Unlock 35% Cost Savings with Smarter Spend Under Management: Here’s How
Introduction
In today’s fast-paced economy, where margins are thin and competition is fierce, companies must evolve beyond traditional cost-cutting methods. Strategic spend management is emerging as a pivotal solution. One of the most powerful levers in this space is spend under management—a concept that, when applied effectively, can drive cost savings of up to 35%.
So, what exactly is spent under management? Why is it becoming a critical focus area for procurement leaders? And how can your organization harness its potential?
By the end of this article, you’ll gain an in-depth understanding of spend under management, how to calculate and improve it, and how it translates into real-world financial impact.
What is Spend Under Management?
Definition of Spend Under Management
Spend under management refers to the portion of a company’s total spending that is actively overseen, tracked, and optimized by the procurement function through strategic sourcing, policies, and technologies.
In simple terms, it’s the spending your organization has visibility and control over—meaning it is governed by contracts, preferred suppliers, and compliance mechanisms.
Clarifying the Meaning
To further break it down:
- Spend under management = Strategically sourced + Controlled + Tracked expenditures.
- It excludes untracked or “maverick” spend that happens outside the procurement team’s oversight.
A high percentage of spend under management reflects strong procurement maturity and strategic alignment.
Why Spend Under Management Matters
When procurement gains more visibility and control over company spend, the results can be transformational. Here’s how:
Cost Savings
Companies with high spend under management save 10% to 35% through:
- Volume discounts via supplier consolidation
- Better negotiated contracts
- Reduction in maverick or off-contract spending
- Automation and reduced transaction costs
Better Risk Management
When procurement has a clear view of where and how money is spent, they can:
- Mitigate supplier risks
- Improve compliance with regulatory and internal policies
- Avoid duplicate or fraudulent transactions
Enhanced Strategic Decision-Making
Spend visibility provides accurate data for:
- Forecasting and budgeting
- Identifying sourcing opportunities
- Scenario planning and financial modeling
Strengthened Supplier Relationships
Managing spend through preferred vendors leads to:
- Improved terms and pricing
- Faster dispute resolution
- Stronger collaboration and innovation
How to Measure Spend Under Management
Spend Under Management Formula
Here’s the standard calculation:
Spend under management (%) = (Procurement-managed spend / Total organizational spend) × 100
Spend Under Management Example
If your organization has an annual spend of $100 million, and your procurement team controls $75 million of that spend, your spend under management is 75%.
What is a Good Benchmark?
Industry benchmarks vary, but:
- Best-in-class organizations: 80–90%
- Industry average: 50–70%
- Emerging companies: Often start below 40%, with significant room for growth
How to Improve Spend Under Management
Improving your organization’s spend under management is not a one-time project—it’s a continuous, strategic transformation.
Centralize Procurement
Break down silos between departments and implement a centralized procurement process that ensures all purchases go through approved channels.
Implement Strategic Sourcing
Use supplier data, demand forecasts, and category strategies to secure optimal contract terms and reduce tail spend.
Automate Spend Tracking
Invest in procurement software and spend analytics platforms that offer real-time visibility into purchases, contract usage, and compliance.
Train and Align Stakeholders
Internal alignment is crucial. Educate teams across the organization about procurement policies and the benefits of compliance.
Analyze and Optimize Continuously
Regularly assess supplier performance, contract effectiveness, and policy adherence. Use insights to refine strategies and drive further efficiency.
Common Pitfalls to Avoid
Even with the best intentions, many organizations face roadblocks. Avoid these common mistakes:
- Relying solely on manual spreadsheets or outdated tools
- Lack of coordination across departments
- Ignoring small or one-off purchases (also known as tail spend)
- Failing to update procurement systems or vendor databases
- Underestimating the importance of change management and training
Real-World Example of Spend Under Management Success
A Fortune 500 technology company recently undertook a digital procurement transformation. By consolidating over 1,000 suppliers, adopting a cloud-based spend management platform, and training all purchasing stakeholders, they increased their spend under management from 60% to 85% within a year.
As a result, they:
- Saved $20 million annually
- Reduced procurement cycle times by 25%
- Improved contract compliance by over 40%
This example underscores the tangible benefits of focusing on smarter spend management.
FAQs
What do you mean by spend management?
Spend management is the broader process of managing, tracking, and optimizing company expenditures.
What does money under management mean?
The management of financial assets and funds belongs to entities or individuals while performing regular investment management activities.
What is the meaning of under management?
It refers to something that is being controlled or handled by a designated party.
What is an example of spending?
Ordering office supplies through an approved vendor portal is a typical example of managed spending.
What is the meaning of assets under management?
The total market value of assets that a financial institution manages on behalf of clients.
What is the difference between spend management and expense management?
Spend management covers procurement and strategic sourcing, while expense management focuses on employee reimbursements and operational expenses.
What are the characteristics of the management summary?
These often include spend visibility, contract compliance, vendor performance, and risk exposure.
What is under-spend?
When less money is spent than was budgeted, resulting in leftover funds.
What is total spend management?
A holistic approach to managing all spending, including direct, indirect, and services.
What is direct spend management?
Managing expenditures directly tied to the production of goods and services.
What is spending management?
A term often used interchangeably with spend management involves planning and controlling company expenditures.
What is tier 0 spent?
Highly transactional, low-value spending that often escapes procurement oversight.
What is the difference between spend management and spend analysis?
Spend analysis is a component of spend management focused on reviewing and interpreting spend data.
What is the meaning of management expenses?
Costs associated with operating a business, such as salaries, rent, and administrative fees.
What is managed spend?
Spend is governed by contracts, systems, and procurement teams.
What is the meaning of budget in management?
A financial plan that outlines expected revenues and expenditures over a period.
What is spent under contract?
Purchases made under the terms of a pre-negotiated agreement with a vendor.
What is enterprise spend management?
The company follows an organization-wide approach to oversee all spending operations within different departments and business units.
What is the meaning of money in management?
In this context, it relates to financial resources being effectively allocated and controlled.
Conclusion
The term Spend Under Management stands as a quantitative method that boosts profitability and lowers organizational risk while improving decision quality. The proper combination of tools, processes, and training enables organizations to achieve a 35% reduction in costs.
Begin your plan by reviewing current expenses, then create specific procurement strategies that you will continuously improve. Your control efforts will produce significant cost reductions.
You will gain better spend management today to discover smarter savings approaches that will benefit you in the future.
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