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Why look at the past when you can see what’s happening now

Procurement directors and finance officers always ask for spend analytics. They (think) they want the history of their organization’s spend - detailed reports that show, over the course of a quarter or a year, where the money is going so they can plan, budget and make strategic decisions.

Those historical reports, however, are only just a snapshot in time. In reality, they do nothing to actively steer organizations toward a better financial behaviors.

What leaders should be asking for is spend visibility - real-time analysis that shows companies where the money is going today, not six months ago. Procurement leaders should be looking to those visibility reports, not historical data, to better manage their spend.

Spend visibility goes beyond the data. If monitored properly, it provides an opportunity to implement immediate changes to change behavior and save money.

Analytics is ‘just data’

Spend analytics and visibility both are very broad topics. There certainly is a time and place to look back and analyze past activity to better understand what happened and how to control the future. If an organization has historically been underperforming, for instance, it’s best to rewind and find out where things went wrong. In that case, analytics can spotlight overarching problems. For others, looking back does nothing more than narrow down a handful of spend areas that they likely already knew they had covered. Those historical looks provide a taxonomy of things, but no real action plan for improvement. For instance, a spend analysis report might find that a company spends millions on a dozen accounts with a phone company, but that’s not analytics. That’s just data. And if that historical data was never monitored on a regular basis, it’s likely the trend won’t be positive.

 

Track spending now, not six months ago

Spend visibility goes beyond the data. If monitored properly, it provides an opportunity implement immediate changes to change behavior and save money. The benefits are many. With spend visibility, companies can improve contractual compliance and reduce maverick spending. If a company has a contract with one paper company, but an office manager starts buying from another company, weekly reports that are properly monitored can spotlight the practice and put an end to it. Spend visibility provides a clearer picture of an organization’s activity with known vendors and whether, that spend profile meets regulatory or strategic requirements. This information can be especially important in the public sector where grants can hang on whether a percentage of firms hired are local or minority-owned, for instance. There can be financial and legal ramifications if the rules aren’t met.

 

Knowledge is power

Visibility also helps leaders better negotiate with vendors and take advantage of rebates. If a procurement director has negotiated a contract with an office supply store that includes a rebate, but everybody else shops at a different store, there goes the rebate.

History tends to repeat itself. If companies wait a year between spend analytics reports, they’ve lost out on opportunities to save money now, to negotiate better contracts and catch rogue activity as soon as it starts. Why wait for the report in six months when you can make change now?