We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is Spend Analysis?

By Emma G.
Updated May 17, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Spend analysis is a method used by businesses to track how money is being spent by the company, with the ultimate goal of decreasing spending. Information about vendors, purchasing, and orders is organized and then analyzed for patterns. Due to the huge amounts of information involved, most companies use specialized software to perform spend analysis.

The process of gathering and analyzing data is more difficult than it first appears. In order for spend analysis to be effective, all aspects of a company's spending patterns must be taken into account. This information is usually stored in discrete computer systems within each division of the company. The divisions may be separated by both distance and language. Gathering all of this data and organizing it into a usable format takes a large expenditure of time and money.

Much of the complexity can be removed by using software to facilitate spend analysis. The first spend analysis software was created in the early 2000s. Though still very expensive, the software removes the necessity of human labor and creates an easy interface for accessing the resulting information.

The software works by pulling data from existing record-keeping systems. These could be simple spreadsheets, warehouse data, or other sources. This data is then cleansed, meaning that the formatting is standardized, duplicate records are merged, and missing details are found. The software then classifies the data according to industry standards and standards specified by the company. Procurement specialists can then access the data for reports and analysis.

One important aspect of spend analysis is evaluating suppliers. Spend analysis can show which suppliers are getting the most money from the company. The company can use this information to bargain for better deals or to re-negotiate contracts. Most companies have preferred suppliers, suppliers that offer the best service or reduced prices for buying in bulk. Analysis may reveal that supplies or services currently being purchased from a non-preferred vendor could be bought from a preferred vendor for less.

The company may also be buying similar supplies or services from several suppliers. This is known as fragmented commodity. Money can be saved by making one large purchase from a single supplier rather than a series of small purchases from several suppliers.

Spend analysis also helps to identify maverick spending. This occurs when purchases are made that are not covered under contract. Without a contractm the company is charged full price rather than the negotiated price specified by a standing contract with a preferred supplier. This type of spending can cost a company a lot of money over time.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Discussion Comments

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.