All businesses have a wide range of expenses and must plan for revenues, incomes, and overall operational expenses such as tech stack, marketing and advertising spend, maintenance and repair, and more. 

In this blog post, learn how to use spend analysis templates and stay on top of your expenses by analyzing and maximizing ROI on spends.

What is spend analysis?

Spend analysis is a part of spend management systems that is responsible for analyzing your business’ expenditures to reduce expenses, pinpoint saving opportunities, anticipate requirements, make the most of current spending and manage risk and relationships. Spend analysis helps you optimize costs and improve the overall performance of your business. 

What is spend analysis in procurement?

Spend analysis in procurement is a process of collecting, cleansing, classifying and analyzing procurement data for business insights. You can then identify spending patterns and savings opportunitiest. It also encompasses reviewing historical procurement data to fetch insights and identify chances of cost reduction, improving efficiency, creating values and managing risks.

What questions to ask before initiating spend analysis?

Spend analysis can help you review your past performance and evaluate your future performance and trends by answering these questions:

  • What products or services are you buying?
  • What prices have you paid for them?
  • What quantities have you bought?
  • Which suppliers are you buying from?
  • Which departments are making the purchases?
  • What agreements did you use for the purchases?
  • How frequently do you buy?
  • When did you buy the product or service?
  • Are you receiving what you expected or agreed on?
  • How does the data differ from previous years?

Understanding your spend data, which is essentially the information related to your company’s expenditure on outsourced services, helps you create your spend analysis templates that come in many forms such as expense analysis excel sheets, business intelligence tools or automated spend analysis tools.

How to create spend analysis template

You can embrace any method or tool to create a personalized spend analysis template. Here is a 7-step formula to create your procurement spend analysis template and save costs for your company:

#1 Defining scope and objectives

As the first step, you must determine all the data sources, categories, periods and suppliers that you'll cover. It’s helpful to establish what questions you want to address and what outcomes you want to achieve with your analysis, as mentioned in the previous section.

#2 Collecting the data

You must obtain all the relevant spend data from your internal and external sources, such as invoices, purchase orders, budgets, contracts etc. A data extraction tool or spend analysis software can integrate the data into a single database.

#3 Cleansing the data

Data cleaning is usually the most time-consuming process. However, it helps you eliminate errors, duplicates, outliers or missing values from data. Good spend analysis software can standardize the data forms, currencies, units etc. Also, enhancing your data with complementary information like market prices, risk scores and supplier profiles increases its value.

#4 Classifying the data

Categorizing and segmenting your data into meaningful categories and subcategories based on the products or services purchased, the suppliers involved, the business departments responsible etc. You can use a classification tool or spend analysis software to apply a custom schema to your data.

#5 Analyzing the data

The best advice would be to use various analytical tools and techniques to examine your data and discover insights. For example, analyzing data can help identify unused or overlapping services and negotiate better deals.

#6 Reporting the results

You can utilize visualization tools to create dashboards and reports that clearly and effectively communicate your findings and recommendations. You can also use storytelling techniques to make your reports more engaging and persuasive.

#7 Implementing and repeating the actions

Use the insights and recommendations from your analysis to take action and improve your procurement process. Measure and monitor the impact of your efforts and track your progress toward your goals.

Why do you need procurement spend analysis?

Businesses must optimize spending and improve outcomes. Analyzing procurement spends during the growth phase can be challenging for decision-makers as they actively adopt SaaS solutions to enhance business value.

A study reveals that 68% of business leaders want to optimize their SaaS spending, and 42% usually end up overpaying due to a lack of benchmarks and clarity, which makes procurement spend analysis a necessity. 

Despite understanding the nitty-gritty of accurately tracking and managing spending, it’s the number of solutions in the tech stack that make it daunting for decision-makers to map out a plan that’s sustainable and efficient.

You need an efficient procurement spend analysis process to:

  • Optimize your procurement spend: When you centralize the procurement and have limited procurement partners, negotiating with suppliers who value large and consolidated orders is easy. You can avoid paying for unused or duplicate licenses and optimize your subscription plans according to your needs. Hence, it lowers your procurement costs and increases contract value.
  • Streamline your logistic challenges: Standardize and simplify your procurement processes by using the same vendors every time. This minimizes your efforts and helps you ensure consistent quality and performance of the tools and avoid compatibility or integration issues.
  • Enhance supplier loyalty: Procurement spend analysis can help you build stronger and more reliable partnerships with your preferred vendors who depend on your steady revenue. Also, having a loyal vendor can enhance vendor performance, compliance and resilience and reduce vendor switching costs.
  • Create value for your business: Procurement spend analysis leaves your team with more time to focus on other business operations. Hence, you can create more value by saving time, costs and energy.

What are the types of SaaS procurement spend analysis?

These four are the major categories of SaaS procurement spend analysis:

  1. Category spend analysis: Analyzing spending, trends and opportunities for a specific SaaS category (e.g., CRM, HR, marketing or finance) is referred to as category spend analysis.
  2. Supplier spend analysis: Analyzing the performance, risk and compliance of a specific SaaS vendor like Salesforce, Zoom or Microsoft is considered supplier spend analysis. You’ll also evaluate contracts, terms, value and pricing.
  3. Usage spend analysis: Analysis of the usage and adoption of SaaS tools across the organization is called usage spend analysis. It identifies waste or inefficiencies due to unused or underutilized licenses or subscriptions.
  4. Benchmarking spend analysis: Under this category, you’ll compare SaaS spending and performance with other organizations or industry standards and identify gaps for improvement or differentiation. It helps you negotiate better deals with market data.

How to maximize ROI on your SaaS spends

As a decision-maker, you can maximize the ROI on your SaaS spending by

  • Becoming a pro in SaaS buying and negotiation: If you have the skills and knowledge to evaluate, compare and negotiate SaaS contracts with vendors, you're doing great already. However, you can evaluate pricing models, terms and conditions, SLAs and renewal options of various SaaS products to leverage the best deals.
  • Tracking real-time activity for visibility into expenses and ownership: Having a clear and accurate view of your SaaS spending helps a lot. You need to know who uses which SaaS tool, how much they pay and when they're reviewing. Tracking your SaaS ROI and value also helps in identifying inefficiencies
  • Standardizing and automating processes for your SaaS procurement: Standardizing processes is not a one-person show. You must build a transparent approval process, a centralized repository of SaaS contracts and invoices and seamless compatibility with your accounting and payment systems. Bring all the relevant stakeholders together to create and iterate sustainable frameworks and processes.
  • Get a SaaS automation tool: A tool or service like Spendflo can automatically collect, classify and analyze your SaaS spending and usage data from various sources. It provides you with a dashboard that helps you with actionable insights and recommendations for SaaS optimization 

Make data-backed decisions for your SaaS spend

Excel sheets or Google Sheets are great, but as you scale the processes become complex. It becomes cumbersome to operate on a single sheet to derive accurate insights for growth. But Spendflo is a scalable one-stop solution to analyze your spending and make data-driven decisions.

Here is how it helps:

  1. Centralized repository: Spendflo manages all your SaaS contracts and documents in one place and stays on top of your SaaS spends and renewals.
  2. Comparing products: With market intelligence and product comparisons, it helps you find better SaaS products for your needs.
  3. Data-driven approach: Make data-driven SaaS spending decisions with insights on app usage, spending trends and license optimization.
  4. Cost-minimization: Analyze free savings with Spendflo and see how much you can save.
  5. Vendor risk management: Spendflo helps you accelerate security reviews with efficient collaboration with vendors and stakeholders.
  6. SaaS contract lifecycle management: It allows you to streamline your workflow approval with a fast and easy SaaS procurement, negotiation and renewal system.

Spendflo also allows you to:

  • Integrate your Slack channel to expedite SaaS buying decisions and send regular reminders
  • Streamline buying and management process with automation
  • Ensures up to 3X ROI for finance teams
  • Provide easy information access and collaboration for IT teams
  • Take data-driven insights, approval workflows and expert negotiation for procurement teams
  • Smooth communication with all stakeholders for infosec and legal teams

Sustain your business profits using Spendflo’s spend analysis template

From buying and negotiating to automation and approval, Spendflo makes it easy for a lengthy and complicated spend analysis process. You can overcome the blockers and challenges on a single dashboard to make data-backed decisions and sustain a profitable business. 

Curious how to do that? Book a free saving analysis today.

Ajay Ramamoorthy
Content
Karthikeyan Manivannan
Design

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