The old adage, "If you cannot measure it, you cannot improve it," remains as relevant today as ever. In the current competitive market, where the focus extends beyond just cost savings, it is essential to monitor SaaS procurement performance and ensure it aligns with business goals and objectives.

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According to GlobeNewsWire, the procurement as a service (PaaS) market is expected to grow at a CAGR of 6.4% from 2020 to 2027. As procurement tasks grow more complex, data emerges as a crucial efficiency driver.

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This means that Procurement teams heavily depend on data to make strategic decisions. But the question arises that are they monitoring the correct metrics? Explore this in our guide to procurement KPIs in 2025.

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For this reason, companies are actively tracking purchasing metrics (also known as procurement KPIs).

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So, what's the best way to assess the effectiveness of your organization's procurement activities?

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The solution is simple: it is through KPIs.

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Continue reading to learn detailed insights into the 5 top procurement KPIs, challenges in tracking such procurement KPIs and how to focus on areas to concentrate on to deliver the greatest value to your company.

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What are KPIs in Procurement?

Procurement KPIs measure the efficiency and effectiveness of procurement activities. These metrics track supplier performance, cost savings, contract compliance, and purchasing cycle time. Organizations use procurement KPIs to optimize spending, improve supplier relationships, and enhance operational efficiency.

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How to Determine Procurement KPIs? 

The procurement process includes all your procurement department's activities to acquire goods and services. Procurement KPIs are metrics used to assess the effectiveness of your procurement management. These KPIs evaluate how your company manages time, cost, and quality.

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When determining these procurement KPIs, you should consider several factors:

• Your business model
• The size of your organization
• The location of your organization
• Compliance requirements
• Your budget

Your selection of procurement KPIs may differ based on your position regarding these five factors. Keep in mind that there is no ideal set of procurement metrics. This is not a universal solution; it requires a customized approach.

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Benefits of Tracking Procurement KPIs

Tracking procurement KPIs is essential for businesses looking to optimize costs, enhance vendor relationships, and improve overall efficiency. By closely monitoring key performance indicators, organizations can identify inefficiencies, mitigate risks, and drive smarter purchasing decisions.  

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Here are the key benefits of tracking procurement KPIs:

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• Cost Savings: Tracking procurement KPIs helps businesses identify overspending, reduce inefficiencies, and optimize supplier contracts. By analyzing trends and comparing supplier costs, companies can negotiate better deals and cut unnecessary expenses. 

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• Improved Supplier Performance: Supplier-related KPIs ensure vendors meet expectations for quality, timely deliveries, and compliance.  Businesses can use this data to evaluate supplier reliability, renegotiate terms,  or switch to better-performing vendors. 

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• Faster Procurement Cycles: Monitoring procurement KPIs allows organizations to pinpoint delays in the purchasing process. Identifying bottlenecks in purchase approvals, supplier negotiations, or invoice processing, helps streamline workflows and accelerate procurement cycles. 

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• Better Compliance & Risk Management: Procurement KPIs help ensure that all purchases comply with internal policies and external regulations. By tracking compliance-related metrics, businesses can mitigate financial risks, avoid penalties, and maintain regulatory standards. 

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• Stronger Decision-Making: With data-backed insights procurement teams can make informed strategic decisions. Analyzing trends in spending, supplier performance, and procurement efficiency leads to smarter purchasing choices and long-term business growth. 

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Challenges in Tracking Procurement KPIs

81% of leaders believe procurement must transform the way incumbents are handling operations. Before reaping the benefits of these changes, procurement professionals have five major hurdles to overcome. 

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1. Providing technology support for suppliers and vendors

Your suppliers and vendors must have access to digital tools that facilitate better communication with your team. However, acquiring this technology support can be difficult if your suppliers and vendors need more trust and confidence . They may be reluctant to share their data with your technology systems or invest time in learning new tools and processes. 

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To address these concerns, you should tailor your onboarding and training programs specifically for vendors and suppliers. Scaling this approach requires analyzing various digital solutions and selecting platforms that offer a user-friendly experience. 

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2. Inaccurate data

Supply Chain Dive says 50% of procurement processes are conducted using spreadsheets. This manual method of data handling is not only time-intensive and cumbersome but also a significant source of human errors. Employees often find themselves trapped in a cycle of repetitive tasks that do not align with their performance objectives, reducing productivity and increasing the likelihood of mistakes. 

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Employees may spend extensive time navigating through different systems to gather and analyze information before entering it. Although there are shortcuts, these cannot be scaled to process large data volumes automatically in real-time, which is essential for obtaining the most accurate data. 

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SaaS procurement software tools like Spendflo can streamline your intake-to-procure process, centralizing all SaaS purchases in one place for improved collaboration and accelerated procurement through Slack-first workflows, significantly enhancing productivity.

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3. Driving actionable insights

Beyond merely organizing data, technology can analyze it, eliminating the need for human intervention to detect trends or patterns in vast data pools. The main goal of amassing large volumes of data is to enhance decision-making in procurement. 

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Technologies such as blockchain, the Internet of Things (IoT), and artificial intelligence (AI) are particularly effective in transforming data into actionable intelligence. IoT devices, for example, location trackers or machine sensors, allow procurement professionals to gather information in real time. Blockchain ensures the reliability of the collected data, while AI facilitates the rapid and efficient analysis of large data sets. 

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Before investing in technology to manage your data, carefully consider its intended use, objectives, associated costs, and the requirements for ongoing maintenance.

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4. Challenges in internal communication

A McKinsey survey highlighted that enhancing internal collaboration is one of the most impactful applications for digital tools. Procurement teams differ from typical organizational departments. Traditionally, they were not linked to any specific department, viewed primarily as a transactional function. 

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Today, companies achieve greater success when procurement leaders strategically manage risks and ensure business continuity. This requires alignment with financial data and growth projections across all business departments. Poor communication within this framework can result in suboptimal spending decisions that negatively affect financial health.

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5. Lack of transparency concerns

A supply chain dive survey reported that 60% of business leaders identify the lack of transparency between finance and procurement functions and suppliers as a risk factor. This limited visibility can adversely affect cash flow, with leaders noting that improved transparency could enhance cost savings by 11-20%. 

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To enhance procurement transparency, leaders might need to overhaul existing processes entirely. Here are several initiatives you could adopt:

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• Eliminating manual data entry
• Incorporating procurement analytics into leading financial software
• Introducing new best practices for data entry and communication
• Conducting training for employees, suppliers, and vendors on these best practices

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11 Procurement KPIs to Track in 2025

The ideal procurement strategy varies, but we've identified key procurement KPIs that are beneficial for any procurement team.

1. Best price and costing

A pivotal KPI, 'Best Price and Costing,' ensures procurement strategies yield optimal financial returns by securing the most favorable market rates. This involves continuous monitoring and analysis against a backdrop of historical pricing and market trends. 

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Advanced techniques such as Total Cost of Ownership (TCO) analysis are employed to assess not just the purchase price but all associated costs throughout the lifecycle of a product or service. This comprehensive view helps make procurement decisions that impact long-term profitability, considering factors like maintenance, operation, and disposal costs. 

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You can streamline procurement processes by placing requests with Spendflo's immediate assisted buying. You can stay updated via Slack by receiving real-time concierge services and fast-tracking renewals and purchases to save you a guaranteed amount of time and money. 

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2. Procure to pay cycle

The efficiency of the procurement process is measured by the 'procure-to-pay cycle.' This KPI tracks the period from placing an order to completing the payment, highlighting inefficiencies that could slow down workflows or strain vendor relationships. 

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Reducing this cycle time can be achieved by integrating advanced digital solutions such as electronic invoicing and automated approval workflows, which expedite processes and enhance accuracy by minimizing human error. This metric is crucial for optimizing working capital and maintaining a resilient supply chain.

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3. Purchase order cost

Purchase order cost reflects the total expenses incurred in processing each purchase order. Identifying cost-reduction opportunities within the procurement function is essential by evaluating all associated administrative and operational costs. 

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Streamlining purchase order processes through automation and better vendor management practices can significantly lower these costs. For example, adopting a centralized purchasing model can reduce redundancies and achieve scale economies, considerably lowering the cost per purchase order.

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4. Procurement ROI

Evaluating procurement ROI involves analyzing the financial efficiency of procurement activities. This KPI is integral to understanding how procurement expenditures translate into tangible business benefits, thus guiding strategic decisions related to investment in procurement processes and technologies.

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Regularly revisiting procurement strategies based on ROI outcomes can lead to more informed, dynamic procurement practices.

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5. Sentiment score 

The 'Sentiment Score' provides an essential supplier and internal stakeholder satisfaction gauge. Beyond simple satisfaction, this score assesses alignment with strategic objectives and compliance with procurement policies. 

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Spendflo's Sentiment Hub offers a sophisticated solution. It enables teams to conduct periodic surveys to gauge employee sentiment toward their SaaS tools. This feedback is invaluable for measuring ROI on these tools and conducting data-backed renewal negotiations. By making well-informed decisions with Spendflo, procurement teams can optimize their SaaS spend, thereby stretching the budget further and ensuring investments are truly aligned with user preferences and business needs.

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6. Supplier Lead Time

Supplier lead time measures time from order placement to delivery. Tracking this KPI helps businesses prevent delays, optimize supplier selection, and improve procurement planning. Long lead times can cause stock shortages and increase costs, leading to operational inefficiencies. Businesses should negotiate better terms, build strong vendor relationships, and use predictive analytics to optimize timelines. 

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Reducing supplier lead time enhances  supply chain agility, inventory control, and overall cost savings, ensuring a smoother procurement process. 

7. Maverick Spend Percentage

Maverick spend refers to unauthorized purchases made outside the procurement process, leading to higher costs, compliance risks, and lost savings opportunities. A high maverick spend percentage indicates weak procurement policies and lack of visibility. Companies must enforce compliance, implement automation, and educate employees on proper purchasing procedures. 

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Reducing rogue spend improves cost control, strengthens vendor relationships, and enhances financial oversight, ensuring procurement remains aligned with business goals. 

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8. Contract Compliance Rate

This KPI tracks supplier adherence to agreed contract terms, pricing, and service levels. Poor compliance can lead to financial losses, quality issues, and contract disputes. Procurement teams should use automated tracking, enforce penalties for non-compliance, and conduct regular audits to maintain supplier accountability. 

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A high compliance rate ensures procurement consistency, cost efficiency, and risk reduction. This helps businesses optimize supplier relationships and meet financial objectives. 

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9. Cost Reduction Ratio

The cost reduction ratio evaluates how effectively procurement teams cut costs through negotiations, strategic sourcing, and automation. Higher cost reductions indicate successful supplier negotiations, optimized contracts, and efficient spending controls. Businesses should track savings, benchmark against industry standards, and refine cost-reduction strategies. 

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A strong cost reduction ratio contributes to sustainable financial growth and procurement efficiency. This helps companies to maximize savings without compromising on quality.

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10. Percentage of Automated Procurement Transactions

This KPI measures the proportion of procurement activities processed through automation, 

including purchase orders, approvals, and contract renewals. Higher automation  percentages lead to fewer errors, faster processes, and improved compliance. Businesses should invest in automation tools to enhance procurement efficiency and reduce manual workloads. 

Tracking automation adoption ensures faster approvals, better supplier management, and optimized procurement operations, leading to cost savings and operational agility. 

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11. Spend Under Management (SUM)

Spend under management (SUM) refers to procurement spend controlled through approved processes and vendor agreements. Higher SUM percentages indicate better financial oversight and reduced unmanaged spending. A low SUM suggests inefficiencies, lack of procurement control, and budget overruns. Organizations must enforce compliance, implement spend analytics, and standardize procurement workflows and standardize procurement workflows to increase SUM. 

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Optimizing this KPI leads to better cost predictability, stronger vendor relationships, and improved procurement efficiency, ultimately enhancing financial performance.

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Best Practices for Tracking Procurement KPIs

Tracking procurement KPIs effectively requires a structured approach that ensures accuracy, visibility, and alignment with business goals. By implementing the right best practices, procurement teams can optimize performance, enhance supplier relationships, and drive continuous improvement. 

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Here are the best practices for tracking procurement KPIs:

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1. Define Clear KPI Objectives

Ensure each procurement KPI is aligned with business goals, financial targets, and operational efficiencies. Clearly define what success looks like for each KPI to measure meaningful progress. 

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2. Use Centralized Procurement Software

Implement a procurement analytics platform to track, analyze, and report KPIs in real time. 

This ensures data accuracy, reduces manual errors, and provides visibility into procurement performance. 

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3. Automate Data Collection & Reporting

Use automation tools to collect procurement data, generate reports, and track trends. Automated dashboards help procurement teams identify patterns, detect inefficiencies, and optimize decision-making. 

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4. Standardize KPI Measurement & Reporting

Ensure consistent data formats, reporting structures, and benchmarking methods across departments. This helps in accurate performance tracking, trend analysis, and cross-team alignment. 

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5. Conduct Regular KPI Reviews

Review procurement KPIs periodically to adjust strategies based on changing business needs. Use quarterly or monthly performance assessments to identify areas of improvement. 

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6. Benchmark KPIs Against Industry Standards

Compare procurement KPIs against industry benchmarks and competitors to identify gaps, opportunities, and improvement areas. This helps businesses stay competitive and cost-efficient.

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How Spendflo Helps You Track and Optimize Procurement KPIs

Tracking procurement KPIs is only possible with clear visibility into contracts and purchase orders that define supplier relationships. Many purchasing teams need a unified repository for contracts, often dispersed across various shared and local drives, complicating retrieval and analysis. 

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Spendflo addresses this issue by centralizing all contracts in one easily searchable location, facilitating the reporting on contract terms. Our tool also acts as your virtual procurement team by providing comprehensive analytics and performance dashboards. It continuously measures and monitors critical KPIs such as cost savings, supplier compliance, and spend under management, ensuring that you track and achieve your procurement objectives. 

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This consolidation eliminates the need to alternate between different systems for managing first and third-party documents. With everything securely stored in one contract repository, Spendflo also allows for automated reminders, ensuring you never miss a contract renewal deadline again.

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To learn more about the product, you can book a demo with our experts today. Our team is ready to address all your procurement concerns and demonstrate how our solution can streamline your processes. Get started now and ease your procurement worries with our expert guidance.