Spend under management is the percentage of business spend that is actively overseen and managed by the procurement team. It is a very important factor in assessing a company’s financial health. Optimizing spend under management will help increase efficiency, make smarter decisions, and have a healthier bottom line.
While every company’s ultimate goal is to achieve 100% spend under management, it is not practically possible. On average, an organization manages only 55-60% of its spend, whereas best-in-class businesses manage close to 85%. If procurement can gain 5-10% savings on spend under management, increasing from 55% to 75% can produce an additional 1-2% savings – putting procurement on track to exceed its usual annual savings of 7%.
Here are some of the steps to bring spend under management to increase savings.
5. Improve spend transparency
To increase spend under management, the first and foremost thing to do is to make your spend visible. The ability to see how much your business spends, when it spends, and on what categories are critical. Hopefully, your accounting or ERP system is keeping note of this already. Make sure your procurement team has access to this information if they don’t already. Using this data, you can develop a spend profile to determine how much of the spend is being managed across different categories. Recently Kissflow Procurement Cloud helped Nana Direct, the largest digital grocery marketplace to improve its spend under management by 60% by improving visibility.
4. Build a good supplier relationship.
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