At the recent webinar, Assessing the CFO’s View of Procurement, an audience member asked a question that I’d like to share: What exactly is “spend under management?” Andrew Bartolini, VP and group director of Global Supply Management Research at The Aberdeen Group, answered the question as follows:

It’s an area that I’ve been focused on in my time at Aberdeen. The definition would be to look at all enterprise spend, excluding payroll, taxes, and things of that nature. Everything else that the company spends is the “total enterprise spend.” The percentage that Procurement manages would be the percentage of “spend under management” of Procurement.

Now, what does “managing the spend” mean? And I think we’re in the early parts of this transformation, but as you look to answer that question for yourself, you should ask if you have visibility, first and foremost, into the spend. Maybe I don’t have the buy-in of the stakeholders, but can I see that there’s an opportunity for sourcing? Am I sourcing it? Do I have visibility into the contracts? Is there a system of record that I’m able to see the transactions as they occur? We don’t play so hard and fast with the definition because some smaller organizations don’t have eProcurement systems. It’s really the sense of how much of a potential impact a procurement organization can have.

I always recommend to organizations that they have this as a metric, and have a deliberate plan to increase that number. If you’re not measuring it, not looking at it, if you don’t have visibility into it, you can’t make improvements on how it’s being managed. For those who manage a greater percentage of spend than those who do not, we see high correlation in performance across other areas-higher savings, higher compliance-over time, that may shift as organizations start managing greater percentage, and at that time, we’ll need new maturity models.

For the complete list of questions and answers from the event, visit the blog post on Ariba Exchange.

Also, be sure to download the webinar replay, which covered the CFO’s changing view of Procurement, including how organizations can strategically align Finance and Procurement to produce a best-in-class organization.

Caroline Robinson has been in the spend management industry for four years and currently manages Ariba’s external webinar programs, focusing on thought-leadership and best practices.