Source-to-PayWhy analyse spend
In most organisations, spend is scattered across accounting, orders, expense claims and sometimes several ERPs. Nobody knows exactly how much is spent per category or with how many suppliers. Without that view, negotiations happen case by case and savings are hard to prove.
A well-run spend analysis answers three questions: where the money is concentrated, where the savings leads are, and which actions to launch first.
Step 1 — Collect the data
Gather at least twelve months of data from every available source:
- Accounts payable entries (the most complete source)
- Orders and receipts, for item and quantity detail
- Expense claims and purchasing cards
- Data from each entity or subsidiary, including those on another system
Step 2 — Clean and group suppliers
The same supplier often appears under several names, codes or subsidiaries. Group the variants using ICE, tax ID, name and address to measure real spend per supplier and group. This step is often underestimated, yet the reliability of everything else depends on it.
Step 3 — Classify with a suitable taxonomy
Define a category tree suited to your business, with two or three levels. Classify each spend line from its description, GL account and supplier. Aim for a high classification rate by value, starting with the largest suppliers; small residual lines can stay in a “to classify” bucket.
Step 4 — Analyse
- Pareto by category: a few categories often make up most of the spend
- Pareto by supplier and number of suppliers per category
- Share of spend under contract
- Price comparison between entities for the same item
- Trend over time: price effect and volume effect
Step 5 — Quantify the opportunities
Each lead must be estimated in value to be prioritised:
| Lever | Signal in the data | Typical action |
|---|---|---|
| Consolidation | Many suppliers for the same need | Tender and panel reduction |
| Contract coverage | High off-contract spend | Framework agreement and catalog |
| Price harmonisation | Price gaps between sites | Group price applied everywhere |
| Standardisation | Many equivalent references | Shared item master |
Step 6 — Act and track savings
Turn opportunities into actions with an owner, a deadline and an expected gain. Then measure the real saving in the following months’ spend, not just at contract signature: that is what gives procurement credibility with finance.
Finally, repeat the analysis regularly, ideally continuously, so the spend map stays current and drifts are spotted early.
Frequently asked questions
How long does a first analysis take?
With accessible accounting data, a first usable spend map can be produced in a few weeks; accuracy then improves every period.
Do we need 100% classification?
No. What matters is classifying the large amounts correctly; high coverage of spend by value is enough to decide.
Is Excel enough?
For a first pass, yes. For recurring, multi-source and shared analysis, a dedicated tool avoids redoing the work every time.