How to Select the Best Spend Management Software for Your Business
Spend Data Management can be defined as a collection of best practices in the management of 'spend' data, which are data related to sourcing and procurement. By leveraging software tools built around core data classification and enrichment technologies. This enables delivery of enterprise spend visibility to ensure compliance and control.
Main services range from processing spend data to classify suppliers, cleansing of data and its enrichment, classifying item data, and converting data from different coding languages to one global language, along with tools for spend analytics, such as measurement, alerting and reporting. The advantages include the examination of the impact of sourcing plans on key categories, along with measurement of KPIs such as periodic review of compliance with preferred suppliers and contracts, savings realized and assessments of business results, along with ongoing control of spend for higher profits.
Spend management is an important tool for reducing expenses and tracking financial waste. In a company, spend management is the controlling of how to spend money to the best effect to build products and services. The term is intended to cover such processes as outsourcing, e-procurement, procurement, and supply chain management.
What are the types of Spend Management Software?
The Spend Management data at times doesn’t provide informed decision making as the business insights provided isn’t sufficient enough even after the business achieves spend visibility. Information which is encapsulated inside the cryptic line need and need to be mapped and structured in a viable level of detail that will enable smooth functionality. Each type of spend management software has its own structure that give it own level of detail, they include:
- Indirect Spending: Not all indirect goods and services are directly involved in the process of manufacturing, even though they are among some of the pillars that enable smooth running of a business. With indirect spend data the organization has the larger sourcing opportunity which is made possible by indirect supply unit being consolidated and aggregated even if the data is of its lowest quality. Compared to direct spend there is usually a low number of transactions depending with the type of organization with services that the business have primary indirect spend and minimum granularity, a good example is GL data. At the commodity level being able to achieve low level of detail is good enough to facilitate decisions that are relating to procurement.
- Direct Spending: In order to drive decisions relating to procurement in direct spend, individual attributes and details need to facilitate it since it is fairly well sourced. Encapsulated inside the cryptic item description is the information, at times it might not exist. For direct spend to capture additional benefits a deeper level of details at the line item level is needed to:
- On the introduction, it should remove all redundant and unnecessary sections.
- Find substitute or duplicates sections to consolidate supplies and aggregate demands.
- Across several suppliers analyze consistency on the part price.
- On several locations of the plant analyze the consistency of part price using one supplier.
- MRO Spending: MRO stand for maintenance, repair and operations. This spend ensures that the maintenance, repair and operations of all tools and equipment that enable the manufacturing process to run smoothly. MRO also ensures that suppliers, products and services that are needed for your day-to-day operations of your business are okay by provision of comprehensive data collection and normalization process. At most times MRO items may have lots of small medium suppliers and the items are usually in massive volumes. With relations to the quality of data, MRO is depicted between two main types which are direct and indirect, which means it can have both opportunities and challenges of the two types of spend management software.
What are the benefits of Spend Management Software?
Businesses are coming up with different strategies to improve their results success and reduce their costs as the organization procurement is taking more tactical and strategic role. Pressure is mounting business and they try as fast as possible to meet or exceed the high saving targets. To improve their results and achieve its goals, the best procurement organizations are building substantial spends management software’s. Here are the benefits of spend management software:
- Rationalization of price: A specific item might have different price, as businesses are forced to purchase the same product at different prices. These happen when a supplier decides to charge different prices for the same product to unassociated companies. It might also include purchasing the same product but from multiple suppliers. Having the right spend management software ensures businesses that everyone in the organization is making payments or buying items at the lowest available price.
- Rationalization of part: The same parts are always found across the product line, locations, and plants but what is not identified is an opportunity for alternative parts. At the part level, having a well-articulated spend management software, enterprises can consolidate supply and be able to identify on the entire enterprise these overlaps.
- Maverick spend reduction: In some cases, the business can uncover that its employees are not purchasing goods from approved suppliers despite having in place a good deal on the negotiated rate. With the help of spend management software business can make fast savings as it can identify these issues and move spent to approved suppliers and vendors.
- Compliance with the budget: To retain cost reductions, budget needs to be adjusted once you have identified the savings. For a business to aid compliance properly with the revised budgets, spend management software enables comparison between the exact spend and what’s budgeted.
- Compliance with the process: Process compliance needs to be adequately analyzed to avoid or identify spending which is conducted off-contract, purchase orders that aren’t adequately completed and purchase that isn’t examined through proper systems using the rights controls. But with the use of spend management software, you can have the right information into which processes are used for the management of procured goods and services from the suppliers.
- Management oversights: Spend management software enables enterprise executives and managers to oversee spend appropriately as enterprises can’t manage what it can’t measure. Having the right information, the managers are confident that the procurement rules and procedures are followed correctly by both the supplier and buyer.
- Supplier’s consolidation: It is beneficial to consolidate with few major suppliers, in products where business use several suppliers. The enterprise can negotiate favorable terms across the board as spend with each supplier increases.
- Purchasing leverage: Spend management software enables businesses to gain a more significant bargaining chip in supplier’s negotiations by being able to achieve aggregating demands across locations of the plant, business units, and regions.
- Un-leverage spend: This is when no contracts are involved thus businesses had to start sourcing to ensure pricing is competitive.
How to Select the Best Spend Management Software for Your Business
Spend Management Software offer multiple benefits that will enable an organization to improve its overall performance and be on a competitive advantage over other enterprises. What’s critical is for the business to identify the challenge or the barrier, find ways to overcome that challenge and identify a solution that is favorable to the company.
Most companies have realized that they can’t afford to wait for the development of modern spend data warehouses which have the needed level of information to manage their spend management. Instead, they are moving to manual approached and beyond costs to raise their potential savings rates. That’s why these organizations are pursuing spend management software’s nowadays.
Defining booming solutions are emerging to tackle the challenges faced by many businesses. Organizations should take and holistic yet repeatable approaches to providing spend management system that is granular, accurate and one that can lead companies to make better decisions.
Businesses with a good spend management software can find savings opportunities, being able to facilitate compliance with financial reporting and regulatory requirements and better mechanisms of enforcing contract compliance with a comprehensive auditable record. Having such solution businesses can begin to see the several benefits of having a good spend management software
When choosing procurement software, keep an eye out for these essential features:
- Purchase Order: Organized data should be essential in on the software. This facilitates the approval of processed purchase orders being sent to the vendors for timely delivery of goods.
- Product Selection: The software should have an option of products and suppliers in their catalogue. This makes purchasing decisions easier by allowing one to compare and select the right products.
- Spend Analysis: This is possibly one of the biggest reasons companies today are moving towards e-procurement, delivering more bottom-line savings to the company.
- Electronic Bill Handling: By matching order to s invoices, procurement software can electronically handle the payment of bills.
- Selecting the right E-Procurement software: Choosing the right e-procurement software for your business, starts with assessing your business needs.
It’s critical that a company calculate the potential return on investment before committing to software. And consider a larger Purchase2Pay (P2P) software suite that may have other tools you need to efficiently run your business.
Here are the trending and the top rated Spend Management Software for you to consider in your selection process: