The term spend management refers to the set of practices and procedures put in place to ensure that all procurement and sourcing decisions, such as selecting vendors, suppliers, and third-party contractors, are made with the bottom line and continued operational efficiency in mind. It encompasses the process of thoroughly overseeing and governing vendor relationships to ensure that the business gets the most value possible from every penny that it spends.
Modern digital tools have made it possible to consolidate the entire procurement process, right from sourcing, contracting and purchasing to managing suppliers, organising invoices, and making payments, into a single cloud-based platform that is integrated into the organisation’s digital business network. This centralisation of all procurement-related activities and processes makes it possible for businesses to collect and analyse all their procurement data and arrive at detailed insights to help them efficiently manage company spend.
Meticulous spend management offers several organisational benefits and adds value to the business. The primary benefits of incorporating spend management practices include:
- Greater efficiency and accuracy, borne from the automation of time-consuming and error-prone manual procurement processes
- Reduced supply costs and risk since procurement teams have easy access to all purchasing activities, such as what is being bought from each supplier and at what cost.
- Easier collaboration between the organisation, its vendors, suppliers, trading partners, and all cross-functional teams.
- Efficient use of available resources and reduced costs by the elimination of excessive spending.
- Better overall productivity, as the resources and time saved by incorporating effective and systematic spend management processes can be directed towards more strategic business activities.
Other business advantages of incorporating modern spend management solutions include access to organised spend data to better manage expenses, better real-time spend visibility, improved cash flow, quick and easy identification of saving opportunities across the entire procurement process, and the establishment of clear spending policies.