Data-driven spend management - the key to good business planning and decision making

As markets evolve, effective information management is quickly becoming an essential requirement to achieve control of spend and a healthy bottom line. For many organisations, this takes the form of data-driven spend management, i.e. strategic purchasing, cost reduction, and supply chain management informed by in-depth data.

In order to maximise your return on investment (ROI), achieve absolute efficiency, and create long-term value for your organisation, your team needs to be able to access comprehensive data. For example, if you can access a clear picture of eProcurement and purchasing activities, from transactions through to summary analysis, you can gain total visibility of spend in near real-time, to help make informed business decisions.  

Paired with your enterprise resource planning (ERP) and/or other software packages, this approach gives you unparalleled ability to view, analyse and report on previously fragmented and siloed information. Seamless integration with a finance/ERP solution strengthens Source-to-Pay processes and embeds them deeper into your organisation as supplier data is consolidated, supplier invoice queries are more quickly resolved, and PO-flips enabled for more efficient processing.  All of these activities deliver a wealth of powerful data, which when combined offer great insight.

You are only ever as good as your data, so ensuring that both Procurement and Finance are categorising data in the same way is vital. For example, having access to extensive information about past, present and future purchases is key. Procurement leaders need to make data-driven supply chain decisions – with better visibility and insight into who it is the company is dealing with. Improved access to data will influence better strategy, to predict, plan and therefore model. Whilst there is plenty of information – around things such as spend, transactions, sourcing cycles, lead times, etc, – the data are often not integrated. Organisations need a view across all business areas, something which Procurement is perfectly placed to do.

In the current climate, however, actionable data is needed immediately, rather than having to wait for it to be included in a report. This is where Artificial Intelligence (AI) can come into play. It can interpret the sourcing or purchasing situation and what the most likely outcomes will look like, leading to more time saved, more compliance and less risk.

Outmoded management tools lack the breadth and depth of next-generation spend management platforms, which is why both procurement managers and senior executives at businesses around the world are moving beyond cost reduction and transforming procurement into a strategic tool for building real, lasting value. Gary Simon, BSc, FCA, FBCS, CITP, Chief Executive of FSN & Leader of the Modern Finance Forum on LinkedIn, for example, has stated: "Procurement data (amounts, deliveries, sources and substitutes) needs to be planned in line with sales forecasts, sometimes over very long periods depending on industry sector. Shortages and delays can have a profound impact on profitability and strategic decision making. Increasingly, integrated business planning (IBP), i.e. the fusion of operational data from, say, procurement and sales order systems with financial plans, is crucial to assessing the robustness of both short-term forecasts and longer-term planning scenarios."

It is often difficult to achieve, as spend management project teams will often encounter a series of major data barriers that need to be overcome, including:

  • Disparate data: Spending data is typically found in multiple systems that may not be connected, from Accounts Payable spreadsheets and finance management systems, through to ERP tools, corporate purchasing systems and p-cards.
  • Inaccuracy: Spending data is often inconsistent because of mistakes, duplications, chasms in records or a large amount of data classified as “other”. It may also be old or present several competing versions of the truth.
  • Inconsistent product information: Names and codes for suppliers, products and services may be recorded incorrectly, adding to the fog and limiting negotiation leverage with suppliers.
  • Limited analysis: Analysing current spending patterns by multiple dimensions is a challenge as general-purpose business intelligence tools can’t help.

But the best spend management solutions can overcome these tricky issues and more. Modern tools ensure that you constantly have the right information, at the right time, with 100% insight into your organisation’s financial and operational performance. They can aggregate, cleanse, validate, categorise and analyse every ounce of data across your transactional systems. Supplier data enrichment can enable industry codes to be added too, so products and services appear under the right headings. Suddenly, you've got a crystal-clear picture of spending. Any patterns will show you where you could fuel the sourcing pipeline and ensure compliance.

In a data-driven business world, complex tasks can be handled quickly and effectively through automation.