Blog · Procurement and supply chain · Procurement
The honest answer to what share of spend procurement should manage: the 60 to 85 percent figures quoted depend on what managed means, on which spend is addressable, and on whether the figure is computed from invoices or claimed from contracts. This page gives the ranges by maturity, the three measurable things that set the right figure for one organisation, and the table to compute before anyone quotes a percentage.
Spend under management is managed spend over addressable spend, and both halves are definitions. This page sets them and gives the table.
| Source | Figure | How measured |
|---|---|---|
| Survey, typical organisation | 55 to 70 percent | Self-reported, category level |
| Survey, leaders | 80 to 90 percent | Self-reported, category level |
| Invoice-level, typical | 35 to 55 percent | Each invoice tested |
| Invoice-level, mature | 60 to 75 percent | Each invoice tested |
The gap between the rows is definition, not performance.
Managed if: supplier on a contract in force on the invoice date, and the category is covered by it, and the purchase used the agreed channel
| Invoice | Supplier on contract? | In force on date? | Category covered? | Channel? | Managed? |
|---|---|---|---|---|---|
| 1 | Yes | Yes | Yes | PO | Yes |
| 2 | Yes | Expired 3 months before | No | ||
| 3 | Yes | Yes | No: contract is for laptops, invoice is for consulting | No | |
| 4 | No | No | |||
| 5 | Yes | Yes | Yes | Card, no PO | No, or partially, by the stated rule |
The worked example on ten invoices applies the test line by line.
| Item | Amount | Treatment |
|---|---|---|
| Total spend | $200,000,000 | |
| Payroll and taxes | $70,000,000 | Excluded |
| Intercompany | $15,000,000 | Excluded |
| Regulatory fees | $3,000,000 | Excluded |
| Addressable | $112,000,000 | Denominator |
| Of which marketing, legal, consulting | $22,000,000 | Included |
Dropping the last row raises the rate by ten points without managing anything.
A rate is only as good as the contract file's end dates. Contracts with no end date, contracts expired and still flagged active, and suppliers duplicated under two names each move the figure. The contract file's own quality row, percent with a valid end date, percent mapped to a supplier identifier in the ledger, sits beside the rate.
| Measure | Formula | From |
|---|---|---|
| Addressable spend | Total − listed exclusions | Ledger |
| Managed spend | Sum of invoices passing the test | Ledger, contract file |
| Spend under management | Managed ÷ addressable | Above |
| By category | Same | Same |
| Off-contract with a contracted supplier | Invoices failing the category or date test | Same |
| Off-contract, contract exists elsewhere in category | Maverick spend | Same |
| Contract file quality | Valid end date; mapped supplier | Contract file |
| Identity | Addressable = managed + unmanaged; total = addressable + excluded | Ledger |
The spend under management guide covers the measure in full.
Category-level claim. Eighty-five percent, with a third of the invoices in each category off-contract.
Addressable trimmed. Legal and marketing excluded because they are hard.
Expired contracts counted. The rate holds while the cover lapses.
Survey benchmark chased. A true 55 judged against a self-reported 85.
A good spend under management is 60 to 75 percent computed invoice by invoice against a stated test and a full addressable base, rising against the organisation's own prior year, with the contract file's quality shown beside it. Self-reported figures in the eighties are a different measure. Covirage computes it from the ledger and the contract file every month with both identities checked.
State it as a test each invoice passes or fails: the supplier is on a contract that was in force on the invoice date, the category is covered by that contract, and the purchase went through the agreed channel. Pass all three and the invoice is managed. A contract that expired last year does not count; nor does a purchase from a contracted supplier in a category the contract does not cover.
Total spend less what procurement cannot influence by anyone's definition: taxes, payroll, intercompany transfers, regulatory fees. The exclusions are listed, with amounts. Everything else is addressable, including the categories procurement has never been invited into, such as marketing, legal and consulting, because leaving them out is how a figure of 90 percent is reached.
Because surveys count categories and invoices count purchases. A category with a contract is called managed; inside it, a third of invoices may be with other suppliers or off-contract items. The invoice-level figure sees those. It is lower and it is the true one.