Easy CFO SPEND Analysis for Growing Companies

If you're a CFO of a growing company and you've been tasked with reducing your spend and do it in a more strategic way, you might be dealing with issues like not having data in one single place. Your team is still chasing invoices. There's no single place for you to look at your total spend and cost saving opportunities. If you are in this situation, this video is for you. Because in this video I'm going to walk you through how to do effective spend spend analysis even when all your data is not in one central place. And stick till the end where I'll share one mistake you must avoid when it comes to doing effective spend analysis. Now let's get started. If you're joining me for the first time, welcome. My name is Sachin Sharma. I am the founder of Procure Desk where we help growing companies control costs through automation of procurement and income AP processes. So let's jump right in. Number one is to start with effective spend data. Spend analysis, you need to gather all your spend data in one place. So what do I mean by that? You might have invoices in your accounting system if you're using QuickBooks, Netsuite, whatever the case might be, you need to look at your credit card spend data, right? So all the credit card spending, maybe you need to pull all the data from your credit card account or you might have contracts for a long term spend. Like in a spend where you have negotiated contracts are there in one place. So start with just aggregating all of that into a large spreadsheet where now you have data from different sources. That's step number one. Number two is once you get the data, you need to categorize the spending. So what I mean by categorization, you want to know what exactly that spend is. Did you spend it on office equipment or office supplies? Is it a software subscription spend? Is it entertain, travel and entertainment spend? Right. So you're basically dividing your spending into different buckets. It solves for two purposes. Number one is now you, no matter how you spend the money, whether it was on a purchase order, whether it was just a non PO invoice or whether just credit cards, you can now group that into the right bucket so you can look at first of all how people are spending money. And number two is you can now aggregate the total spend and see how much did you spend on office supplies, for example, whether you bought it directly from Amazon and they send you an invoice or somebody created a credit card, you know, just swiped their credit card somewhere else, right? As an example. So that's number two, very simple structure. The way you should have it is vendor description, unit price, amount and so on. And the category structure you can just add on a network. Don't go too granular on categories. You just want the basic category structure so you can do your spend analysis. Number three is then doing the spend analysis to find the cost saving opportunities. And that is the meat of this whole thing, right? So number one is what you want to look for is is there an opportunity for me to consolidate my vendors? Very common scenario is you're buying the same set of product or services from different vendors. Office supplies, you're probably buying from Staples, Office Depot, W.B. mason, probably from Amazon. Do you really need four vendors for Office supplies? The answer is no. So look for those opportunities to identify the cost savings and kind of go from there, right? That's number one. Second, you should look for is anything regarding software subscriptions. A very common problem is once you sign for a software, you just keep on paying them, you might not be using it. So look for opportunities to reduce costs by getting rid of unused software subscriptions. And number three is you want to look at just the duplicate payments or any sort of that thing that might be happening, right? So if you are seeing spend which doesn't make sense and you know, going into miscellaneous bucket, that is something to double click on and say, do we really need to spend that money or something else is going, going on here, right? So those are the three simple steps to do effective spend analysis and save up to 10 to 15% of your annual cost. Now about the bonus tip. Here's one thing which many companies do it wrong. And especially with growing companies, they do spend analysis once a year at the time of the budget. And that's a wrong strategy. Let me tell you why. If you're looking at only one once a year, you know, one is your spend is changing month over month, right? I mean, like for example, if you're growing, you might be spending more every three months as compared to just looking at one year, which doesn't make a lot of sense in that case. So you should effectively do spend analysis every month, if not do it every quarter. And the idea behind doing this frequently is that not only you can identify the opportunities sooner to reduce cost, but you can also identify if there is any maverick or uncontrolled spending going on, which you need to curb. Because spend analysis always tells you all these things and like, okay, why did we spend money on that? And you could just, you know, immediately go ahead and stop that. Right? So those just to summarize, you know, to do effective spend analysis, gather your data, categorize your spending, and then analyze to identify saving opportunities. If you like this video, go ahead and hit the subscribe button. And if you need more tips to do effective spend analysis, drop the comment spend analysis in the comments and I'll get back to you. Thanks for joining me today and I'll see you in the next video.