How to choose the right spend analytics platform for your business

Your business probably already has tons of spend data: Every card swipe, reimbursement, and vendor payment is a valuable data point your company can use. The problem is that having all of this data doesn’t automatically make spending decisions any easier. You’ll also need a way to turn the data into actionable insights.

Spend analytics tools can help you sort through data to identify unnecessary spending, understand how your budget is trending, or spot out-of-policy transactions, for example. When you’ve surfaced insights like these, you’ll be better equipped to make informed decisions for your business that improve financial oversight and help you reach your goals.

In this article, we’ll explore what spend analytics is and how you can choose a spend analytics tool that meets your needs. By the end, you’ll feel confident about how to choose spend analytics software to deliver data-driven takeaways for your business.

Spend analytics is the process of collecting and understanding spend data, with the goal of learning how, where, and why the business spends money, so you can make smarter financial decisions. Spend analytics tools gather data from multiple sources, such as invoices, purchase orders, corporate cards, and bank transactions, then categorize and analyze the information to help businesses accurately track spending.

With spend analytics, businesses can turn raw spend data into useful insights to improve strategic decision making. For example, growing businesses that want full visibility into their spending can use spend analytics to uncover cost-saving opportunities and reduce unnecessary spending. Spend analytics also supports better budgeting and forecasting by highlighting how your actual spend compares to planned spend.

Spend analytics tools vs. spend management analytics

Spend analytics tools and spend management analytics tools do overlap, but they aren’t one and the same. Here’s the difference:

• Spend analytics tools: This category of software is used to provide a detailed understanding of how, where, and why a business spends money.
• Spend management analytics: Spend management is the process that a company follows to control and optimize spending. And spend management analytics are a feature subset of larger spend management tools, with a focus on understanding the data within the spend management platform. This can include traditional spend analytics data, but also includes insights about spend management workflows.

The right spend analytics platform can help your business make confident decisions about how you spend money. Here are a few key advantages of using spend analytics tools:

• Complete spend visibility: Spend analytics tools consolidate spend data from multiple financial systems, so you can easily track expenses by department, employee, project, or another category for full spend visibility
• Stronger financial controls: By detecting unusual transactions, policy violations, and duplicate payments, you can reduce financial risk before it impacts your business’s bank account.
• Cost-saving opportunities: Spend analytics tools can help you to spot opportunities to consolidate suppliers, renegotiate contracts, and reduce unnecessary expenditures.
• Better budgeting and forecasting: You can compare actual spending against budgets in real time, and use historical patterns to create more accurate budgets and forecasts.
• Better cash flow management: Instead of waiting until month end to see where your company spent money, you can see it in real time and understand where your cash is allocated across the business. This means you can make faster, proactive adjustments to preserve working capital.
• Increased operational efficiency: Since this type of software reduces the need to manually track spending in spreadsheets, for example, your finance team can focus more time on strategic initiatives, instead of administrative tasks. Plus, the software also takes care of data analysis and report generation.
• Getting actionable insights, instead of raw data: In addition to collecting spend transaction data, spend analytics tools help you determine the next actions to take based on your goals.

If you have a spend management strategy for your business, you’ll likely want to use a spend analytics platform to help execute it. Follow this framework to select a spend analytics tool that supports your company’s financial objectives.

1. Start with your business questions and use cases

Consider the types of decisions you want the tool you help you make, such as figuring out where you’re overspending or which departments need to revise their budgets. Decide if you need day-to-day operational reporting, long-term strategic analysis and cost optimization, or both. Identify the workflows you want to improve, such as forecasting and budgeting, vendor management, and executive reporting.

2. Evaluate data coverage

Opt for a spend analytics platform that offers a complete picture of your spending, including:

• Corporate card transactions
• Accounts payable
• Bill payments
• Employee reimbursements
• Bank accounts and transactions
• Purchase orders and procurement data
• Payroll
• Recurring payments and subscriptions
• Multiple entities, currencies, and locations

Look at how often data is updated: Is it updated in real time or on a scheduled basis? And determine how your data is organized. Ideally, you’ll be able to see all of your business’s spending information in one easy-to-use dashboard.

3. Prioritize data accuracy and quality

Evaluate whether the data analytics platform can automatically categorize transactions, standardize inconsistencies, and enrich transaction data with the necessary details. It should also be able to maintain consistent categorization and detect duplicates and incomplete transactions.

4. Examine dashboards, custom reports, and drill-down capabilities

Well-designed dashboards and reports enable you to get answers to spend questions quickly. Opt for a tool that has interactive, custom dashboards into which you can drill down from a high level to see individual transactions. Make sure you can apply filters to help you see transactions by vendor, department, employee, or other categories. You’ll also want to have automated report delivery as well as export options for Excel or business intelligence platforms.

5. Analyze budgeting, forecasting, and related features

Instead of only reporting on past spending, spend analytics tools enable you to look to the present and future. Opt for tools that help you track spending against budgets in real time and compare actual spending with forecasts. The tool should also identify any unusual spending patterns or anomalies and highlight new trends in spending.

6. Assess AI spend analytics capabilities

There are many benefits of AI in spend analytics, but don’t be fooled by tools that simply summarize reports with AI, without providing any meaningful insights. Artificial intelligence in spend analytics should enhance transaction categorization, anomaly and fraud detection, and data extraction. Look for natural language search and reporting, so you can easily gather insights with prompts. Be careful of tools that lack transparency around data quality and how they train the models.

7. Verify integrations with your tech stack

Spend analytics tools are most useful when they connect with your other business platforms. So, choose tools that have integrations with your accounting, banking, enterprise resource planning, procurement, expense management, corporate card, payroll, HR, and business intelligence systems. Make sure that the data will automatically sync in real time.

8. Review permissions, controls, security, and audit readiness

Strong security and oversight is necessary for spend analytics tools. Opt for platforms that offer role-based permissions, granular access, audit logs, approval workflows, data encryption, and multi-factor authentication. Also check to see if the software has compliance certifications for your industry and geographic location.

9. Consider ease of implementation and ongoing administration

If the spend analytics platform is too difficult to deploy or maintain, it likely won’t be useful for your business. Look for signs that the software will be easy to implement and maintain, such as whether the platform offers data migration support, how detailed the onboarding guides are, whether there’s a dedicated customer success team, and if there’s a range of self-service training resources and documentation available.

You may be overwhelmed with the number of platforms available and the range of features offered. You don’t need to look at everything all at once. Instead, narrow down your options for SaaS spend management platforms by focusing on your company’s operational priorities.

To do so, consider these questions:

• Do you need a standalone spend analytics tool vs. an all-in-one spend management platform that also offers spend analytics?
• Are you in the market for a finance-led platform or a procurement-led platform?
• Do you have simple spend processes or more complex spend workflows?
• Do you only need visibility into your spending or do you also need the ability to manage and control spending?

Here’s a quick evaluation scorecard to help you select the right spend analytics tool for your company. Note that the must-haves and nice-to-haves for spend analytics platforms may shift slightly from business to business, but the red flags will likely be the same for every business.

A key spend management best practice is to ask a lot of questions when selecting your tool. That’s the easiest way to get a full understanding of how the tool will add value to your business.

Here are a few questions you could ask during a demo or trial to get clarity on how the tool works:

• Can you demonstrate how the tool answers our most common questions about spend?
• Can users create custom dashboards and reports without technical support?
• Can transaction categorization rules be customized?
• What does the platform do with duplicate, incomplete, or uncategorized transactions?
• Can the platform enrich transaction data with missing information?
• Can you demonstrate the AI features using our business use cases?
• Which AI features are currently available, and which ones are coming in the near future?
• How frequently is data synced across integrated systems?
• Which security certifications does your platform have?
• How do we manage permissions and audit trails?
• What support and resources are available for implementation and ongoing maintenance?
• How is pricing structured?
• Can we trial the platform using our own financial data?

As the founder or operator of a growing company, you’ll need a full financial picture of your finances in real time, from transaction data to actionable insights, to make informed business decisions.

Mercury’s spend analytics offer key metrics at your fingertips, so you can see everything in one place, without the need for downloads, spreadsheets, or extra tools. With live, interactive charts and tables, you can easily slice and filter your financial data as you please. The AI analytics tools enable you to identify trends faster, answer questions in more detail, and do an in-depth discovery of your spend.

Explore Mercury’s spend management analytics tools today, and get the financial clarity you need to meet your business goals.