There are strategic plans, programs to increase the effectiveness in business. With time being so difficult, planning a budget, analyzing expenditure and spend has become an essential part of business management. Many times, one overlooks the spending if it is under budget and does not even think of the issue of whether the spending was necessary or not.

This is the part where focusing is required, analyzing how much of the spending is essential. Spend analysis is a small but essential part of management. Spend analysis is a technique where you identify, gather, cleanse, group, categorize and analyze the organization data.

This method helps in decreasing your procurement cost and increases efficiency and brings visibility to your spending data.

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Here, we will help you out to understand the process and let you know how to conduct a spend analysis. The process of spend analysis highlights the spend activities, it allows you to gather all the data in one place and help in identifying the area of improvement.

How to conduct spend analysis

Spend analysis is an easy process wherein just six simple steps you will be able to conduct the analysis. Let’s look at the six steps of spend analysis.

  • Identify – This is the first step of the process where you identify all the spending data from various departments of your organization. You should carefully look at all the data and should not only consider the department where purchasing matters are handled.
  • Gather – Now, when you have already identified all the spent data, you should work now collecting and gathering them. All the data gathered should be put into one central location and must be in the same format. This can be a difficult process and hence you can use software for this step.
  • Cleanse – Commonly, mistakes pop up. This very step is dedicated to only that. You need to cleanse your data and identify all the errors and mistakes. You must convert it to a high standard so that there is no issue in viewing it. You need to correct all the errors in the spend data you have collected. This process can be done with the help of group work.
  • Group – This step deals with your supplier. In this process, you need to identify all your suppliers and group them. There may be several suppliers, do you need to group them based on the product they supply. Keeping the same suppliers in one group will do a lot of help. This can ease your work.
  • Categorize – Here, you need to identify in which category your spend data falls. There are classification systems that help to determine the category but you can create one of your own. There are different areas where purchasing is made. You can analyze it and can categorize it.
  • Analysis – This is another crucial step where you measure your spending data. In this process, you analyze how much data is irrelevant, how you can reduce cost. If there are any suppliers you need to cut off.
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Doing a spend analysis can prove a boon to the company. But it does not end here. You must ensure that you update your data regularly and keep a check on it. It will help you save money, identify unnecessary spendings, improve the procurement coat, and also bring clarity and visibility to the organization. This process is very crucial for the efficiency and development of the organization.



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