Spend analysis is the process of examining procurement spend to maximize value. It helps reduce costs, improve efficiency, and strengthen supplier relationships by assessing the who, what, why, when, and how of organizational spending.

Spend analysis seeks to answer three questions:

• How much is being spent?
• Which suppliers are being requisitioned?
• Is the organization getting what was promised?

Gartner says that enterprise IT spending on public cloud computing will overtake spending on traditional IT in 2025. When it is not uncommon for companies to spend 5 million on SaaS licenses, analyzing SaaS spend is essential. 

In this guide, you will learn: 

• The difference between spend analysis and spend analytics
• How to carry out spend analysis
• How to choose the best software to conduct your spend analysis

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What Is Spend Analysis?

Spend analysis is the process of collecting, cleansing, categorizing, and analyzing procurement spend data with the goal of reducing costs, improving efficiency, and strengthening supplier relationships. It is a core part of spend management because it transforms raw purchasing data into actionable intelligence that helps organizations make smarter financial decisions. In practice, spend analysis answers questions such as how much is being spent, who the suppliers are, and whether the organization is getting the value it was promised. By providing this visibility, it enables procurement and finance teams to identify savings opportunities, enforce compliance, and plan budgets more effectively.

To better understand the concept, it helps to know some key terminology. Spend data refers to all purchasing-related information gathered from ERP, AP, P2P, and SaaS systems. Data cleansing is the process of correcting errors and standardizing formats to make the data accurate. Classification organizes this data into meaningful categories such as IT services, SaaS subscriptions, or office supplies. Spend analytics is the software-driven process that prepares data for deeper analysis. Other common terms include tail spend, which refers to low-value or fragmented purchases that often go unmanaged, and maverick spend, which describes off-policy purchases that increase costs and compliance risks. Companies may also engage in supplier consolidation to reduce the number of vendors and negotiate stronger contracts. Finally, in SaaS-heavy businesses, a specialized form of this practice known as SaaS spend analysis focuses on tracking licenses, renewals, and usage to prevent waste and optimize value.

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Why is spend analysis important?

APQC’s Open Standards Benchmarking in Procurement reveals that organizations with spend analysis programs have better procurement operations, supplier relationships, process efficiency, cycle time, cost effectiveness and staff productivity.

Thus, spend analysis helps to:

• Create better budgets and projections.
• Detect expenditures that are unauthorized.
• Hone or combine like products and services.

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Spend analytics vs. spend analysis

Spend analytics and spend analysis are often used interchangeably, but they are not the same.”
Objective: To make wording logical and concise.

• Spend analytics is concerned with data collection, cleansing, classification and analysis with the help of specific software.
• Spend analysis uses the processed data and interprets it to cut costs, enhance efficiency and improve supplier relations.

What Spend Analytics Involves

• Data collection and cleansing: Gather data from various sources and correct errors to make it accurate and usable.
• Classification and consolidation: Group the data based on categories that are sensible to procurement.
• Enrichment: Add external spend benchmarks to internal spend data.

Once this process is complete, the data becomes ready for deeper spend analysis.

What Spend Analysis Focuses On

• Visibility: Procurement teams examine certain pieces of the information to get acquainted with the corporate spending.
• Performance improvement: Find out which processes can be optimized.
• Compliance: Make sure that there is adherence to contracts and policies.
• Cost savings: Identify and renegotiate, consolidate or remove uneconomical spend.

In SaaS-heavy companies, a similar process reviewing usage, renewals, and license allocation is known as SaaS spend analysis.

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The 4 Stages of Spend Analysis

A successful spend analysis follows four key stages, each designed to transform raw procurement data into actionable insights.

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1. Data Collection

The first step is to collect spend information from all possible sources, including ERP systems, accounts payable, purchase orders, SaaS platforms, and employee expense tools.

 Best practices include:

• Integrating information of all business units to prevent silos.
• Catching a minimum of 12 to 24 months of past transactions in order to be accurate.
• Exporting data in uniform format so that easy processing can be ensured.

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2. Data Cleaning and Data Authentication.

After gathering data, it has to be cleansed to eliminate errors, duplicates and inconsistencies.

Techniques involve:

• Unifying the names and currencies of vendors.
• Correction of wrong GL codes or values.
• Balancing totals with the general ledger to make sure that there is financial accuracy.

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3. Classification and Enrichment.

The purged information is further classified into rational groups and is defined as IT services, SaaS tools, or office supplies. This process usually involves exploration of external standards with an aim of gaining further understanding.

 Processes include:

• Taxonomies, such as UNSPSC or own.
• Including metadata like supplier performance, renewal dates and compliance tags.
• Associating the data on SaaS usage with license and spend data to optimize.

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4. Exception Handling

No matter how carefully it is cleansed, there are still certain anomalies, such as unusual purchases, inconsistent records or off-policy expenses.

Procedures should cover:

• Marking and analyzing anomalies prior to their corruption of analysis.
• Forwards the unresolved problems to the owners of procurement or finance.
• Recording audit and compliance reporting exceptions.

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How to perform spend analysis

Use this step-by-step flow to run a reliable spend analysis and turn findings into savings.

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Step 1: Set scope and goals

• Delimit time frame, types, business divisions and suppliers.
• Accept KPIs: savings goal, percentage savings managed, cycle time, compliance to policies, use of licenses.
• Appoint Finance, Procurement and IT owners.

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Step 2: Inventory data sources and access

• List systems: ERP, AP, P2P, corporate cards, T&E, SaaS admin consoles, SSO/IdP, contract repository.
• Secure access and export formats. Note currencies, time zones, and data refresh cadence.

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Step 3: Extract and consolidate raw data

• Extract 12–24 months of transactions and contract documents.
• Normalize the header and join key (vendor ID, GL code, cost center, employee ID).
• Staging area of land files being processed.

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Step 4: Cleanse and standardize

• Normalize names of vendors, dedupe supplier, correct GL code errors, process blanks and FX translations.
• Prepare a master vendor list and match totals to general ledger.

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Step 5: Classify and enrich

• Mapping expenditure to a taxonomy (UNSPSC or your own).
• Attributes of tags: status of the contract, the date of renewal, payment terms, its owner, the policy flags.
• In the case of SaaS, include usage and seat data to make license rightsizing possible.

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Step 6: Centralize in a single source of truth

• Load cleansed data into a warehouse, BI model, or procurement platform.
• Set role-based access, data refresh schedules, and version control.

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Step 7: Analyze and find opportunities

• Run core views: categorically, supplier, business unit and payment type.
• Identify duplicate tools, unnecessary items, maverick purchases, out-of-contract spending, and price variances.
• SaaS focus: usage of licenses, application redundancy, upgrade timeline, platform possibilities.

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Step 8: Build the action plan

• Prioritize by savings vs. effort:
  
  • Quick wins (less than 30 days): cancel the unused licenses, consolidate duplicative tools.
  • Short term (this quarter): renegotiate prices, harmonize terms, package suppliers.
  • Long-term: policy changes, merchandise, assisted buying.
  • Assign owners, target dates and savings estimates.

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Step 9: Execute and track results

• Negotiate, amend contracts, change licenses and enable approvals on the buying path.
• View realized vs. forecast savings, cycle time and policy compliance in a live dashboard.

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Step 10: Make it continuous

• Monthly pulse: update the data, look at the exceptions, take action on quick wins.
• Deep dive every quarter: review categories, revise benchmarks, refine policies.‍
• Have a renewal playbook to make sure the teams do not act at the auto-renew stage.

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Benefits of spend analysis

Here are some of the benefits of conducting a spending analysis: 

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1. Cost Reduction & Efficiency

• Direct savings: Organizations can reduce unnecessary expenses, cancel redundant SaaS subscriptions, and negotiate reduced rates with vendors when examining their spending trends.
• Efficiency benefits: Automation of spend analysis saves on manual labour allowing the procurement and finance teams to concentrate on strategic activities.

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2. Better Visibility & Decision-Making.

• Supplier management: Understand a consolidated picture of the supplier performances in order to know those vendors providing value and those who need to be renegotiated or substituted.
• Data-driven budgeting: Get data on real spend forecasts and use patterns to better allocate budgets by department.

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3. Pro-Sourcing/Risk Management.

• Risk mitigation: Before suppliers become problematic, over-dependence on certain suppliers or poor performance on their part.
• Better sourcing decisions: Rationalise products, consolidate suppliers and develop more competitive sourcing strategies using spend data.

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4. Operational Benefits

• Improved compliance: Be aware of non-compliant or unauthorized spending and guarantee that the regulatory requirements and internal policies are adhered to.‍
• Streamlined procurement: On-going spend analysis assists in monitoring renewal, enhancing the cycle times and enhancing the overall procurement capabilities.

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Spend analysis software 

1. Spendflo (Best SaaS Spend Analysis).

• Functionality: Visibility of SaaS spending, renewal management, contract consolidation, license optimization with AI, inbuilt procurement specialists.
• Advantages: Guaranteed savings of up to 30%, rapid ROI, centralized dashboard, and expert vendor negotiations.
• Disadvantages: They are largely concerned with SaaS and spending by vendors (not tangible items).
• G2 Rating: 4.8/5 | Capterra Rating: 4.8/5

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2. Payhawk

• Functionality: Company cards, expense management, multi-entity, automated reconciliation.
• Advantages: Good when dealing with worldwide business, pays and costs are combined, simple to expand to different areas.
• Cons: Less concerned with serious optimization of SaaS spending.
• G2 Rating: 4.7/5 | Capterra Rating: 4.7/5

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3. Pleo

• Functionality: Intelligent company cards, categorize expenses, capture receipts, automated reimbursements.
• Advantages: Employee-friendly, suitable in small and mid-sized companies, makes reporting of expenses to the team a lot easier.
• Cons: Has few procurement-specific functionalities, is not oriented to SaaS negotiation and vendor management.
• G2 Rating: 4.7/5 | Capterra Rating: 4.8/5

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4. Zoho Expense

• Features: Expense reporting, policy compliance, automated approvals, mileage tracking, multi-currency support.
• Pros: Inexpensive, compatible with the Zoho suite, very powerful with SMEs.
• Cons: Lacks advanced analytics, which is more efficient to track the expenses rather than strategic spending optimization.
• G2 Rating: 4.5/5 | Capterra Rating: 4.5/5

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5. Airbase

• Functionality: Financing, company credit, bill payment, authorizations, automation of accounts.
• Advantages: Expense management is an all-in-one platform, it integrates well with accounting programs, and it is visible in real time.
• Disadvantages: Mid-market; may be too much to very small companies, not SaaS-focused.‍
• G2 Rating: 4.6/5 | Capterra Rating: 4.6/5

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Types of spend analysis software 

Organizations use different types of tools to perform spend analysis, depending on maturity, budget, and complexity. Here’s a breakdown of the most common options:1. Excel or SpreadsheetsIn use to this day, particularly in small firms.Spend analysis can be done in Excel, but is quickly inefficient due to the increasing vendor portfolios and SaaS usage.2. BI Tools.The visualization of spend is done using platforms such as Tableau, Power BI, and Qlik.

• Advantages: Powerful dashboards, intelligent visualization, customizable reporting.
• Cons: Over-dependence on clean data inputs, involves skilled analysts, few procurement-identified features.

BI tools can be mighty with analysis, but do not address procurement processes, such as renewals or vendor bidding.3. AI-Powered Spend AnalysisThe use of AI/ML to automate cleansing, classification, and anomaly detection is achieved as a modern solution.

• Advantages Real-time insights, predictive analytics, automated license optimization, anomaly flagging.
• Cons: It may be expensive, the success of the integration and data quality require integrity.

AI features are especially effective in SaaS-heavy organizations with fluctuating usage, where waste can easily accumulate.4. Procurement-Specific SoftwareSpecialized systems such as Spendflo, Coupa, Zycus, or GEP are designed to handle procurement and spending.

• Advantages: Full-cycle procurement, vendor management, renewal tracking, contract consolidation and in-built negotiation support.
• Cons: It has to be onboarded and adopted at the team level, the price depends on the modules.

Mid-to-large companies that are interested in the quantifiable savings and full visibility of expenditure are best served by procurement-specific platforms.

• Advantages: Inexpensive, available, analyzable easily because customizable.
• Cons: Fallible, time-consuming, not automatable, not scalable to large or complex data.
Key features of spend analysis software

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Tool Selection Criteria for Spend Analysis Software

Companies must not only do a feature checklist when assessing spend analysis tools. Consider these key criteria:

• Ease of integration - Does the software integrate well with your ERP, AP and procurement systems?
• Scalability- Does it support the increased volumes of transactions, as your business grows?
• Purchaser/finance/IT intuition, do the interfaces make sense to the procurement, finance, and IT teams?
• Data accuracy – Does it provide tight cleansing, classification, and deduplication to provide good analysis?
• Automation - Does the tool automatically renew, report, and optimize licenses, to minimize manual work?
• Security & compliance - Does it comply with SOC 2, ISO 27001, GDPR or other industry compliance requirements?
• Expert support - In addition to software, does the provider provide advice and negotiation expertise, and price points?
  
  

Spend Analysis Software Comparison Matrix

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Conclusion

Spend analysis is no longer just a cost-cutting measure it has become a strategic tool for efficiency, compliance, and smarter growth.However, in the absence of the appropriate tools, the process may be cumbersome, disjointed and likely to miss opportunities. That is where Spendflo is different. Spendflo, the primary spend management software, is an amalgamation of SaaS intelligence, automated purchasing processes, and professional negotiation services to assist you in saving up to 30 percent on your SaaS stack and achieving full insight into vendors.

Willing to gain control over your SaaS expenditure and get the greatest ROI?

‍Book a demo with Spendflo today

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Frequently Asked Questions

What is the typical ROI on a spend analysis initiative for a business?

A spend analysis typically delivers a 15–30% cost reduction in the first year. through the identification of idle licenses, redundant tools, and vendor bargaining opportunities. Other than direct savings, businesses also experience quicker approval processes and enhanced compliance, as well as, improved forecasting. Using Spendflo, automated tracking, expert negotiating support, and centralized SaaS visibility often help companies realize up to 3x ROI.

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How frequently should a company perform a spend analysis?

A spend analysis should be conducted at least quarterly by most companies in order to identify early indicators of waste spend. In organizations that are heavy on SaaS and whose renewals and usage change rapidly, a continuous or monthly analysis is more appropriate. A spend management platform provides the automation to ensure that you are not only responding when it gets time to renew but making a proactive data-driven decision throughout the year.

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What are the biggest challenges a company faces when performing a spend analysis?

Companies usually have problems with:

• Inability to see SaaS activity and contract with vendors.
• Shadow IT is a situation where groups of people buy tools without authorizations.
• Manual data collection which is time-consuming and spreadsheet-based and system-based.
• Lapsed renewals resulting in automatic renewal at an increased cost.
• Weak bargaining power due to lack of benchmark pricing information.

All these complicate the achievement of complete savings potential. Applications such as Spendflo address it by consolidating vendor information, bringing to the surface real-time insights into utilization, and integrating procurement professionals to negotiate on your behalf.

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