Vendor spend analysis: What is it, and how’s it done?

Vendor spend is one of the biggest areas where businesses leak money. Without clear visibility into who you’re paying, what you're paying for and whether you’re getting good value for your money, it’s all too easy for costs to spiral and inefficiencies to creep in.

That’s where vendor spend analysis comes in: it isn’t just about cutting costs, but about making smarter, sharper decisions with your company’s money. From spotting savings opportunities to reducing supplier risks and streamlining operations, a good vendor spend analysis can unlock serious value for your business.

We’ll break down what vendor spend analysis is, why it matters and how to get it done in eight clear, actionable steps.

Key takeaways:

• Vendor spend analysis reveals exactly where your money goes, helping you identify savings and reduce waste.
• Categorising and cleaning your spend data is crucial for accurate, actionable insights.
• Regularly reviewing vendor concentration and off-contract spend helps reduce risk and improve supplier management.
• Using tools like Pleo streamlines the analysis process, making it faster and more reliable to uncover opportunities and enforce controls.

What is vendor spend analysis?

Vendor spend analysis is about taking a close look at every pound your business spends with suppliers to uncover where your money’s going, who it’s going to and whether you’re getting the best value for it.

With vendor spend analysis, you can turn messy procurement data into sharp, actionable insights, identifying opportunities to cut costs, consolidate suppliers, negotiate better deals and reduce risk.

Vendor spend covers everything a business pays to external suppliers – from physical stock to SaaS tools to creative agencies.

A vendor spend analysis typically includes:

• Total spend by vendor
• Spend by category
• Number of vendors by category
• Vendor contract terms and pricing
• Spend trends over time
• Off-contract or rogue spend
• Vendor performance metrics
• Risk exposure
• Opportunities for savings or renegotiation

In short: vendor spend analysis is your roadmap to smarter, leaner and more strategic supplier management.

Why does vendor spend analysis matter?

Managing vendor spend isn’t just about keeping costs down: it’s about making smarter, more informed decisions about where your money goes. A thorough vendor spend analysis gives you the visibility to spot hidden risks, uncover savings opportunities and take control of supplier relationships.

Here’s why vendor spend analysis should be on every finance and procurement team’s radar:

• Uncovers hidden costs: Vendor spend analysis shines a light on where money is leaking – e.g. duplicate suppliers, off-contract purchases or creeping costs slipping through the cracks.
• Improves cost control and savings: By identifying areas of overspending or opportunities for bulk deals and renegotiations, vendor spend analysis helps cut unnecessary costs and stretch budgets further.
• Boosts supplier management: Vendor spend analysis helps you spot underperforming vendors, identify high-risk suppliers and build stronger, more strategic relationships with the ones that matter most.
• Reduces risk exposure: By analysing vendor concentration and dependence, you can reduce operational risk and avoid being too reliant on a single supplier.
• Drives procurement strategy: Spend data guides smarter decisions – like where to consolidate suppliers, standardise contracts or switch to more cost-effective alternatives.
• Improves compliance and governance: Vendor spend analysis identifies rogue or off-contract spend, ensuring procurement policies are followed and reducing legal or financial risks.
• Enhances forecasting and budgeting: With clearer insights into where money’s going, finance and procurement teams can plan more accurately for future spend.

Basically, vendor spend analysis turns raw procurement data into actionable insights, helping businesses save money, reduce risk and make smarter, faster decisions about where and how they spend.

What’s not to like?

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8 steps: How to do a vendor spend analysis

Whether you’re aiming to cut costs, reduce risk or renegotiate supplier terms, a structured vendor spend analysis will give you the data you need to make smarter, faster decisions.

Here’s a practical, step-by-step guide to help you get started:

1. Gather your spend data

Start by collecting all vendor payment records from your accounting software, procurement tools, expense claims and corporate card transactions. Make sure you include all types of spend, whether it’s physical stock, SaaS subscriptions, travel expenses or consultancy fees.

The goal is to create a complete picture of every pound you’ve spent with external suppliers over your chosen time period.

2. Clean and standardise the data

Raw spend data is often messy, with duplicate supplier names, missing categories and inconsistent formats.

Standardise vendor names (e.g. ‘Microsoft Ltd’ vs ‘MSFT’ should be treated as one supplier), fix errors and fill in any missing information. This step is key for an accurate, reliable analysis, and it’ll save you a lot of confusion later.

3. Categorise your spend

Next, group each transaction into spend categories that reflect your business’s needs. Typical categories might include:

• IT
• Marketing
• Office supplies
• Logistics
• SaaS subscriptions
• Professional services

Categorising spend gives you a clear picture of where your money’s going and makes it easier to spot trends, identify overspending or uncover savings opportunities.

Tip: If you’re using an expense management solution like Pleo, this step becomes much faster and more accurate. Pleo automatically categorise expenses as they happen, tagging transactions with the right spend category and vendor details.

This way, you can skip hours of manual sorting and jump straight to analysing your data with confidence.

4. Identify top vendors and spend concentration

Once your data is categorised, rank your suppliers by total spend to see who your biggest vendors are. Pay attention to how much of your spend is concentrated with a small number of suppliers – too much reliance on a handful of vendors can expose you to risk, whilst larger volumes might give you leverage to negotiate better rates.

Pleo’s Insights can help surface your top vendors in just a few clicks, saving you from tedious spreadsheet work.

5. Look for off-contract or unmanaged spend

Look for payments made to suppliers without formal contracts or outside of procurement processes. This kind of ‘rogue’ or unmanaged spend can quietly erode your margins and increase operational risk.

Tools like Pleo help flag unusual or unapproved transactions in real time, making it easier to bring this spend under control and enforce company policies.

6. Track spend trends over time

Analyse how vendor spend has shifted over recent months or years. Are certain categories or suppliers becoming more expensive? Are new vendors being added too frequently? Trend analysis highlights creeping costs and spending patterns before they become problems.

If you’re using a digital spend management platform like Pleo, you can easily visualise these trends through dashboards and reporting tools without having to build them manually.

7. Highlight savings and consolidation opportunities

Use the insights you’ve gathered to spot where you can consolidate suppliers, negotiate better deals or phase out redundant services. For example, if multiple teams are using different suppliers for similar services, combining that spend could unlock bulk discounts.

Spend management tools can help you quickly identify overlapping vendors and track total category spend to make these opportunities clearer.

8. Share findings and take action

Turn your analysis into a clear, practical report for finance, procurement and leadership teams. Focus on actionable takeaways – like potential savings, risky vendor dependencies or policy gaps – and recommend next steps.

Many platforms, including Pleo’s export and reporting tools, make it simple to package this data into clean, visual reports that are ready to share.

And that’s it – your vendor spend analysis is done and dusted.

Final thoughts

By turning scattered procurement data into clear, actionable insights, vendor spend analysis helps you cut unnecessary costs, reduce risk and make faster, more confident decisions about where your money’s going.

Whether you’re negotiating better rates, tightening up supplier management or plugging leaks in your procurement process, the steps we’ve covered will give you the foundation to take control of your vendor spend. And with smart tools like Pleo on your side, the insights you need are always on hand.