Last Update: July 2025
Budgets don’t go off track all at once. It usually starts with small, untracked purchases, delayed approvals, or teams working around the process to get things done faster. Those gaps add up over time, and suddenly, you’re left trying to explain where the money went.
Spend management KPIs help you catch those gaps before they become problems. When you track the right ones, you get a clearer picture of what’s driving spend, what’s working, and where you’re losing control.
The seven KPIs discussed in this guide are practical, proven metrics that help finance teams make better decisions and keep spending aligned with business goals.
This one’s a favorite among finance teams, and for good reason. It gives you a high-level view of how much your business is actually saving over time. It also lets you know if your procurement strategy is delivering the returns you expected.
Cost savings can come from smarter sourcing, negotiated supplier pricing, or from cutting out inefficient processes. The point is not to spend less, but to spend better. When you look at year-over-year trends, you can pinpoint what’s working and where there’s room to improve.
This KPI is most useful when paired with other insights, like departmental spend trends or supplier performance. If you notice savings flattening year over year, it might be time to revisit contracts or evaluate if teams are following procurement policies.
What to look for:
Maverick spend, those out-of-process purchases made without the right approvals, can quietly eat into your budget.
It often starts with small, well-meaning decisions. An employee places a quick order to get something done faster. A manager bypasses procurement because “it’s just a one-time thing.” But over time, those exceptions turn into patterns. And those patterns lead to spending that’s hard to track, harder to control, and often more expensive than it should be.
Maverick purchases tend to bypass supplier agreements, budget checks, and approval workflows. That means missed discounts and duplicate vendors that may not align with your priorities or policies.
Reducing maverick spend is about building a more predictable, efficient procurement process. When all spend flows through the right channels, it’s easier to manage budgets and evaluate supplier performance. It also helps protect against fraud and strengthens internal accountability.
What to look for:
Even if you can’t eliminate maverick spend entirely, getting it down to a manageable level makes a big difference. And when teams understand the why behind procurement policies (not just the process), they’re more likely to follow them.
Tracking how many suppliers your organization works is one of the most telling indicators of procurement efficiency.
When supplier lists get too long, a few things tend to happen: pricing becomes inconsistent, admin work increases, and your team misses out on opportunities to negotiate better deals. In other words, the more fragmented your supplier base, the harder it becomes to control spend.
The goal here isn’t to work with as few suppliers as possible. It’s to identify where you can consolidate smartly, grouping purchases under preferred vendors, building stronger partnerships, and reducing the overhead of managing too many relationships.
This KPI is especially important for companies that have grown quickly, expanded into new regions, or recently gone through a merger or acquisition. These transitions often leave behind bloated or redundant supplier lists that quietly drag down efficiency.
What to look for:
Bonus tip: Once you've identified your top suppliers, dig deeper. Are you getting the most from those relationships? Could you renegotiate for better volume pricing or improved payment terms?
Looking at cost savings across your entire organization is helpful, but sometimes it’s even more insightful to zoom in. Which projects or departments are generating the biggest cost reductions? Which ones could use more attention?
This KPI helps you spot the difference between broad progress and specific, measurable wins. Keeping track of cost reductions, either by project or over a period of time, lets you see where your spend management efforts are working most effectively and which other areas need more attention. It’s especially useful for finance leaders trying to evaluate the real impact of policy changes, sourcing strategies, or software implementations.
What to look for:
Try this: Track spend before and after a contract renegotiation, a new software rollout, or a shift in supplier strategy. Then compare the results over time. You’ll start to build a clearer picture of impact.
Cost avoidance is such a valuable yet often underutilized KPI. It measures how often your procurement process helps the business avoid unnecessary expenses: things like duplicate orders, late fees, premium shipping costs, or unapproved purchases that would have exceeded budget.
Think of it this way: catching a $1,200 duplicate invoice before it’s paid has just as much financial impact as negotiating a better contract. But because it’s a prevented cost, it often doesn’t get tracked or celebrated.
It’s a powerful metric when you're trying to demonstrate ROI, not just in terms of spend reduction, but in operational efficiency. For example, if automating approvals reduces manual invoice handling by 20%, that frees up staff hours that can be redirected to higher-value work.
What to look for:
While cost reduction shows where you’ve saved after the fact, cost avoidance proves the value of staying ahead of spend before it becomes a problem.
You’ve negotiated great terms with your suppliers, but are they being followed?
Contract compliance tracks whether teams are actually purchasing according to the agreements in place. It also gives you a reason to go back to suppliers when something isn’t holding up, whether it’s pricing, payment terms, or delivery schedules.
Negotiating favorable terms won’t get you far if you’re not taking advantage of every discount available to you. Similarly, if a supplier isn’t holding up its end of the bargain, you may be able to negotiate price concessions.
To optimize and consolidate spend management, find out if your purchasing managers are taking advantage of favorable payment terms and leveraging spend data to qualify for bulk discounts or lower prices. You also need to ensure contracts are enforced to gain more spend under management.
What to look for:
Where is your money actually going?
Tracking spend by department helps you understand which teams or functions are using the most budget, and whether that aligns with your priorities. It also makes conversations around budget planning or policy enforcement more grounded in data, not assumptions.
Departments within an organization have different spending habits. A growing operations team might need more frequent purchases. A marketing department might work with dozens of vendors. Understanding those differences allows finance leaders to offer better guidance, and apply controls where they’ll matter most.
What to look for:
Use this KPI to adjust procurement processes based on team needs and identify where tighter oversight, or more education, is needed. The goal is to give every department the tools and support to spend responsibly.
In an ideal world, you’d be able to throw money at improving your organization’s spend management strategy and it would translate seamlessly into cost savings.
But it’s not that simple. Every organization has different needs. However, by keeping track of these seven spend management KPIs, you increase the chances that your procurement software investment returns the rewards you’re looking for.
And of course, you can refine your spend management strategy even more with key time and cost-saving procurement software features.
Tracking KPIs is only useful if you can act on them. With Fraxion, you don’t just get numbers, you get visibility, control, and automation built for busy finance teams.
Book a demo today and see how Fraxion simplifies spend tracking and drives measurable savings.
The most valuable spend management KPIs include year-over-year cost savings, maverick spend, supplier count and consolidation, cost reduction by project or time period, cost avoidance, contract compliance, and spend by department.
Cost reduction reflects savings after money is spent, like better pricing or improved workflows. Cost avoidance measures the expenses you prevented before they happened, such as catching a duplicate PO.
Tracking maverick spend helps you identify purchases made outside of policy, reduce missed savings, and build a more controlled and predictable procurement process.
High contract compliance ensures teams are using negotiated terms, helping you take full advantage of discounts, payment terms, and service-level agreements.
Spend management software like Fraxion helps you monitor key metrics, like maverick spend, contract compliance, and savings by department, through built-in reports, automated approvals, and real-time budget visibility. It also flags out-of-policy purchases and makes it easier to tie procurement activity back to actual savings.