How to Track Spend Across All Vendors
How to Track Spend Across All Vendors
Does your business rely on a seemingly endless array of vendors? No matter how many vendors there are in your network, tracking spend across all of them often can feel overly complicated. It’s no wonder why there are programs and service providers who exist for the sole purpose of vendor spend analysis—in other words, vendors who help you track other vendors.
If you’re wondering how to track spending habits for your business, this guide will break it down for you. There two approaches to vendor spend analysis:
- Manual vendor spend analysis
- Automated vendor management
Method 1: Manual Vendor Spend Analysis
Vendor management is a process of controlling your spend with vendors, maximizing their value for your business, and ensuring a lasting, mutually beneficial partnership. The key to vendor management is understanding your relationships deeply through spend analysis and expense tracking. Budgeting with your vendors is a great way to see your monthly expenses so that you can reach your financial goals.
Vendor spend analysis requires you to ask and answer fundamental questions about your business relationships with vendors:
- Who are we paying?
- How much are we spending and what are we getting in return?
- How do these numbers compare to last year?
These questions are the guiding force of vendor analysis. But to answer them, you need to implement robust spend tracking to account for every penny spent—and how it’s spent. Working manually, one challenge is that you may need to scour various sources of data.
Identify All Sources of Vendor Spending
The first step toward accomplishing manual vendor analysis is actually compiling an accurate, comprehensive, and up-to-date list of all vendor spend. This sounds simple enough, but in practice it can be challenging—not to mention time-consuming—if different vendors are tracked separately by departments. You need complete spend visibility so you can identify savings opportunities and areas where you can improve as a business.
What you’ll need to identify:
- Any and all vendors your company has paid for goods and services
- Any and all repositories in which data on vendors has been stored
To do so, you’ll need to make an exhaustive review of:
- All vendor invoices and purchase orders
- Any relevant general ledger or accounting records
- Any relevant enterprise resource planning (EPR) tools
Once all sources of vendor spend information are identified, you’ll need to begin the process of scanning for all obvious vendor transactions, as well as any that may fly under the radar.
Collect, Classify, Organize, and Analyze Data
As you collect all of your company’s vendor spend data, it’s imperative to apply a uniform system of classification to each data point. Tags or categories enable organization in one master list, allowing you to index and analyze uniformly, rather than applying multiple different lenses.
In particular, some of the categories that are most important for indexing include:
- Vendor type
- Spend department
- Spender (individual)
- Amount spent
- Date of transaction
- Other payment details
Data should be tagged and tabulated in real-time as it’s collected. Ideally, your dashboard should enable you to view by any individual category, or combination. For example, you might notice trends over time, like:
- Spending on one vendor has increased yet the ROI has remained the same, decreasing the margins. This might prompt you to investigate whether the vendor has become too expensive for your total spend budget.
- Spending within a vendor category has increased faster than other tangential categories. This might indicate which side of your organization is growing quicker or utilizing more resources.
- One department (or individual) has been spending irregularly on vendors. This might prompt an internal investigation to confirm funds are being properly allocated.
The patterns that emerge provide a clear picture of past vendor spend, which then enable predictions for future vendor spend, facilitating decisions about future contracts. However, manually collecting and analyzing data can exhaust your business’ resources.
That’s why automated solutions like a spend analysis software are a better fit for most companies.
Method 2: Automated Vendor Management
Rather than relying on one individual or team to wrangle all your vendor spend data, it’s much more efficient to utilize automated, technological platforms to do the work for you. A spend analysis software eliminates human error in terms of input and communication, which ultimately saves time and money. It also facilitates far more powerful data analytics via machine learning.
These days, there’s no shortage of vendor management software available. From standalone programs to web apps, and even powerful vendor management platforms connected to corporate cards, there are two main benefits to look out for:
- Real-time visibility and control over vendor spend
- Streamlined and predictive analysis
The best solutions manage all company spend (including vendors) in one place—a centralized command center.
View and Control Vendor Spend in Real-Time
Some of the biggest benefits of all-in-one vendor management solutions involve optimal visibility over vendor spend in real-time, centralized in one easily accessible platform.
For example, a smart corporate card can enable you to:
- View vendor spend as it happens with automatic, real-time updates the moment your corporate card is used to pay a vendor. No more waiting for expenditures to be reported at month’s end.
- Create an unlimited amount of cards to use for vendor spend, limiting each to a specific use condition (one card per vendor, per department, per employee, etc.), then integrate these categories automatically into your dashboard for instant trend analysis.
- Use existing vendor spend data for predictive analysis, identifying problem areas like SaaS creep and Shadow IT that can be eliminated before payments are due.
All that visibility is valuable in its own right, as understanding your vendor spend is the key to managing it. But it also sets the stage for more active forms of control.
Streamline Procurement and Eliminate Excess Spend
Other benefits of an all-in-one solution include empowering you to approve or deny vendor payments, mobilize all members of your team, or activate additional ways to save. All told, these features streamline your active control over vendor relationship management.
For example, the following functionalities are hallmarks of the best platforms:
- Instant approval or denial of recent, current, or upcoming vendor spend costs. Press a button right in your dashboard to turn its analytical insights into real-time savings.
- Integration into existing accounting and messaging platforms, like Quickbooks and Slack. Improve visibility and communication across all departments.
- Other savings insights and opportunities, such as notifications about cost-effective vendor alternatives. Rectify any identified inefficiencies all in one place.
For all these reasons, an all-in-one solution is the best way to manage vendor spend.
Power Your Vendor Management with Ramp
It’s important to approach vendor management in a planned, intentional way. With Ramp, your business can automate this time-consuming process in more ways than one.
Ramp’s Control Center centralizes the procurement process so that all expense data is aggregated into one hub. This allows you to uncover shadow IT and eliminate any wasted spend immediately. Ultimately, vendor management is about making the best business decisions possible. With Ramp, you have the visibility and resources to do just that.
Best of all, this Control Center is built directly into Ramp’s corporate card. This is on top of an expense management platform, unlimited flat 1.5% cash back on all expenditures, and high spending limits.
If you want to power your financial future with the right tools—try out Ramp today!