53% of procurement organizations developed their own spend taxonomy, here is why.

Find a baseline aligned with the purpose

At first, this is going to be overwhelming in case there are no taxonomies in place. If that’s the case, our suggestion is to start utilizing one of the standard schemes (like UNSPSC) and start tweaking them toward your sourced products or services. This will be taking the burden off your teams initially and will be helping them to structurally scope and initiate tuning the spend tree. It is highly recommended to assign this responsibility to a team/group in the organization so all efforts can be coordinated and protected without any losses. The process of tweaking and getting into your organization’s spend signature could be lengthy and require a broad range of people with different expertise to share their years of knowledge each in a specific domain. Therefore, the continuity of this activity and leadership support is most essential (you can read our other blog on this topic “Continuous value generation with spend analysis”

Pick a software tool to allocate taxonomy to spend transactions

Obviously, all steps done above are meant to be used and depict a picture on the spend profile. Logically next step is to allocate your spend into boxes you created (your spend taxonomy). This is fairly easy to do if you have very limited products or services as well as have vendors. But for most companies with hundreds and thousands of products and vendors and daily new transactions spend allocation turns into a complicated operation. Therefore, you would like to decide and evaluate this decision every couple of years right from the beginning. If you fall under the first group, you probably need a spend repository and will be able to manage the allocation of spend with simple IF/Then formula in excel. However, if you fall under the second group utilizing a solution to manage this centrally is no question. In Mithra AI we are passionate and driven to facilitate this in a novel way not only for bigger companies but for smaller sizes and even individuals responsible for a spend portfolio.

Spend analysis A to Z

Once you have accessed and scoped your data it’s time to cleans and massage it to maximize