Spend analytics has broken through as an essential part of corporate procurement strategies. Businesses need to know how much money they've spent, and on what. Luckily, enterprise digitization is pushing the needle forward for procurement teams, enabling access to data that empowers the type of spend analysis organizations demand.
Today, though, CFOs and procurement leaders want to go even deeper. No longer are businesses satisfied with merely knowing how much money they've already spent; they are seeking insights on future spend and budget analysis. Traveling further into the world of procurement analytics, these professionals are also exploring trends in supplier behavior, purchase order and invoice management, and beyond.
That's according to Benjamin Portusach, CEO of procure-to-pay solutions provider Accrualify. The company recently announced $3.2 million in Series A funding led by Aligned Partners. In its announcement, Accrualify noted that the funds will be used to ramp up its investment in machine learning (ML) and artificial intelligence (AI), two technologies that, Portusach told PYMNTS, are propellers of meeting procurement's analytics demands.
"Information and transparency [have] become key in the relationship between the purchaser and customer," he said. "Now, what we see is the relationship with the vendor as a way to streamline processes and to gain data."
More business customers are embracing the vendor portal to facilitate data sharing between buyers and suppliers, Portusach added. At the same time, more ERP platforms and banks are opening up data and embracing API-powered integrations with procure-to-pay systems, similarly acknowledging data sharing as an essential strategy to helping businesses gain a clearer picture of operations.
The most obvious benefit to this trend is automated data entry — and, in procurement, automated purchase categorization. Sophisticated technologies like ML can match purchase order, payment and invoice information together for streamlined reconciliation or categorize those purchases so managers can see how procurement teams are spending company money.
However, according to Portusach, with digitization and data sharing on the rise, the potential for analytics to offer insight into the procurement function is quickly expanding. CFOs and controllers are seeing insight into supplier habits, for instance, particularly the issue of vendors backdating their invoices. It's a strategy that some suppliers may deploy if they were slow to issue an invoice, Portusach said. The bill will be sent, but backdated in an effort to be paid more quickly, presenting a predicament for accounts payable (AP) teams that view this tactic as a way to bypass existing payment terms agreed upon in their supplier contract.
"Looking at vendor trends, you want to see which vendors are consistently playing this game of sending backdated invoices," he said. "You, as a [purchaser], need to know this invoice was truly not submitted until today, and the clock doesn't start until now."
Analytics capabilities can now offer insight into not only spend categorization, but how a purchase stacks up against existing budgets, particularly as a proactive measure of spend management. Existing ERP systems and other platforms today are already able to analyze spend against a company's budget, but fewer are capable of predicting how upcoming spend — for example, accruals — will affect adherence to budget limitations. Procurement analytics provides managers the ability to approve purchases and invoices based on how much budget remains.
"It causes a huge shift in the fiscal prudence of [purchasers]," said Portusach. "They're able to see how much they're incurring before the actually incur the expenses. Rather than being reactive on budgetary spend, they're being proactive."
In a recent report by The Hackett Group, 78 percent of procurement officials agreed that improving analytical and reporting capabilities was either of high or critical importance — and 84 percent predicted their use of advanced analytics will increase in the next two to three years.
Data analytics that offer procurement leaders the ability to look ahead is a particularly in-demand functionality, the report noted, with most procurement leaders expecting to use predictive and prescriptive analytics solutions in their spend analysis operations within the next two years. The procurement department scored highest in expected adoption of AI and cognitive computing, too, with more planning to use these tools than leaders in the finance and human resources departments.
Before these technologies can be implemented, and before the benefits of analytics can be realized, data must be digitized. Portusach said procurement leaders seem to recognize this as they accelerate their digitization efforts.
For Accrualify, invoice automation is a high note of digital adoption among customers, while Portusach also noted that more businesses are requesting the ability to make payments using a virtual card. Both trends support the digitization of data, and procurement and finance leaders' demand for deeper analytics.
Businesses are eager to use vendor portals to share information, and turn faxed and paper invoices into electronic data, he said. However, the greatest shift is the automated management of the digital data now at businesses' fingertips, he said, providing the first step to a more evolved procurement analytics strategy.
"The biggest trend is the adoption of technology, and wanting to outsource data entry," said Portusach. "If you can get it done with the technology, then why not do it?"