spending habits. When you analyze structured spend data, you gain the insights needed for strategic procurement. 

You can create standardized purchasing processes, forecast future needs accurately, and make sure every purchase supports sustainable revenue growth.

What Are the Basics of Procurement Spend Analysis?

Spend analysis is a key component of strategic procurement and can help you save millions of dollars annually.

The basics of spend analysis can be summarized in the following key questions:

• What are we buying? (Products and services)
• How much have we paid? (Prices)
• How much have we bought? (Quantities)
• Who are we buying from? (Suppliers)
• Who is buying? (Business units)
• On what terms? (invoice payment terms)

Let’s expand on each question below:

Question 1: What Are We Buying?

This question helps you understand your historical spending patterns and identify areas where you can save money. 

You can then catalog these products/services and categorize them for specific projects, teams, or departments, such as IT, facilities, lab supplies, and marketing. This helps you avoid duplicate buys and implement a spending policy across multiple departments.

For example, if a construction company is purchasing the same materials, like lumber or concrete, from multiple suppliers without standardization, it creates inefficiencies. By understanding exactly what they’re buying, they can consolidate orders, negotiate better prices, and reduce unnecessary costs across projects.

Question 2: How Much Have We Paid?

This question helps you identify areas where you are overpaying for products or services. For example, an organization may discover that it is paying different prices for the same product or service from different suppliers.

This spend visibility allows your team to plan better cost reduction strategies. Your team uses accurate data to negotiate stronger supplier contracts, enforce compliance with agreed-upon pricing, and prevent overpayment.

Question 3: How Much Have We Bought?

Many mid-sized businesses struggle to balance supply with actual demand. Analyzing quantities purchased over time helps you track buying patterns and avoid overstocking or understocking.

For example, a small business may purchase more office supplies than it uses. With accurate quantity data, the team can plan purchases more effectively and reduce inventory carrying costs.

Question 4: Who Are We Buying From?

This question helps you consolidate spending and improve supplier relationships for cost control.

For example, a lab researcher and marketing team lead might be buying the same product from two different suppliers. If you consolidate your spending with fewer suppliers, you can negotiate better prices and improve your supplier relationships.

Question 5: Who Is Buying?

Without accountability, teams may bypass approvals, leading to budget overruns and maverick (unauthorized) spending. You need to track spending by department or requester for clear visibility into purchasing behavior. 

This insight helps you enforce compliance, improve budget forecasting, and ensure purchases align with company policies.

Question 6: On What Terms?

Reviewing supplier invoice payment terms helps you achieve better cash flow management. It also helps you track historical data to negotiate better terms or discounts.

For example, a biotech lab orders reagents and specialized equipment from several suppliers, each with different payment terms. Some suppliers expect immediate payment, while others give the lab two to four weeks to pay. 

After analyzing these terms, the lab negotiates extended payment terms with its top suppliers. This helps them improve cash flow and free up funds to invest in critical research projects.

What Are the Types of Procurement Spend Analysis?

Here are the types of spend analysis for procurement:

Tail-Spend Analytics

Tail-spend analytics focuses on analyzing the low-value purchases that make up a small portion of a company’s total spend. Although these seem insignificant individually, they can add up to substantial costs over time.

Tail-spend analytics helps teams identify duplicate purchases, consolidate suppliers, and reduce non-compliant buying.

Vendor Spend Analytics

Vendor spend analysis examines an organization’s spending with its suppliers. 

This type of analytics helps you identify which suppliers you are spending the most money with and which ones offer the best prices. It also shows which suppliers are providing the best overall value.

Category Spend Analytics

Category spend analysis looks at spending grouped by broad categories, such as office supplies, IT services, or raw materials.

This type of analysis helps you understand your spending on certain categories, identify areas to control spending, and improve supplier relationships.

Item Spend Analysis

Item spend analysis examines individual products or services within a category. For example, instead of just tracking total office supply costs, you analyze spending on specific items like pens, paper, or toner cartridges.

This detailed view helps you identify which suppliers offer the best prices for that product or service and which suppliers provide the best value for money.

Payment Term Spend Analysis

Payment term spend analysis focuses on reviewing a company’s expenditure with suppliers based on the payment terms agreed upon. This helps you track how payment schedules affect cash flow, working capital, and supplier relationships.

This type of analysis also highlights opportunities to improve liquidity by extending payment terms or taking advantage of early payment discounts.

Contract Spend Analysis

Contract spend analysis monitors a company’s contract compliance and detailed spend profile with its suppliers. 

You can use this type of analysis to monitor supplier performance and make sure they comply with negotiated agreements. It also helps you identify off-contract or unmanaged purchases and renegotiate contracts with suppliers for better prices, terms, and services.

What Are the Important KPIs in Spend Analysis?

Spend analysis helps you identify, track, and analyze key performance indicators (KPIs) that matter the most to your company’s spending. This visibility helps you avoid supply chain risks and set strict budget controls. 

Here are some of the most important KPIs in spend analysis:

• Cost savings: This metric measures the amount of money you have saved through spending analysis initiatives. Cost savings can be achieved by negotiating better prices with suppliers, consolidating spending with fewer suppliers, and reducing unnecessary purchases.
  
• Spend under management: This metric indicates the percentage of your total spending managed through spend analysis processes. Spend under management indicates how well an organization can track and control its spending.
  
• Supplier performance: This metric quantifies the performance of your suppliers in terms of on-time delivery, quality, and price.
  
• Operational KPIs: These metrics measure the operational efficiency of your procurement processes and other internal processes. Operational KPIs include monthly approved purchase orders, average purchase order process time, and the percentage of purchase orders processed correctly.
  
• Employee-related KPIs: These metrics calculate the productivity and satisfaction of your company’s procurement employees. This includes purchase orders processed per employee, the average time to process a purchase order, and the employee satisfaction survey results.

You can use a combination of these KPIs to measure the success of your spend analysis initiatives. The specific KPIs you choose to focus on will vary depending on your needs and company goals.

Benefits of Procurement Spend Analysis

Here are the benefits of procurement spend analysis:

Improves Transparency

Spend analysis provides transparency across all your company’s spending. It consolidates data from different sources, such as invoices, purchase orders, and expense reports, into a single, organized view. 

It gives you meaningful insights about the supplier base, contract terms, and spending patterns, so you can make informed decisions on your procurement processes. 

Increases Efficiency

Spend analysis increases efficiency through automated and insightful analysis. The data helps you identify spending patterns and trends, revealing cost reduction and savings opportunities. 

These insights allow procurement teams to group related items into categories and create targeted strategies to control costs.

Aids in the Prioritization of Resources

You can allocate resources more effectively by understanding the different spending categories and associated cost centers. This helps you prioritize your highest impact areas with the necessary resources.

Cost Savings Opportunities

Spend analysis catalyzes the identification of cost savings opportunities. It helps you adopt smarter strategies by examining key supplier performance, contract terms, contract compliance, and market trends.

This enables proactive cost management and empowers procurement teams to negotiate better terms, leverage buying power, and optimize vendor relationships. Thus, improving your procurement process (both internal processes and external processes) overall.

Stronger Supplier Relationships

Spend analysis reveals which suppliers deliver the most value and which may be underperforming. 

With this insight, procurement teams can focus on building strategic relationships with key vendors and holding others accountable for quality, service levels, and pricing. This leads to more reliable supply chains, less overspending, and fewer delivery delays.

Common Use Cases of Procurement Spend Analysis

As per APQC (American Productivity & Quality Center), best-in-class companies that use spend analysis programs report lower overall procurement costs because of cycle time reduction.

Here are some use cases of procurement spend analysis you should know:

Use Case 1: Spend Visibility

Many teams don’t have a centralized view of all their spending. Senior management, like CFOs, Controllers, and department heads, rely on high-level financial reports, such as general ledger (GL) data, to monitor budgets. 

Although the GL data shows total amounts spent, it isn’t granular enough to provide commodity-level visibility. For example, a biotech company’s CFO might see that $500,000 was spent last quarter but not know how much went to office supplies vs. lab equipment, or which department exceeded its budget.

You need a centralized spending dashboard that consolidates your entire spend data and breaks it down by category, department, or supplier, in easy-to-read infographics. This allows you to:

• Aligns everyone on a single source of truth for spend visibility
• Makes budgeting and forecasting more accurate and proactive
• Supports better, faster decision-making in board meetings and strategy sessions
• Builds transparency and accountability across departments.

Use Case 2: Spend Forecasting

Spend analysis helps you track recurring expenses, fluctuating costs, and rogue spend for forecasting.

The expenses can be broken down into categories, such as direct vs. indirect spend, department-wise spend, and vendor-specific spend. This allows multiple teams to use the spending data to forecast future spending. 

For example, finance and planning can use the spending data to understand recurring vendor spending along with long-term contracts to forecast the next few years’ expenditure budgets.

Use Case 3: Diversity Reporting

Spend analysis tracks spending with diverse vendors, allowing companies to meet internal goals and meet their customer requirements. These customers are usually large organizations, government agencies, or enterprise clients to whom the company supplies goods/services.

With centralized spend data, teams can easily understand spending with diverse vendors and also uncover opportunities to engage more with diverse vendors in certain predefined categories. 

Diversity reporting is also required by the sales team to respond to RFPs (request for proposals), so having this spend database handy leads to a faster turnaround of RFP responses.

For example, if a nonprofit is seeking a grant to expand its community programs, it needs to include diversity spending data in its proposal. These insights allow the team to quickly complete the RFP, demonstrate accountability, and increase the chances of securing funding.

How Do You Get Started With Procurement Spend Analysis?

The following are the important steps you need to go through to get started with spend analysis:

Step 1: Objective

The first step in a spend analysis is to define clear objectives. These goals guide you in data collection and analysis. Here are some common objectives of spend analysis for small to mid-sized teams:

• Identify savings opportunities by breaking down spending in detail, so the sourcing team can set budgetary controls.
  
• Analyze key vendors to understand where most of the money goes and create strategies for managing strategic suppliers.
  
• Provide visibility into major spending areas that impact EBITDA margins, such as COGS (Cost of Goods Sold) and SG&A (Sales, General, and Administrative expenses).

Step 2: Source Systems

The next step is to create an inventory list of all single-source systems from where you will pull the spending data.

Your entire spending must be captured for analysis. If your company has multiple business units, you likely have multiple systems. So, the scope of analysis will determine what systems you need to capture. A simple inventory table should capture all data points for improved inventory management.

Here’s a quick example of how you can arrange your data source manually:

Using a procurement system like ProcureDesk speeds up this process. The software automatically syncs with all your systems to consolidate your spend data into a centralized dashboard. This allows you to track your company’s spending in real-time without manual workarounds.

Step 3: Schema For Data Capture

A data schema is a structured framework that defines what data you need to capture and how it should be organized. It outlines the key fields, such as supplier name, spend category, and purchase amount, and provides clear definitions for each one.

Since different systems have different nomenclatures for the same fields, a common schema standardizes everything into a single, uniform structure. This makes it simpler to merge data and reduces errors when analyzing spend across various sources.

Step 4: Data Availability

Once you’ve defined your data schema, work with your IT team to understand the effort required to extract data from your different spend systems, such as ERP or accounting platforms.

You need to consider two things in this step:

• Data refresh frequency: Decide how often to update your data. For example, update quarterly if you’re mainly tracking cost savings, so you can see if negotiated savings are actually being realized.
  
• Data extraction format: Export data in the same format (e.g., Excel or CSV) to make combining and analyzing it easier. If you have multiple systems, you can use procurement software that automates batch integration. If not, you have to merge files manually.

Step 5: Classification Schema

Most ERP systems categorize the spend transactions into unique buckets. The most common approach is to use a General Ledger chart of accounts to categorize data.

In some cases, you might see homegrown or industry-specific nomenclature for classification. If that serves your purpose, use that; if not, multiple options are available for the classification schema. Data needs to be categorized into unique buckets so that analysis in procurement is easy.

Here are some industry standards in order of their popularity:

1. UNSPSC (United Nations Standard Product and Services Code). It is an open and global standard for efficient and accurate classification of products and services. It is free to browse, and you can download it in PDF format.
   
2. NAICS (North American Industry Classification Schema). Federal agencies use it to classify businesses for reporting statistics.

Step 6: Data Classification

Data classification is the process of organizing and labeling your spend data into clear, standardized categories.

Many businesses use spend classifications from their ERP or general ledger (GL). But we recommend reclassifying your data into a new, standardized schema. 

Here’s why:

• Correct misclassifications: The same expense might be labeled incorrectly and needs fixing.
• Standardized categories: The same item may appear under different names across multiple systems, which makes tracking difficult.
• Handle credit card spend properly: Credit card data often uses MCC (Merchant Category Codes). While MCCs work for travel and entertainment (T&E) expenses, they aren’t detailed enough for other types of purchases, like materials or supplies.

Data classification is the most time-consuming part of data analysis. 

The following are key considerations you need to keep in mind:

Granularity (Level of Detail)

Decide how detailed your categories need to be. Complex areas like MRO (Maintenance, Repair, and Operations) or direct materials may require more detailed classification. For simpler categories, like office supplies, you don’t need to classify them at each commodity level.

Accuracy

Achieving 100% data accuracy is hard, even with the best procurement tools. Instead of trying to perfect everything, focus on the high-value items that represent most of your spend. 

You can use the Pareto principle, or the 80/20 rule. In the context of spend analysis, this means that a small percentage of transactions or suppliers usually represent most of the company’s total spending. 

For example, 20% of suppliers might account for 80% of total spend. By focusing on accurately classifying and analyzing this critical 20%, you can gain the most impact and insights without wasting time on low-value, low-impact transactions.

When it comes to the classification of spending data, there are primarily two approaches:

• Use a third-party tool: Many spend analysis tools can automatically classify your data. Always start with a proof of concept to confirm the tool works for your type of spend.
  
• Manual approach: If you don’t have the budget for a tool, start small by hiring an intern or allocating internal resources. You can even use Excel to get started with basic classification.

Step 7: Data Spend Analysis

This is one of the most important steps in the spend analysis process, where you slice and dice the data to identify cost-saving opportunities. 

There are two main ways to perform this analysis:

Using a Business Intelligence (BI) or Reporting Tool

If your organization has access to a BI tool or custom reporting system, load your classified data into it. 

If you are unsure what tools are available, check with your finance, marketing, or analytics teams. These departments already use reporting tools that can be leveraged for spend analysis.

Using Microsoft Excel

If you don’t have a BI tool, Excel works well for basic analysis. Create pivot tables, charts, and filters to explore the data. Even simple Excel templates can help you analyze spending effectively.

The way you analyze the data depends on your objectives. If you want better visibility, focus on identifying spending trends over time, such as changes by month, department, or supplier. If you aim to find savings, look for price variations, duplicate suppliers, and opportunities to consolidate spending.

Step 8: Opportunities Presentation

The last step in the spend analysis process is presenting the results to senior management or your stakeholders. 

If the goal is to help stakeholders understand spending patterns, focus on details such as spend by vendor, spend by category, category trends, and price changes for high-cost items. 

For example, an IT director might want to see trends in contingent labor or annual software maintenance costs.

To provide visibility to senior leadership, highlight big-picture trends such as: 

• Total spend year-over-year
• Spend trend broken down by direct/COGS vs indirect spend/SG&A spend
• Cost reduction year over year

Tailoring the presentation to your audience makes your spending data look clear, relevant, and actionable.

How ProcureDesk Streamlines Procurement Spend Analysis for SMBs

ProcureDesk is procurement and accounts payable software for small to medium-sized businesses (SMBs) that manage 50+ POs or 100+ invoices per month. 

It is designed for industries such as biotech, climate tech, education, construction, manufacturing, and nonprofit. 

Our software provides real-time and committed expenditure data, giving you and your teams complete transparency into your company’s spending activities. It pinpoints where and by whom expenses are incurred.

Here’s how ProcureDesk features streamline your procurement spend analysis:

Centralized Dashboard for Data Collection

Manually collecting data from multiple sources, like spreadsheets, emails, or chats, gives you poor spend visibility.

ProcureDesk provides a centralized procurement dashboard with a complete, real-time view of all company spending. The software automatically syncs with your existing ERP or accounting systems, so data is stored in a single source of truth.

Teams can filter and track spend by department, project, or category, while role-based access controls keep sensitive data secure. For example, department managers can view spending tied to their specific budgets, while senior leadership can access a company-wide overview for strategic decision-making.

This speeds up your data collection process, gives better financial control, and allows your teams to implement stricter purchasing compliance across all departments.   

Data Cleansing with Automated Invoice Matching

If you’re managing 100+ invoices manually, you risk data entry errors and may fail to capture small, low-value expenses that are important for accurate spend analysis.

ProcureDesk automatically matches invoices with purchase orders and receipts to identify mismatches. It uses OCR (optical character recognition) technology to extract accurate data from invoices and consolidate it into the dashboard for easy access.

For spend analysis, this process delivers clean, verified data. The software uses a 3-way matching method to compare the invoice with the purchase order and receipt. 

If there’s a mismatch, the software flags it and sends it to the right person for review. Once details are confirmed, the software syncs invoice data with your accounting system for payment.

During spend analysis, your teams can easily search for invoice details in real-time. The software provides accurate data, giving them confidence to plan better procurement strategies. 

Supplier Management for Performance Tracking

Managing multiple suppliers manually leads to scattered data, inconsistent pricing, delivery delays, and non-compliance risks. 

ProcureDesk’s procurement management software simplifies supplier management by consolidating data into a centralized dashboard. You can view and track all your suppliers’ details, including contact information, payment terms, and tax documents.

Our software organizes vendors by category, region, or department for quick reference. This prevents duplicate records. 

ProcureDesk allows teams to monitor whether every supplier is meeting delivery timelines, contract pricing terms, and quality standards in real-time. These vendor performance metrics simplify your spend analysis. 

For example, if a construction company sees repeated delays from a key materials supplier, they can quickly flag the issue. The software provides performance data that can help them decide whether to renegotiate terms or shift orders to a more reliable vendor. 

Expense Management for Standardized Spending 

Alt text & Caption: Budget controls on ProcureDesk

Without real-time spending tracking, it’s hard to allocate budget limits and standardize pricing for multiple departments.

ProcureDesk offers built-in expense and spend management tied to your purchase orders and invoices. When employees create a purchase request, the software automatically checks the request against the limit before approving it or sending it for review. 

You can set custom approval workflows by amount, department, category, or vendor based on your company’s structure and goals. The software then uses logic to route purchase requests or invoices based on these rules. 

For example, if you set a $5,000 spending limit, ProcureDesk will make sure all the purchase requests meet this limit. Requests below $5,000 are approved automatically, while those above $5,000 are sent to the right reviewer based on your preset rules.

For spend analysis, our system stores data of each purchase order and invoice, so your teams can easily view, track, and extract data in real-time. You can then use this data to set budget controls for each department on ProcureDesk without manual workarounds. 

Built-in Spend Analytics for Accurate Reporting

Manual spend analysis doesn’t offer advanced reporting capabilities, making it hard to present actionable insights to stakeholders or senior management.  

ProcureDesk offers built-in spend analytics with in-depth reporting capabilities and real-time tracking. This gives you complete control and visibility into your procurement process. 

With our intuitive dashboard, you can get granular insights into your company’s spending. These insights provide data for category analysis, tail-spend analysis, supplier-specific analysis, or payment term analysis. 

ProcureDesk also offers 15+ built-in templates so teams can create and submit quarterly, monthly, or yearly expense reports to stakeholders. 

ProcureDesk Integrations

Extracting data from multiple tools for spend analysis is time-consuming and labor-intensive. 

ProcureDesk integrates with your existing ERP and accounting tools, allowing you to sync your purchase orders, invoices, and payments data into a single dashboard. 

The following are the key integrations ProcureDesk supports:

• QuickBooks
• Bill.com
• NetSuite
• Xero
• Sage Intacct
• Dynamics 365
• Slack

ProcureDesk also supports batch integration to automatically exchange data with legacy systems using file-based formats like CSV or text. This gives you accurate, centralized data for spend analysis without requiring a full system upgrade.

Other ProcureDesk Features That Streamline Procurement for Accurate Spend Analysis

• Purchase requisition management: Centralizes purchase requests, so you can capture and track all your spending from the start for cleaner, more accurate data.
  
• Custom workflows: Set approval hierarchy rules by spend, category, department, or GL code to enforce compliance and maintain consistent, reliable spend records.

• Contract management: Links purchases to contracts, making it easy to track compliance, negotiated pricing, and vendor performance.
  
• Inventory management: Tracks stock levels and usage to prevent over-purchasing and improve visibility into material costs.
  
• Bill payments: Approve and pay vendor bills directly in the platform via ACH, checks, or virtual cards, so payment data stays within the same system for analysis. 

• Mobile access: Allows employees to submit requests, approvals, and receipts from anywhere, so no spend data is missed.

Book a demo to learn how ProcureDesk streamlines your procurement process for accurate spend analysis. 

Procurement Spend Analysis Using Excel

Microsoft Excel is a great tool for classifying data in a few hours.

Here are the steps to help you categorize your data manually:

1. Sort items by a unique identifier: Use a GL code or item description to group similar items together.
2. Create a pivot table: Add item descriptions in rows and count in values to list unique items.
3. Sort by frequency: Arrange the pivot table by count to highlight the most common items.
4. Copy to a separate tab: Move the list of unique items to a new tab for easier classification.
5. Classify line by line: Assign categories manually, using keyword searches to speed up grouping.
6. Use VLOOKUP to add categories: Merge the classified data back into your main file for reporting.

Once you complete the classification, you can move to the data analysis step.

Analyzing Data Using Excel

When analyzing data in Excel, the pivot table is your best friend. If you are unfamiliar with pivot tables, this blog post is a good start.

Also, make yourself familiar with creating simple charts using Excel. If you are unfamiliar with that, this article covers the basics of creating Excel charts. You can download this Excel template to get started. 

Although Excel can be exhausting, here are some custom spend analysis reports you can build for your business.

Spend by Vendor

This report helps you understand how much you’re spending with each supplier and whether your supplier base is consolidated or fragmented. It also highlights the “long tail” of small vendors. 

Spend by vendor reports are ideal for applying the 80/20 rule; if 80% of your spend comes from 20% of vendors.

Vendors Per Category

This report looks at how many vendors you have within each spend category, such as grants, IT services, office supplies, or raw materials.

You can group as many vendors in a single category as you want to simplify vendor management. For example, multiple local suppliers may be needed for geographically dispersed operations. 

Price Part Variance

This analysis report identifies cases where the same item is purchased at different prices across departments, locations, or vendors. This happens due to a lack of standardization or a sourcing strategy.

A custom report like this helps identify savings opportunities by consolidating multiple pricing structures and, in some cases, standardization across the organization.

Payment Term Analysis

This custom report helps you control company spending by grouping costs across different vendor payment terms. You can use this report to extend payment terms with your high-spend vendors. 

To calculate potential savings by extending terms, use the following formula: 

Potential Savings = Total Spend × Days Extended × Weighted Average Cost of Capital (WACC).

Spend by Business Unit

This actionable report helps you understand how different business units spend if you have multiple business units. The most common procurement metrics included in this report are:

• Year-over-year spend trends by unit
• Spend by category within each unit
• Month-by-month actual spend for tracking budget adherence

Spend by business unit gives leadership a clearer picture of company-wide spending patterns.

5 Best Practices for Data Collection in Procurement Spend Analysis

Here are some of the best practices for data-gathering in procurement spend analysis:

Gather Data from Multiple Sources

Collect data from all relevant systems, including procurement systems, financial software, supplier records, invoices, and contracts. These diverse sources give you a complete picture of spending patterns across your company.

Standardize Data Formats

Use consistent naming conventions, coding systems, and fields across all datasets. This prevents confusion. For example, avoid duplicates like “IBM,” “I.B.M.,” or “International Business Machines”. This makes it easier to combine and compare data during report analysis.

Validate and Clean the Data Regularly

Regular data validation allows you to identify and rectify any inaccuracies or inconsistencies in the collected data.

This includes verifying data quality, resolving discrepancies, and cleansing the data if necessary. Regular data validation improves the reliability of your analysis, so your team gets accurate, actionable insights to make confident decisions.

Centralize and Integrate Data

Integrate data from various sources and systems into a centralized repository. This gives your team a comprehensive and unified view of procurement and spending activities.

ProcureDesk spend management software consolidates all your procurement and accounts payable data. It also integrates data from your legacy systems. This allows you to analyze supplier performance, identify trends, and spending patterns without jumping between systems.

Keep Data Up to Date

Update your spend data frequently to reflect the latest purchases and payments. Timely data helps you identify and respond to control spending quickly. 

It also enables procurement professionals and business leaders to make informed decisions and take proactive measures to optimize spend management.

Bottom Line: Optimize Your Spend Analysis with ProcureDesk

Procurement spend analysis can lead to higher opportunities for clean spend and better visibility into company spend. But doing this manually takes a lot of time and effort. 

A spend analysis tool streamlines the process of collecting, cleaning, and organizing data, so you can quickly turn raw data into actionable insights. 

ProcureDesk simplifies procurement spend analysis with built-in capabilities for SMBs who earn $10M – $100M+ in annual revenue. It offers features including real-time visibility, centralized dashboards, budget controls, spend analytics, supplier management, reporting, and integrations. 

With our software, you don’t have to manage multiple tools for different tasks. All your procurement processes flow through a single system, while giving you real-time spend data in infographics.

This gives your teams more time to focus on high-value tasks, such as identifying cost-saving opportunities, allocating spending limits, and adopting smarter procurement. 

Book a free demo to learn how ProcureDesk consolidates your purchasing and AP data with real-time spend control and visibility.

FAQs

What Is an Example of Procurement Spend Analysis?

A mid-sized manufacturer noticed high raw material costs. The procurement team ran a spend analysis to find savings and improve supplier management.

They collected data from their ERP, spreadsheets, and invoices, then cleaned and standardized it. The analysis focused on key questions:

• What are the top 10 materials by spend?
• Which suppliers get the most spend?
• Are prices consistent across suppliers?
• Can spend be consolidated with fewer suppliers?

Results showed steel and aluminum made up 60% of total spend. Steel came from 12 suppliers, leading to price differences and missed discounts. Aluminum prices also varied due to lack of standardization.

With these insights, the company negotiated bulk contracts with three steel suppliers, consolidated orders, and explored lower-cost aluminum options. Within six months, they cut material costs by 12% and simplified supplier management.

What Is a Spend Analysis Tool?

A spend analysis tool automates the process of analyzing procurement spend, helping organizations understand spending habits, control costs, and improve efficiency. It collects and analyzes data from sources like invoices, contracts, and payments, reducing manual work and errors while freeing time for strategic tasks.

Key features include data classification, supplier tracking, reporting, and trend analysis. Procurement teams use these tools to monitor spending, evaluate suppliers, and manage budgets for stronger financial control.

What are direct spend and indirect spend in spend analysis?

Direct spend is the cost of goods and services directly tied to creating a product or delivering services, such as raw materials or manufacturing parts. Indirect spend covers the expenses needed to run the business, like office supplies, utilities, or marketing services.

How can organizations improve supplier performance through spend analysis?

Spend analysis helps you track and evaluate supplier performance by giving you actionable insights. It helps you track where money is spent and how suppliers are delivering value

Your company can use spend analysis to:

• Identify suppliers charging high prices or delivering poor quality
• Flag suppliers missing contractual obligations, like on-time delivery
• Find opportunities to consolidate spend with fewer, strategic suppliers
• Highlight suppliers open to collaborating on cost-saving initiatives.

What are the common challenges in spend analysis?

Here are some challenges companies face in spend analysis: 

• Data quality: Incomplete or inaccurate data makes it difficult to trust spend analysis results.
• Data complexity: Large, complex datasets often require specialized tools and expertise to interpret.
• Resource constraints: Spend analysis can be time-consuming and may require dedicated staff or additional resources.

ProcureDesk automates data collection, integrates with existing systems for clean, consistent data, and provides built-in reporting and analytics tools. This reduces manual effort, simplifies complex datasets, and allows teams to focus on cost-saving strategies.

What is the formula for spend analysis?

There is no single formula for spend analysis because it depends on a company’s priorities and business goals. 

But a common approach is to categorize and calculate total spend across suppliers, categories, or departments. This data is then analyzed to identify trends, savings opportunities, and supplier performance.