Introduction to spend management software

Manufacturers can use spend management software to reduce expenditures, make cost-effective decisions and gain a better understanding of their suppliers and purchases.

There are two primary goals that spend management software should accomplish for companies. First, it should provide a better understanding of what manufacturers are buying and the suppliers with whom they are doing business. Second, it should put in place a mission control system to reduce overall expenditures, spend more effectively and drive internal users to make better business decisions.

Spend management software consists of a number of elements. At its core is a procure-to-pay application that includes transactional e-procurement tools (also known as supplier relationship management or SRM) and invoice automation capability.

In most companies, these functions are separate, with procurement typically controlling transactional purchasing and finance, through accounts payable, controlling the payables process. But increasingly, top performing companies are joining these two elements of the spend management equation.

Equally important to deploying spend management software are tools that help monitor and report on spending and compliance to negotiated contracts. These spend visibility and spend analysis tools provide insight to companies about what they're buying, how much they are spending and with whom -- across their distributed operating environment.

These tools work in tandem with supplier management tools to help with supplier content and process management, e-sourcing, initial contract pricing and terms and ongoing contract management. They provide a standard set of capabilities and visibility into all supplier agreements.

Companies rarely source all of their spend management tools with a single provider. Rather, it has become common for organizations to work with multiple providers for different elements of the spend management software equation, including their ERP provider as well as independent software vendors (ISVs).

Spend management can require significant customization, configuration and systems integration work, depending on the complexity of an organization's environment, the specific buying processes they are enabling and the number of systems that a spend management process must touch.

This was first published in December 2009

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