Complete insights on Spend Under Management

Admit it. We’ve all been there at some point. Getting the company’s credit card and making a quick purchase for our Adobe Suite or Hubspot because we could not unlock a premium feature that we desperately needed immediately. 

Well, we’ve been a cause of the problem plaguing every procurement team 一 Decentralized Buying. 

The only way to curb purchasing in silos is to have a standardized procurement policy and process in place. Procurement is not simply buying software anymore. It is all about optimizing costs, streamlining processes, and ensuring value for every dollar spent. To achieve these goals, procurement professionals rely on a robust set of procurement processes to measure their effectiveness. Spend Under Management is one such critical procurement metric which provides visibility and control over organizational spending. 

What is Spend Under Management?

Spend Under Management is the direct spend that is actively ‘managed and controlled’ by the procurement team. 

All purchases that go through a streamlined intake process from sourcing, negotiating contracts, evaluating vendor compliance, to the final payment are categorized as Spend Under Management. 

The Spend Under Management is calculated as a whole or split according to the procurement spending in different categories, regions, and suppliers. Ideally, every business should aim to track all Spend Under Management to attain complete visibility and eliminate off-radar purchases. Monitoring SUM as a procurement metric yields enhanced productivity as it is a potpourri of accuracy, clear decision-making, saving costs and driving value through better negotiations. 

Why is Spend Under Management important?

It is vital to keep track of all expenses within your SUM, which translates to significant benefits for the organization such as:  

Cost Savings and Optimization:  By managing a larger portion of spending, procurement professionals can leverage their knowledge and expertise in negotiating better deals and sourcing strategies. This leads to streamlined purchasing processes, and eliminates maverick spending.

Improved Visibility and Control:  Tracking SUM provides greater transparency into overall spending patterns. Finance teams get a clear understanding of expenses across the organization that allows them to budget and forecast spend.

Data-Driven Decision Making:  Monitoring all SUM facilitates the collection of valuable data on spending patterns, supplier performance, and market trends. Procurement teams use this data to leverage better sourcing strategies, contract negotiations, and resource allocation. 

Understanding SaaS spends

The key to Managing Spend effectively is to first get an understanding of your organization’s SaaS spends. 

Do you know how much your company spends on software? 

To give a rough idea, Gartner estimates that SaaS spending will grow to over $232 billion in 2024. Every business ranging from SMEs to enterprises rely on a multitude of SaaS applications to carry out daily operations from internal communication to project management. The ease of use and endless possibilities of SaaS tools are the driving forces of Saas spends of companies.  

On the flipside, managing these expenses can be a challenge. It is difficult to track expenses without a Spend Management Software as the allure of buying SaaS tools can pave the way to maverick spending. SaaS spend is no more simply tracking subscription fees. It involves analyzing usage patterns, identifying unused licenses, and pinpointing areas for saas cost optimization.

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By gaining a clear picture of their SaaS spend, businesses can uncover hidden costs, negotiate better deals with vendors, and ensure they're getting the most value out of their subscriptions. This empowers them to make informed decisions, streamline SaaS usage, and ultimately, maximize their ROI.

How Spendflo calculates Spend Under Management

At Spendflo, the primary goal is to maximize savings and value-add while ensuring access to top-notch SaaS products for the customer. So how does Spendflo calculate Spend Under Management with respect to the total SaaS spend of the customer organization?

Spend Under Management = Awarded to Spendflo + Offline spends 

It is calculated as the sum of the spend Awarded to Spendflo and the spend managed offline which could mean spends not given to Spendflo to oversee or spends that the customer company decides to manage by themselves. Usually the SUM metric can consist of both saas and non-SaaS spends. However at Spendflo we consider the sum of contract value for all SaaS contracts uploaded on to the platform as Spend Under Management.

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Spend awarded to Spendflo (ATS) 

Once the company’s overall SaaS contracts are uploaded, unified and visible under a central repository - Spendflo platform, the amount of spend handed over to Spendflo to directly manage can be gauged. This procurement metric is termed as ‘Awarded to Spendflo’ and can be obtained from the contract signed by the customer with Spendflo.

ATS is the sum of two other metrics called Spendflo fulfilled and Spendflo pipeline. 

Fulfilled by Spendflo - Computed as the sum of contract value for all SaaS contracts procured by Spendflo. It is the amount of spends that Spendflo has actively worked on for the customer during the contracted term right from negotiations, procurement, renewals to savings. The savings can either be direct cost reductions or the monetary value of other benefits such as extra months of service, free user licenses etc. 

Spendflo Pipeline - On the other hand, the amount of spends that are ‘to be’ procured in the current contract year falls under Spendflo pipeline. This KPI for procurement is computed as the sum of contract value for all SaaS contracts to be procured by Spendflo in the current contract year. If a customer is contracted with Spendflo for one year, any renewals that fall within that contract period are marked as “Spendflo Pipeline”. By default, when spends are uploaded on the platform during onboarding, all their spends are marked as in pipeline. 

Understanding SaaS ROI

Once the customer invests in SaaS Spend Management, it is crucial to identify and deliver value and yield maximum ROI. SaaS ROI is calculated as the percentage of savings delivered with respect to the contract value. Once the root causes plaguing a procurement team like the lack of visibility, duplicate tools, overspending are identified and fixed, businesses are enabled to unleash their full financial potential. Gaining insights from these problem fixes provide improved visibility into unused tools and licenses allowing the customer to plug the spend leaks and achieve maximum ROI by saving on Saas. 

Before the customer signs a contract with Spendflo, the solutions team performs a savings analysis and provides two savings metrics to the customer on how they can bring value to the deal. They are:

• Potential Savings Estimate 
• Minimum Savings Guarantee 

Potential Savings Estimate or PSE is a metric that Spendflo provides after analysing the customer’s existing SaaS spends and deriving an estimate of the maximum savings that they can help the customer achieve. It is an upper limit of saas savings that Spendflo can provide to the customer

Minimum Savings Guarantee or MSG is a procurement metric that represents the minimum savings assurance guaranteed to the customer at the time of contract signing. It assures a specific percentage of savings on your SaaS spend after implementing the recommended optimization strategies. 

Get guaranteed ROI on your SaaS spends with Spendflo as your virtual procurement team.

With opaque vendor pricing and scattered renewals you will often find yourself left in the dark about paying the right price for software. With Spendflo’s assisted buying, you can eliminate the shroud of doubt and buy software with certainty.  With a hybrid of AI and human intelligence, Spendflo delivers guaranteed savings for your existing and upcoming contracts from day one. 

You can become a negotiation powerhouse with Spendflo’s virtual procurement team who negotiates on your behalf to secure the best procurement deals, resulting in significant savings and maximum ROI for your organization.