It’s 5 O’clock,
Do You Know Where Your Money is?
A Closer Look at Spend Analysis
$800 is Expensive Coffee!
According to CBS News, the average American spends nearly $800 a year at Starbucks, and that’s just on single-drip coffee (never mind those venti double shot, extra vanilla Frappuccinos, weighing in at close to $6 each). The American Institute of Certified Public Accountants has recently released the “Feed the Pig” ad campaign alerting citizens to this and other spending facts, meanwhile providing simple tips for money management. The idea is that you can’t save if you don’t have a handle on your finances in the first place. Well, the same is true in business.
$260 Billion Lost
Based on the Best Practices in Spending Analysis report, very few companies know what they spend, on which products, or with which suppliers. The result is that supply managers are not equipped to make decisions based on fact, but rather on intuition. In the corporate world, an estimated $260 billion is lost each year due to unanalyzed spend data.
A Solution to the Problem
During a recent large-scale tech transfer, an Enterey senior consultant conducted a thorough spend analysis for the client, a top-tier biotech. The consultant drilled down into what the client was actually spending on manufacturing and highlighted areas where the client could save big. To put it simply, what the consultant found was that there were things for which the client was paying a dollar that could be acquired for a dime instead.
A spend analysis was compiled, and that information was passed on to the client’s Procurement department. This tool allowed the client to not only harness their purchasing power for goods and services, but also created the potential for millions of dollars in savings.
The Right Tool for the Job
Thought leaders credit this type of spend analysis as providing the foundation for a robust procurement program, leading to an average of 10% to 30% savings overall. Spend analysis is also a tool to proactively evaluate possible future changes to production that result from changes in demand.
The moral of the story is that spend analysis is a window that allows a company to see where its money is going and, more importantly, where it can go—protecting investment, maximizing purchasing power, and increasing profit potential. Join the discussion; do you know where your money is?
For more on the spend analysis tool project, click here.