Seeing all your spend data in one place can inspire a dramatic change in how you manage your business. It's even more useful if you also organize that data by supplier, categories, items buyer, then view it in real-time. You'll want to refer back to this information again and again! Yet, only a few organizations are able to get a detailed view of their spending. And this lack of spend visibility comes with a hefty price tag.
You know, when you're in a store, and you see something so awesome, it's like, your heart skips a beat?
And then you can't find the cashier that you saw 5 seconds ago? That's the lack of visibility.
You know that feeling of panic when you can't find something?
It throws off everything when you can't see something or someone where they are supposed to be. Think of the agony when you're looking for that one signpost to take the right turn to reach your destination, but it isn't there for some strange reason. This is the kind of struggle businesses face every day with visibility when it comes to spend management. Spend visibility is the foundation from which your business can achieve all of its strategic goals: gaining control, realizing savings, generating working capital, and going carbon neutral to propel yourself ahead of the competition. But, it all begins with what you can see. It doesn't matter if your business is big or small; you might still feel like there's too much of everything: too many suppliers, too many products, and too much information. And it can feel like there's not enough time in the day to do your best work. You've got to get out of that cycle to perform at your best. And for that, you need to be able to see everything— with spend visibility across all the flows of money, goods, and services of your business. What is Spend Visibility
The term "spend visibility" can be confusing, as it sounds like a synonym for "expense tracking." However, spend visibility goes beyond tracking spending. It, in fact, gives both a detailed and holistic picture of how money is moving throughout your company.
Think of spend visibility as a window into your company's finances to find how and where your money is being spent. It sounds simple, right? But that's the thing about spending—it's rarely simple. For instance, suppose you if your company ordered a lot of printers. Wouldn't you want to know on which basis the supplier was shortlisted, who agreed to the quotes and assigned the contract, and if you're paying more for those printers than other companies in similar industries? Every single time we talk to a procurement leader, they tell us how worried they are about uncontrolled spending. Why? Because fragmented spend across multiple categories and suppliers is hard to track and manage. And when processes aren't consistent, payments can easily become invisible, making a safe escape way for frauds, risks, and eventually, uncontrolled spending. Furthermore, when spend is miscategorized, it can cause a number of problems. For example, misclassifying spend results in inaccurate data that can lead to poor purchasing decisions and potentially damage the credibility of the procurement process. The business supply chain can also be problematic for management when they are not given a clear picture of its spend category breakdowns. Thus, having an accessible and up-to-date view of spend data is crucial for procurement professionals. In today's business climate, greater spend visibility enables procurement professionals to make strategic business decisions to improve their organization's procurement process.
Why is Spend Visibility so Important
Managing expenses and optimizing spend is a costly, labor-intensive, and inexpedient undertaking that, if done manually, requires diverting significant time and resources away from core business activities.
But now, solutions like Ignite offer comprehensive and unified strategies for doing it more quickly, easily, and efficiently. In the past, there was no simple way to see all of an organization's spend, so it was difficult to determine how each department was spending its money or how much money could be saved by changing suppliers or negotiating better rates. Even today, many companies rely on legacy systems and complex tools that aren't comprehensive enough, flexible, easy to use, or unified. Imagine a procurement person using a spreadsheet to track the company spend by the department. It would take her hours every week to compile this information—hours that could be spent on other, more productive tasks. Or using a complex tool that requires months of training to work on or is not flexible enough to fit your needs or extract insights from.
The drawback of using such tools and systems is that they're not easy to fine-tune or derive insights, which is important when optimizing your spend. The most effective and seamless way to manage spend is through a comprehensive and unified strategy, fully integrated into the company's core business operations. This means taking advantage of advanced analytics, data management, and procurement expertise to make strategic decisions about what to buy, how much to buy, and when/where to buy it. Such a strategy eliminates risks and uncontrolled spending while boosting growth by tracking performance against goals and adjusting spend based on actual results rather than relying on gut feeling or outdated benchmarks. There's enormous value that comes with good spend visibility like: Having a single source of truth that gets updated automatically allows an organization's teams to communicate more effectively because they use a common system where everyone has access to the same information. This reduces errors that can lead to wasted money and increased costs. When you categorize that data by supplier and buyer and view it in real-time, you can quickly identify which suppliers are falling short on their commitments. You get the information about where your money is getting spent by department, category, supplier, item, codes, etc. This spins your head with possibilities as you can instantly see on which category you spent more than expected and which supplier can be bundled for the best deal. You uncover trends for controlled and uncontrolled spend, reduce maverick or rogue spending, and gain a clearer picture of what was happening across the organization by identifying areas of overspending and managing contracts more effectively.
By now, you must be on board with the fact that every organization needs to have a clear picture of where exactly they are spending their money, i.e., to have clear spend visibility. But in reality, organizations seldom engage in spend analysis activities to get such distinct spend visibility.
What is a Good Visibility and How Spend Analysis Helps Achieve it
The procurement environment is becoming more and more complex and competitive, and the need for accurate and reliable data is growing. But contrary to this demand, procurement data is getting messier, siloed, and fragmented.
Even if you have a good data foundation, you would agree that the facts about your spend are constantly getting updated. Hence, it's important to get access to every piece of data—to ensure accuracy and reliability—and analyze spend on an ongoing basis to make sure that the data is up-to-date and correct for better decision-making throughout the organization. A spend analysis lets a business visualize and understand its spending at a particular point in time. This is an all-encompassing, dynamic methodology to visualize, analyze, and understand the spend composition and trends, such as: What are we purchasing? Who is purchasing? Who are we purchasing from? When and how often do we purchase? How much did we spend in total, and what prices did we pay? What quantities or volumes have we purchased? What is the spend development over time?
In short, spend analysis, when done right, provides you with the transparency you need to make strategic decisions based on data rather than gut feelings.
Key Challenges in Achieving Spend Transparency and Visibility
Most companies struggle with procurement visibility.
The issue is rooted in the fact that few companies have comprehensive data on where their money goes, or the data is too siloed, bad, complex to run any analysis. Even companies that consider themselves "well run" can suffer from spend visibility challenges. What are these challenges?
Spend visibility can be hard to follow for several reasons:
Complex IT infrastructure: Multiple enterprise resource planning (ERP) systems or versions or legacy systems with low connectivity result in low spend visibility and make it difficult to track and manage spend and costs. Companies with IT infrastructure that doesn't work together, can't connect well, or is outdated results in the lack of visibility and subsequent hindrance into meeting the company's goals. Data in multiple languages: It has long been a challenge to analyze spend data that's present in multiple languages to get the desired spend transparency. A solution like Ignite provides a centralized platform to access and analyze the spend data from multiple languages and translate it to English. Inconsistent metadata or low data integrity: Spend data is one of the most important yet difficult-to-access and analyze types of data in the world. The data is often inconsistent, with different metadata fields across sources, mismatched entries in the same fields, or inconsistent formats and entries. A cloud-based solution like Ignite Ignite helps solve this problem by using advanced proprietary algorithms to automatically cleanse, transform, and normalize your messy data.
To learn more about how to overcome spend visibility complexities, check out our on-demand webinar:
How to Achieve Spend Transparency in Complex Organizations.
How Cloud-Based Solutions Make Spend Visibility Easy
When it comes to data, most companies have a lot of it. They have spend data for the whole company, departmental data, and even data on individual suppliers and contracts —all of which might be stored in spreadsheets or databases with no real structure or sense. This results in chaos and confusion.
This is where spend analysis comes in! Spend analysis helps you understand and make sense of your messy data, so that you can develop strategies for reducing costs across your business. The core of effective spend analysis is providing clarity and context to your messy spend data, resulting in strategic decision-making with confidence and bottom-line savings across your business. Lots of companies struggle with getting control of their spend. They feel like they're looking at a big, messy pile of receipts, and they can't make sense of any of it. The problem is that they're looking at piles of spend data that haven't been cleaned up yet. It's like trying to unwind a tangled mass of Christmas lights—you can't wrap your head around what you're looking for when everything just looks like a mess. But there's an easier way. Ignite helps companies overcome this problem by using advanced AI to automatically apply complex rules and transformations algorithms to cleanse, transform, and normalize the data to give you 100% spend visibility. Ignite lifts the fog on your spend so you can finally see what you've really been spending on all this time —and then suggest where you might be able to achieve greater efficiency. You can get started right now by clicking the link to book your demo.