What is Spend Leakage?
Spend leakage is the use of company resources in a non-optimal fashion, Spend leakage comes in many forms and it is often associated with the portion of total spend that is of non-strategic or non-tactical use. This type of spending is also called "Tail Spend".
Tail spend is the amount of money an organization spends on employee purchases, reimbursements, materials and resources that support operations. Organizations implement policies and procedures to track this spending but how effective are these policies? How often are these they adjusted? To answer these questions requires a platform and a plan.
WHY SPEND ANALYTICS
Benefits of Spend Analytics
Spend Analytics is a program designed to investigate, analyze and identify ways in which the organization spends money. It works by combining data assets into one platform and applying modern analytical techniques and artificial intelligence to paint a clearer picture of non-conforming spend.
Reduce Wasteful Spending
Uncover patterns that can help the organization reduce wasteful spending.
Optimize Contract Spending
An increase in data accuracy and analysis can help when it comes to negotiating key supplier contracts.
Implement Smarter Policies
Design and implement policies based on real data and move away from carbon copy rules.
Identify Spending Patterns
Understand how money is spent across different business units and teams. Identify trends.
Address Spending Culture
Data can be used to help drive a change in behavior and the implementation of appropriate penalties and incentives,
Identify Potential Fraud
Tail Spend Analytics can help uncover activity that is outside the organization's code of conduct
What is Tail Spend?
Tail spend is the portion of total spend on non-strategic or non-tactical uses. Tail spend is often made up of a large number of transactions spent across a large number of merchants. Given this breadth and volume it can be very difficult for organizations to manage this spend.
Of Total Annual Spend
Estimates of spend leakage reduction range from 10% to 50% of total tail spend. *Results can vary and are not guaranteed.
What is this worth to your organization?
Small to Medium-Sized Company
Total Spend Per Year Estimate: $10M
Potential Savings: $500,000 Per Year
Total Spend Per Year Estimate: $50M
Potential Savings: $2.500,000 Per Year
Over 1,000 Employees
Total Spend Per Year Estimate: $200M
Potential Savings: $10,000,000 Per Year
What Does It Take?
The effort begins by collecting spend data and loading it into the Process Tempo platform. The Process Tempo Spend Analytics Algorithm is then applied which will instantly highlight exceptions and anomalous behavior. The organization will then have access to detailed metrics that can highlight areas where policies can or should be adjusted. The result is lower spending and improved bottom line.
Types of analysis performed during the evaluation stage:
Changes in spending behavior turning certain times of the year. For example, an increase in spending during the holidays.
Patterns between employees and denied transactions
Patterns that repeat weekly. For example, supplies always purchased on a Monday.
The next step in the journey is to begin to fix the root causes of non-conforming spend by reviewing existing policies to see if they still make sense. Policies can become stagnant over time and therefore do not always reflect what is in the organization's best interests.
In order to take proactive steps and to automate policies the organization will need a platform that can automate this effort.
Powerful automation features:
Automated exception handling
Dynamic policy tuning