Effective Supplier Spend Analysis Template – (Updated 2024)

In today’s competitive business landscape, understanding and optimising supplier spend is critical to controlling costs, identifying savings opportunities, and enhancing supplier relationships. A supplier spend analysis template can simplify this process, enabling businesses to track, analyse, and manage their procurement spend more effectively. In this article, we’ll cover the essentials data points to include in the supplier spend template, the benefits it offers, and how a well-designed template can empower your organisation to make data-driven decisions.

What is Supplier Spend Analysis?

Supplier spend analysis is the process of reviewing and categorising an organisation’s expenditures with suppliers. The aim is to uncover patterns, identify savings opportunities, and ensure that resources are being allocated efficiently. By analysing spend data, companies can gain insights into supplier performance, pricing trends, and contract compliance, which ultimately leads to more informed sourcing decisions.

Why is Supplier Spend Analysis Important?

1. Cost Savings: Supplier spend analysis helps businesses uncover savings opportunities by identifying areas where costs can be reduced, such as renegotiating supplier contracts, consolidating suppliers, or switching to more cost-effective suppliers.
2. Improved Supplier Relationships: By understanding your spending patterns, you can engage in more productive conversations with suppliers. This can lead to better terms, discounts, and value-added services that benefit both parties.
3. Risk Mitigation: Supplier analysis can reveal over-reliance on certain suppliers or potential risks associated with single-source suppliers, enabling businesses to diversify and protect against supply chain disruptions.
4. Enhanced Compliance: Spend analysis ensures that supplier spending aligns with organisational policies and regulatory requirements, helping to minimise compliance risks.
5. Better Budgeting and Forecasting: A comprehensive view of supplier spend allows businesses to forecast more accurately and make more strategic financial decisions.

Key Elements of a Supplier Spend Analysis Template

This supplier spend analysis template helps organisations manage and analyse their supplier-related expenses in a structured way. Each section in the template provides a specific piece of information that contributes to a complete view of supplier spend and associated risks or opportunities.

Here are the key headings for a Supplier Spend Analysis Template which can be added into an Excel file, Google Sheets or your system of choice.

1. Supplier
2. Product Name
3. Area Budget Owner (Accountable)
4. Business Owner (Responsible)
5. Supplier Owner (Responsible)
6. Prior FY Actual (£k)
7. FY Budget (£k)
8. FY Forecast (£k)
9. Annualised
10. End Date
11. Description of Service/Requirement
12. Description of Cost Risk or Opportunity

Here’s a description of each heading and why it’s useful:

1. Supplier: This column lists the name of each supplier your organisation works with. Having a clear, organised list of suppliers is essential for tracking expenses and managing supplier relationships effectively.
2. Product Name: Specify the product or service provided by each supplier. This helps categorise and track spending by product type and contract, making it easier to identify high-cost items or areas for potential consolidation.
3. Area: This field represents the business area or department that uses the supplier’s product or service. Identifying spend by area helps you understand which departments are most dependent on specific suppliers, allowing for more targeted cost-control strategies.
4. Budget Owner (Accountable): The person accountable for the budget related to this supplier. This is typically a senior member of the team who oversees financial decisions for the associated department or business area.
5. Business Owner (Responsible): The individual within the business that is responsible for ensuring that the business is receiving good value for money for the product or service. This can be the same person as the Budget Owner or Supplier Owner, however is a key role especially in areas such as IT where the spend and value are in separate areas.
6. Supplier Owner (Responsible): The individual responsible for day-to-day management of the supplier relationship within the business, helping to manage contract renewals and working with the Business Owner to ensure the contract is driving good value for money for the business. They are often the primary contact for the supplier and handle operational aspects of the supplier relationship.
7. Prior FY Actual (£k): The actual spend with the supplier in the prior financial year. This data allows for comparison with the current year’s budget and forecast, helping to spot trends or significant changes in spend.
8. FY Budget (£k): The budgeted spend for the current financial year with the supplier. This serves as a benchmark to track whether the forecasted spending aligns with financial expectations.
9. FY Forecast (£k): The forecasted spend for the financial year, updated periodically based on real-time data. Having a forecast by supplier helps to highlight any risks or opportunities and adjust for any expected variances from the budget. It also supports better financial planning which can feed into other areas such as cash flow forecasting.
10. Annualised: This field indicates whether the spend is annualised or based on a specific period within the year. Annualised figures help in making more accurate year-over-year comparisons and long-term planning.
11. End Date: The expiration date of the contract or agreement with the supplier. Tracking end dates is crucial for timely contract renewals, renegotiations, or identifying when to evaluate alternative suppliers and other options. A break date can also be used here.
12. Description of Service/Requirement: A brief description of the goods or services provided by the supplier. This helps clarify the purpose of the expenditure and provides context, which can be helpful for recipients of the report, cross-departmental reviews or audits.
13. Description of Cost Risk or Opportunity: This field highlights any potential cost risks, such as price increases or supply chain disruptions, as well as opportunities for cost savings or additional value. By identifying risks and opportunities, the organisation can proactively address financial exposures or negotiate better terms.

How to Use a Supplier Spend Analysis Template

1. Gather Data: Start by collecting spend data from invoices, purchase orders, and ERP or procurement systems. Having accurate and complete data is essential for effective analysis.
2. Populate the Template: Fill in each section of the template with relevant details. It’s important to standardise information entry, especially for spend categories, so that data remains consistent and easy to analyse. Additional information such as key contractual terms and supplier contact information like account manager details can be added into separate tabs to provide further useful information. The key is to keep the summary high level and useful as a quick snapshot view so it can be easily understood and communicated
3. Analyse Patterns: Once populated, analyse the data to identify spending patterns, such as high spend categories, increases compared to prior year, most frequently used suppliers. This can help highlight opportunities and potential areas for negotiation and focus.
4. Evaluate Supplier Performance: Use the performance metrics to assess whether suppliers meet your organisation’s expectations. Poor performance may indicate that it’s time to explore alternative suppliers.
5. Identify Opportunities for Savings: Look for areas where cost savings can be achieved, such as consolidating suppliers or renegotiating contracts with high-spend suppliers.
6. Implement Changes and Monitor Results: After identifying savings opportunities, implement necessary changes and continue monitoring spend data to ensure continuous improvement.

Further Data Points to Capture – Enhancements

The data points above have a heavy financial focus to ensure the organisation is getting good value for money from its spend on suppliers. Adding additional data points can be useful to make this is a more rounded view of supplier performance. For example, the organisation could be getting good value for money from the product or service, however they could be a nightmare to manage or interact with. Adding RAG status for Supplier Relationship may also be a useful data point and any issues can be flagged in the comments.

Turning this template into a working document can also be a really useful step to ensure the information is kept up to date. Having periodic scheduled reviews of this document will help with accountability in the business such as including the summary snapshot in business reviews or finance updates.

Final Thoughts

Effective supplier spend analysis is essential for companies aiming to control costs, improve supplier relationships, and make data-driven procurement decisions. A supplier spend analysis template is a valuable tool that simplifies this process, providing structure to your data and making it easier to draw meaningful insights. By consistently analysing supplier spend, your organisation can stay agile, competitive, and well-prepared to navigate market fluctuations and achieve cost savings.

Investing time in a supplier spend analysis template is a small step that can yield significant benefits, empowering all areas of your business to turn data into strategic value. Start today with our free template, and take the first step toward optimising your supplier relationships and maximising procurement efficiency. If you found this template useful and it helped drive some meaningful value in your business, we’d love to hear from you!