A New Approach to Spend Management That Brings Together Procurement and Finance: Part 2

We came across start-up Yordex recently, a London-based firm founded in 2017 with a goal to arrest the manual processes of PO approval, invoicing, spend forecasting, expense management, supplier onboarding and self-service, and supplier spend tracking. Basically to take the low added-value work out of procurement and finance tasks. CEO and c0-Founder Erik de Kroon explained yesterday  in part 1 that the separation of duties between procurement and finance leads to a number of issues for both parties. He proposed “spend plans” as a solution to solve these issues and create greater collaboration between both teams in the process. Today, in part 2, he explains in more detail how spend plans work and how they help solve the issues identified.

How Spend Plans Work

As explained in Part 1, a “spend plan” is planned spend with a particular supplier for which no PO has to be raised yet. Creating spend plans still starts with the normal budget planning process. Once the budget is finalised, it gets uploaded into the system as the starting point for the spend plans.

The image below shows the dashboard that each budget owner gets once the budgets have been uploaded.

Spend Plan Dashboard


  • The "Budget" line shows the agreed budget broken down by month. I will refer to this as the “budget envelope” because the only thing that is shown is the headline number
  • The "Forecast” line is the sum of the underlying spend plans for this budget. Each individual spend plan is shown in the “Underlying Forecasts” table below (“Google Adwords” is the only spend plan shown here)
  • The "Actual” line is the amount for which POs have been raised
  • The “Committed %” is the greater of the actual or forecast for a month divided by the budget for that month

When the budget is uploaded into the system, the underlying detail can also be uploaded as spend plans, but only if that detail is directly linked to a supplier. As soon as the spend plans change (which will be almost immediately), employees can update them to make sure they continue to reflect reality.

When employees update a spend plan, the budget line will not change. Instead, the “Committed %” line will indicate which % of the budget is included in spend plans. If that number is too low, for example 50%, it means there may be a savings opportunity. If that number is too high, for example 120%, that means there is a risk of overspending. Budget owners, finance and procurement can monitor these numbers and take action if required. Employees therefore have an incentive to update the spend plans or else invite scrutiny over their plans.

Budget owners themselves also have an incentive to make sure the spend plans they are responsible for are up to date. The forecasts get rolled up to higher level budgets (to the "Marketing" budget in this example). This means that the budget owner of the Marketing budget will also be able to find risk of overspend or savings opportunities in exactly the same way. They can drill down to find out where the risks and opportunities lie.

Finally, the spend plans can also be used to remind employees to raise POs early or even to automatically raise the POs for them. When no PO is raised for a particular spend plan, the system will remind the responsible employee to raise the PO or risk losing the budget. Raising the PO can then be done with one or two clicks.


I propose spend plans as new ways of managing budgets and POs with the following benefits:

  • Give procurement early visibility into what suppliers the organisation is planning to use. This allows them to steer spend to preferred suppliers and negotiate better contracts with existing or new suppliers
  • Give finance and budget owners early visibility into how teams are planning to spend their budget, thereby making it easier to control spend and cash flow
  • Make the PO process easier for employees by reminding them to create POs on time and by allowing them to raise a PO with a few clicks or even automatically
  • Increase collaboration between finance and procurement by making accuracy of spend plans a shared objective that helps both teams achieve their goals

To manage spend plans, easy-to-use software is required that allows users to constantly update their spend plans and raise POs from spend plans. The software should also provide procurement, finance and managers a dashboard that allows them to monitor spend plans in real time and take appropriate action.


Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position of Spend Matters.

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