Addressable spend is total spend minus what procurement cannot influence: payroll, taxes, intercompany, fees. The denominator of spend under management.
Addressable spend is total spend less the listed exclusions that procurement cannot influence, such as payroll, taxes, intercompany transfers and regulatory fees. It is the denominator of spend under management.
Marketing, legal and consulting stay in the addressable base. A category does not become an exclusion because procurement has not managed it.
Addressable spend = total spend − listed exclusions
The amounts reconcile to the identity:
Total spend = addressable spend + excluded spend
| Item | Amount | Treatment |
|---|---|---|
| Total spend | $200 million | Starting total |
| Payroll and taxes | $70 million | Excluded |
| Intercompany | $15 million | Excluded |
| Regulatory fees | $3 million | Excluded |
| Addressable spend | $112 million | Denominator |
| Of which marketing, legal and consulting | $22 million | Included in the $112 million |
The exclusions total $88 million, so $200 million − $88 million = $112 million addressable. Managed spend of $61 million gives 61 ÷ 112 = 54%, rounded to a whole percent.
Dropping the $22 million of marketing, legal and consulting reduces the base to $90 million. The same $61 million managed then gives 61 ÷ 90 = 68%, rounded. Before rounding to whole percentages, the rates are 54.46% and 67.78%, a rise of about 13 percentage points with nothing more managed.
| Measure | What it tells you | Formula |
|---|---|---|
| Addressable spend | The amount procurement can influence | Total spend − listed exclusions |
| Spend under management | The share of that amount that passes the stated managed-spend test | Managed spend ÷ addressable spend |
Exclusions not listed. The denominator cannot be checked against total spend without the excluded amounts.
Whole categories quietly left out. Excluding marketing, legal or consulting raises the rate without increasing managed spend. Keep them in the base and show whether their invoices pass the managed-spend test.