Spend management involves cutting operating and other costs associated with doing business. By your company having a spend management strategy, you are able to run spend analysis, sourcing, procurement, receiving, payment settlement and management of accounts payable and general ledger accounts.

Spend Management is a subset of Total Cost Management, which takes into consideration financial management aspects such as tax/VAT, exchange rates, the impact of demand (i.e. sales), manufacturing, and other factors.

When considered from a holistic viewpoint, Spend Management can start to feed into supply management, as it also affects how assets (capital and otherwise) and inventory are procured and managed. Spend Management (and in a bigger view Total Cost Management) starts to inform a company of Total Cost of Ownership, and is often used to understand the total cost of items such as assets (from their acquisition, to their use and depreciation, and finally to the assets’ retirement).

In the end, however, Spend Management is about creating long-term and sustainable savings. True Spend Management (and by extension Total Cost Management) is considered by many to be an ongoing cyclical process.