In today's complex procurement landscape, organisations are increasingly under pressure to do more than just cut costs. They must maximise value, ensure compliance, and build resilient supplier relationships. That’s where spend management comes into play.
What is spend management?
Unlike traditional cost management, which focuses narrowly on expense reduction, spend management takes a strategic, end-to-end approach to controlling how an organisation sources, purchases, and manages supplier interactions. It includes planning, monitoring and comprehensively managing business spending to ensure reduced supplier risk, smart procurement and purchasing decisions that align with business goals.
From contract creation to supplier performance tracking, modern spend management solutions, like OneAdvanced’s Source-to-Contract platform, empower procurement teams to drive efficiency and transparency, with greater alignment between cross-functional teams.
In this blog, we’ll break down what spend management really means, how it differs from simple cost control, and why it’s becoming essential for forward-thinking businesses in 2025.
Best practices
Strategic sourcing
Strategic sourcing is the procurement process that involvs analysis of what an organisation buys- who the supplier is, the pricing, and the quantity. It focuses on the total cost of ownership and allows organisations to find suppliers catering to specific needs for better quality supplies at the best possible pricing.
With this process of sourcing, organisations build stronger supplier relationships, viewing suppliers as long-term, trusted partners.
Contract management
Automates and streamlines every stage of the contract lifecycle, from creation to renewal. It centralises contract management, offering dashboards and alerts to monitor deadlines and enhance compliance. This helps customers optimise contract value and ensures comprehensive oversight of contractual obligations.
Supplier management
Consolidates supplier information, monitors performance, assesses risk and enhances collaboration. Features include streamlined onboarding, performance tracking, and risk identification, providing complete visibility and control over suppliers and their contracts
Benefits
Centralised data
It is crucial to consolidate procurement data into a single repository to better understand the spending related to all purchasing activities such as invoice processing and payments. Doing this makes accessing and analysing the spending data easier. Spend data mainly includes invoices, purchase orders and procurement contracts which helps to recognise spending patterns and areas of improvement to bolster efficient spend management for businesses.
Automate contract workflows
A contract workflow encompasses methods such as contract renewals and purchase price alignments with the agreed pricing. These methods when automated result in a decrease in manual errors and efforts eventually making contract workflows quicker. Additionally, businesses can cut down on administrative expenses and avoid fines due to missed deadlines. These practices eventually contribute to significant cost-savings and better spend management.
Real-time budget tracking
This practice is important to improve the spend management process as it allows businesses to ensure that the spending remains within allocated budget limits with purchases. Finance and procurement teams can quickly spot overspending with the presence of real-time budget tracking and take corrective measures to stop unapproved purchases from suppliers.
Conduct regular audits
Regular audits are one of the important ways to refine the spend management process. It involves functions such as analysing spending performance and checking its legitimacy. Audits detect and prevent fraudulent invoices, duplicate payments, incorrect pricing or taxes and even overpayments to suppliers. These are common rogue spending practices that can seep in where a plethora of purchases happen per day in businesses
Spend management challenges
Despite its importance, many organisations still face significant hurdles when trying to implement or optimise their spend management processes. Multiple departments sourcing suppliers independently? Contracts stored across spreadsheets, inboxes, and shared drives? Without a strong business strategy and centralised approach, it’s nearly impossible to control or ensure consistency.
Spend management requires a detailed understanding and analysis of business spending along with a robust strategy to manage. It also requires resources to correctly track and store data to make informed decisions. Due to the complex and cross-functional nature of business spending, businesses experience challenges, a few of them are as follows:
Maverick spend
Maverick spending refers to transactions that are out of approved supplier contracts. They are one of the reasons for lost cost-savings opportunities because they cut the chances of volume discounts with suppliers. When maverick spending seeps in the procurement process, it causes a breach in the agreed purchase numbers which results in contract penalties and sometimes contract termination. It can also damage the business reputation especially when these non-approved suppliers do not meet ESG compliance standards
Lack of real-time visibility
Without the visibility of real-time spending across procurement processes such as order placement to fulfilment, and invoice to payment, businesses can have the following challenges:
- Lack of buying power
- Unable to forecast expenses
- Unable to gauge strategic saving opportunities
These challenges obstruct businesses from identifying opportunities to reduce or optimise costs. One of the reasons behind this is that procurement spending data comes from fragmented systems which exacerbates its quality. Moreover, when the same data is not consolidated properly, it becomes difficult to analyse it.
Poor data quality
According to the Data and Marketing Association, 75% of UK businesses waste an average of 14% of their revenue due to bad data quality
Poor data quality is one of the biggest challenges to obtaining enhanced spend management. It can result in inefficient supplier selection and higher costs paid to them with possible penalties for not meeting contractual agreements. This may also cause wrong assumptions of supplier capacity which can further create issues of understocking and overstocking inventory. With understocks, a business fails to meet customer expectations which not only tarnishes its reputation but also leads to a drop in sales and eventually negative financial impact. With overstocks, a business may lose revenue for products not sold.
Inefficient supplier management
It’s not enough to just know who your suppliers are, you need to know how they’re performing, what risks they carry, and whether they align with your values and goals.
Inadequate supplier management brings a plethora of negative impacts on business spending. The primary loss is due to inconsistent payment practices to suppliers which often strain relationships with key suppliers. This decreases the chances of favourable negotiations and hence businesses miss out on the opportunities of cost benefits like volume discounts.
Compliance adherence
Slow approvals, lost contracts, and compliance blind spots are common symptoms of manual procurement systems. These inefficiencies increase costs and risk. Compliance adherence is critical for effective spend management. But it is difficult to make sure that all purchasing activities adhere to internal policies and external regulatory compliances like the Prompt Payment Code. Challenges of complex regulatory requirements are daunting, and non-compliance brings financial losses and legal penalties which pose a great disruption to an effective spend management system.
Unfortunate instances like failure to meet supplier compliance adherence can cause supply chain disruptions which leads to a decrease in the number of sales. Such an instance eventually affects the finances negatively for businesses.
Effective spend management in action
After gaining an understanding on spend management best practices, benefits, challenges, and processes, explore two core areas where organisations are seeing measurable impact to boost your knowledge of the subject further:
Strategic sourcing initiative
Modern businesses are leveraging detailed spend analysis to make smarter sourcing decisions. For example, in manufacturing and large-scale procurement environments, companies are now using procurement data to identify overlapping suppliers, group high-volume purchases, and consolidate spend into fewer, more strategic supplier relationships.
A common strategy involves launching RFPs (Request for Proposals) to identify suppliers that can offer bulk rates, reduced lead times, or added value services like inventory management. The outcomes of this approach can be significant:
- Reduced supplier counts to simplify management and negotiation
- Better pricing due to higher volumes
- Lower material and decreased delivery costs
- Improved delivery timelines due to improved logistics and reliable suppliers
In the fiscal year 2023/24, the government reduced the market share of strategic suppliers to 10%, amounting to £22.1 billion by diversifying suppliers and disaggregating large contracts.
This kind of strategic sourcing doesn't just deliver cost savings. It also fosters resilience, innovation, and supplier collaboration, making procurement a key player in business transformation.
Controlling maverick spend with centralised contract management
By digitising all supplier agreements and storing them in a single, searchable repository, businesses gain full control over their contractual landscape. When combined with a procurement system that routes purchasing through pre-approved contracts, organisations benefit in multiple ways:
- Complete spend visibility - no more rogue or invisible transactions
- Consistent purchasing practices - reducing unnecessary or duplicate buys
- Stronger compliance - Approved contracts in place to bolster compliance which mitigates financial risks like non-compliance penalties.
- Lower recurring procurement costs - due to standardised pricing and terms
Beyond savings, this centralised approach enables teams to track renewals, set alerts, and ensure procurement policies are followed consistently, empowering both compliance teams and procurement leads.
Implementing spend management software
It is now clear that a robust spend management software is a necessity for organisations to get cost benefits along with operational efficiency. With a lack of it, businesses suffer from challenges such as overspending, non-compliance with approved supplier contracts, and lack of spend visibility.
A powerful spend management solution, such as OneAdvanced’s Source-to-Contract platform, addresses these challenges head-on by:
- Acting as a centralised hub for all purchasing activities, providing real-time visibility into spend
- Streamlining supplier and contract management, reducing admin overhead and improving compliance
- Automating sourcing and document workflows, freeing teams from manual processes
- Delivering proactive insights into supplier performance, pricing, and value
- Helping prevent maverick spend through enforced policies and planning tools
With proven experience for decades, OneAdvanced has become a trusted provider for organisations looking to modernise procurement and drive business value. We are committed to helping businesses achieve their financial goals, not only through our spend management solutions, but also as a strategic partner invested in your success.
Take the first step towards a high-performing, strategic and well-governed procurement process with OneAdvanced Spend Management Software. Connect with us today!