Spend Under Management (SUM)

Spend Under Management (SUM)

KPI Details

Spend Under Management (SUM) measures the portion of company expenses that are overseen by the Procurement Department. A low value for this KPI may suggest the company is missing out on cost savings/reduction opportunities, the company has high rates of maverick spending or that the company does not have clearly defined Procurement processes. Low values for SUM will also suggest an increase in the number of errors and the time to process and approve invoices that are not from vendors, which will be costly to the company. SUM can be increased by improving the transparency of the purchasing process, adding more approved vendors to the system or the implementation of employee purchasing card programs.

KPI Definition

The amount of company spending (direct, indirect and service-related spending) that is managed by the Procurement Department divided by total company-wide spend over the same period of time, as a percentage.

KPI Best Practices

• Enforce the use of employee purchasing card programs
• Develop clear processes for purchasing and communicate those processes to employees
• Treat employees/buyers as customers to reduce maverick spending

KPI Calculation Instructions Spend Under Management (SUM)?

Two values are used to calculate this KPI: (1) the dollar amount of company expenses that are managed by the Procurement Department, and (2) the company-wide expense during the same measurement period. Expenses are defined as "managed by the Procurement Department" if the purchases are sourced by Procurement or if the purchases are in compliance with the company’s defined Procurement policies. Total company-wide expense includes total non-interest expense incurred by the business as a whole.

KPI Formula :

(Dollar Amount of Expenses Managed by Procurement / Total Company-Wide Expense) * 100