Spend analysis is the process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of reducing procurement costs, improving efficiency and monitoring compliance. It can also be leveraged in other areas of business such as inventory management, budgeting and planning, and product development.

There are three core areas of spend analysis - visibility, analysis and process. By leveraging all three, companies can generate answers to the crucial questions affecting their spending, including:

• What am I really spending?
• With whom am I spending it?
• Am I getting what’s been promised for that spend?

Spend analysis is often viewed as part of a larger domain known as spend management

Spend management

Spend management is the way in which companies control and optimize the money they spend. It involves cutting operating and other costs associated with doing business...

 which incorporates spend analysis, commodity management and strategic sourcing

Strategic sourcing

Strategic sourcing is an institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. In a production environment, it is often considered one component of supply chain management...

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Companies perform spend analysis for several reasons. The core business driver for most organizations is profitability. In addition to improving compliance and reducing cycle times, performing detailed spend analysis helps companies find new areas of savings that previously went untapped, and hold onto past areas of savings that they have already negotiated.

Automated spend analysis software can be a valuable tool for chief procurement officer

Chief procurement officer

A Chief Procurement Officer is an executive role focused on sourcing, procurement, and supply management for an enterprise.Globalization, compliance pressures, supply market risk and procurement automation have simultaneously elevated the visibility of the procurement discipline within companies...

s (CPOs) at large, global, diversified enterprises, and a useful tool for many others. The resulting spend visibility helps CPOs and CFOs gain insight into what their company buys and from whom, and it helps them realize savings promised by past sourcing efforts.