Identifying and categorizing expenditures poses a challenge for many
organizations — but getting a handle on spending is essential when
it comes to controlling costs. While many companies rely on software
as a spend analysis assessment tool, software alone will not provide
a total solution. A comprehensive spend assessment also requires
strategic planning and analysis conducted by professionals with
specialized expertise in this complex area.
What Is a Spend Analysis?
The three main goals of a spend analysis are better efficiency,
improved supplier relationships and reduced costs. The process
surrounds four central actions:
Collecting data
Classifying data
Cleaning up data
Analyzing data
Identifying Savings Opportunities
The six key questions asked during a spend analysis are:
Who:
From whom is your company buying, and who is making the purchases?
What:
What products, supplies or services is your company buying? Are your
vendors delivering on their promises?
When:
When is your company placing orders or making purchases? Are you
paying any unnecessary expedited charges?
Where:
Where are you using the purchased items or services? Has a
department head approved the purchases?
Why:
Why are you working with a specific vendor or buying a particular
item?
How:
How much are you buying? How much are you spending?
A spend analysis reveals how your business spends while indicating
opportunities for improvement and savings moving forward.
The Spend Analysis Process
You can conduct a spend analysis independently or with help from a
consultant. By working with a consultant, you'll gain the advantage of
having an expert evaluate your company's spending information. The
consultant can provide insight that maximizes the benefits of the
whole process.
The steps in a thorough spend analysis process typically include:
Gathering data:
This step involves collecting spend data from every possible source,
such as invoices, purchase orders, vendor information or your
company's general ledger. You should also examine all vendor
contracts.
Consolidating data:
By sorting and classifying the information, you can identify
duplicate billings and other redundancies. You can complete this
step manually or with the assistance of computer software.
Categorizing expenses:
Breaking down your expenses into categories organizes your
expenditures. A practical starting point is classifying direct and
indirect costs. This step often magnifies services or supplies that
are unnecessary.
Analyzing the data:
If your company is overspending, the analysis portion will help you
identify where. You'll also pinpoint areas of duplicate or
unauthorized spending and be able to see if your employees are
purchasing from approved vendors or someone else.
Implementing new strategies:
A detailed analysis allows you to develop strategies in line with
your goals. You may want to limit the purchasing personnel in your
company, or you might find it beneficial to trim down your list of
preferred vendors. Instead of buying traditionally, you may also
want to explore the advantages of contract buying.
Most importantly, a spend analysis does not need to be a one-time
process. By repeating the process down the road, you can maximize your
company's return on investment per spending dollar to an even greater
degree while continuing to reduce costs. Ideally, you can conduct a
thorough spend analysis annually.
Best in Market Strategic Sourcing Opportunity Assessments
Dryden Group offers a suite of procurement opportunity assessment
services we can customize to your business operation. Our services
combine years of expertise, analytics and market intelligence to
deliver a robust solution for indirect spend cost containment. Our
consultants can provide keen insight and unmatched visibility into
your indirect spend programs, enabling you to
maximize efficiency and eliminate waste.
How Can Dryden Group Help Your Business?
Our strategic sourcing assessment can benefit your company in a
variety of ways:
Alleviating burden on procurement staff:
Our spend consultants do all the heavy lifting for you — simply
provide us with your spend data, and we will do the rest.
Identifying the most impactful cost-saving
opportunities:
Our spend analysis assessment will allow you to identify and
prioritize the areas that will provide the best return on
investment. We can then work with you to develop a strategic plan
that will
address the most pressing spending issues.
Improving data accuracy: Our spend analysis
assessment process will allow you to consolidate and classify
spend data by category and supplier, which will significantly
increase categorization accuracy.
Cutting costs through strategic planning: We
will work with you to develop a plan based on the results of our
assessment that will allow you to keep your long-term spending
costs under control.
Identifying inefficiencies: Our services will
uncover procurement spending inefficiencies that are artificially
inflating costs, such as vendor overlap and inventory
mismanagement.
Improving vendor compliance: Spending issues
often result from vendors not fulfilling the terms of contractual
agreements. Our services include a review of supplier performance
and
taking steps to ramp up compliance when necessary.
Tightening spend management: Our procurement
opportunity assessment services will ensure you have
more control over indirect spending than ever, as evidenced by a healthier bottom line.
Our assessment will allow you to identify administrative areas that
may need improvement. For example, invoice analysis will provide you a
look into your payables process, allowing you to evaluate how you are
paying your bills and whether any computer software is performing
properly. A thorough assessment will also let you examine your
employees' roles and if too many people are handling the same
responsibilities.
The Dryden Group can develop and implement the results of your
strategic sourcing assessment quickly, which will yield fast results
for your organization.
Why Choose Dryden Group for Your Spend Analysis Assessment Needs?
The Dryden Group offers more than 15 years of spend analysis
experience and expertise. By serving as your strategic partner, we can
gain a thorough understanding of your organization’s procurement
processes, which enables us to develop a plan that will help you
eliminate inefficiencies and
meet your short- and long-term cost-reduction goals. Your bottom line is our top priority.
Contact Us to Learn More About Our Procurement Opportunity Assessment
Services
Discover how a spend analysis assessment by the Dryden Group can
benefit your organization.
Contact us for more information
a no-obligation quote today.
Subscribe to our Newsletter
By signing up, you will receive monthly updates and information from
Dryden directly to your inbox.