Blog · Procurement and supply chain · Procurement
How a procurement team measures spend under management from the payables ledger and its own sourcing records: spend on contracts procurement negotiated, spend on catalogued or approved suppliers, and spend that reached payables without procurement's involvement, by category and by business unit, why the third bucket is where savings claims fail, and the identity that ties the three to total third-party spend.
A procurement team reports twelve percent savings on managed categories. The CFO asks what share of spend is managed and the answer is a guess. The payables ledger, the contract register and the approved supplier list can answer it exactly, by category and by unit. This guide sets out spend under management, the three buckets, and the identity.
Per transaction in payables:
Bucket: on contract, approved supplier off contract, or unmanaged On contract if the supplier and category match a procurement-negotiated contract in force on the invoice date Approved if the supplier is on the approved list for the category Unmanaged otherwise, or if no PO was raised where a PO is required
Per category, per business unit:
Spend under management = (on contract + approved) ÷ total third-party spend Unmanaged share, and the suppliers in it ranked by spend
Supplier identifiers only.
total third-party spend = on contract + approved off contract + unmanaged
Every transaction in one bucket. An invoice with no category fails it and is listed as uncategorised, which is its own data quality finding before it is a management one.
| Category | Spend | On contract | Approved, off contract | Unmanaged | Under management |
|---|---|---|---|---|---|
| IT hardware | $8.4m | $6.1m | $1.4m | $0.9m | 89% |
| Professional services | $12.1m | $3.2m | $2.0m | $6.9m | 43% |
| Facilities | $5.6m | $4.9m | $0.4m | $0.3m | 95% |
| Marketing | $7.3m | $1.1m | $1.8m | $4.4m | 40% |
Professional services and marketing are half unmanaged. A savings claim of twelve percent on those categories is a claim on the managed half, and the report says so.
| Unit | Spend | Under management | Top unmanaged supplier |
|---|---|---|---|
| Unit A | $14m | 82% | S-0217, $0.6m |
| Unit B | $11m | 44% | S-0442, $2.1m, professional services |
| Unit C | $8m | 79% | S-0108, $0.4m |
Unit B routes more than half its spend around procurement, and two million of it is one consultancy. That is a process and a conversation, with a name.
Managed spend estimated. The savings percentage has no denominator.
Approved counted as contracted. An approved supplier at list price is not a negotiated one; the buckets are separate.
Uncategorised spend dropped. It is usually unmanaged, and dropping it flatters the figure.
One company figure. The 43 percent category and the 44 percent unit are inside a 70 percent total.
Mapped once, the payables ledger, the contract register and the approved list produce the buckets by category and unit, the unmanaged supplier list and the identity every quarter. Covirage builds this from the exports as they are. The procurement page describes the setup, and the contract compliance guide covers the on-contract bucket in depth.
From the contract register, which lists what procurement negotiated; from the approved supplier list, which lists what it vetted; and from the purchase order flag, where a PO raised through the procurement system marks the transaction. Spend matching none of the three is unmanaged. The rules are stated and the same for every category.
A savings claim on a category where procurement manages a third of the spend is a claim on a third. Spend under management is the denominator that makes savings figures honest, and it is the number a CFO should ask for before believing a percentage.
There is no universal one; it depends on what the company buys. The useful comparison is the category against its own last year, and the business units against each other. A unit at 40 percent when its peers are at 80 has a process that bypasses procurement, and the report names it.