5 questions you should be able to answer about your spend
Effective spend management is key to running any business, but it involves more than just cutting costs. Every pound invested should contribute to your operational and financial goals.
While this sounds straightforward, without consistent monitoring, analysis and control of your expenditure, it’s easy to spend more than you need to. But how do you avoid this?
How can you be confident your outgoings are delivering value?
Here are five questions you should be able to answer:
Where is our money going?
You know how much you spend, but do you know where it goes?
Understanding how total expenditure is split across key categories — such as food and beverage, utilities or laundry — and whether costs are consistent across sites is essential. So too is tracking how these costs change over time.
Are there seasonal patterns, or unexpected spikes that need investigating? When purchases are made, are they coded to the right area? Or are teams being incorrectly flagged for overspend due to misallocated costs?
Without clear answers to these questions, costs can creep. Errors may go unnoticed, and decisions risk being made on incomplete or inaccurate data. This can create a cycle of reactive behaviour — where budgets are adjusted based on false assumptions and cost-cutting is applied in low-impact areas or where quality matters most.
Having clear visibility of where your money is going will enable more proactive purchasing, allowing you to focus efforts where they will have the greatest impact.
Who are we spending with, and why?
You may have originally chosen a supplier for their price, product quality or service level. But are those still the right reasons today? Can you justify why those suppliers are still being used? Or has reordering become a matter of habit?
Without regular review, businesses can easily fall into this pattern — continuing with the same suppliers out of familiarity or turning to them for last-minute orders, sometimes at a premium.
Even with negotiated pricing in place, teams may occasionally order outside those terms, reducing the overall value of supplier agreements. This is often seen in multi-site organisations, where different locations use different suppliers based on preference or existing relationships, limiting opportunities to consolidate spend and leverage buying power.
Taking time to understand who you are spending with, and why, can help reduce unnecessary costs from fragmented spend and make the most of your supplier arrangements.
What are we committed to?
As a service provider, you likely operate under multiple supplier contracts — each with distinct pricing structures, timelines and service-level agreements. While it can be hard to keep on top of, knowing exactly what you are locked into is critical.
- Are your costs fixed, or subject to change?
- When do agreements renew? Do they roll over automatically?
- Are products meeting agreed quality standards, and are they being delivered on time?
- How easy is it to exit if not?
Having oversight over your commitments allows you to forecast future costs with greater accuracy and avoid unexpected increases. It also puts you in a position to challenge and hold suppliers accountable if specified criteria are not met.
This helps you avoid being tied into arrangements that no longer deliver value and respond with confidence if circumstances change.
Are we paying the right price?
Knowing what you're spending and where is important, but without a view of the wider market, it is difficult to determine whether those prices are truly competitive.
An agreed fee may have drifted above prevailing rates. Additional surcharges that are no longer applicable may remain in place, and discounts offered to others may not have been extended to you.
Regular benchmarking helps ensure these differences are identified and acted on — so you are not left at a disadvantage relative to the market.
What actions are we taking to reduce unnecessary spend?
Once areas of unnecessary spending have been identified, the next step is taking action to address them.
More often than not, that requires implementing defined processes and tools that prevent inconsistent purchasing across your business. Without this, variations caused by staff absences, individual buying habits, or ad hoc, convenience-led decisions can quickly accumulate.
It also involves having the right data. This allows you to accurately pinpoint cost drivers and ensures all contributing factors are considered when assessing performance against key indicators.
If you are looking to introduce a more structured approach to your procurement, or want clearer answers to these questions, get in touch with our team to arrange a call.
