Meta Description: Tail spend management helps businesses control overlooked low-value purchases. Learn how to manage these costs to improve compliance, savings, and efficiency.
When you’re trying to manage business costs, the biggest purchases are usually the first to be tracked and controlled. But what about the small purchases that fall under the radar? These often-ignored expenses are known as tail spend, and managing them properly can lead to substantial savings.
This guide will walk you through what tail spend management is, why it matters, and how to handle it efficiently.
Understanding Tail Spend
Tail spend refers to all the low-value purchases that typically make up around 20% of a company’s total spend, yet can involve up to 80% of its suppliers. These purchases are often made outside standard procurement processes, which makes them hard to monitor and control.
Common examples include last-minute office supplies, one-off IT services, or minor maintenance work. While each expense may seem small, they can quickly add up to thousands of pounds each year if unmanaged.
This is where tail spend management becomes essential. It involves putting systems in place to track, analyse, and reduce these expenses without slowing down operations.
Why Tail Spend Management Is Important
Even though it may not seem like a priority, ignoring tail spend can be costly. Without proper controls, businesses face:
- Duplicate or unnecessary purchases
- Higher costs from buying outside preferred supplier agreements
- Compliance risks when purchases bypass procurement policies
- Lack of visibility into where money is going
Over time, these issues can chip away at profit margins and create operational inefficiencies.
By implementing tail spend management, you can uncover hidden savings and improve budget accuracy.
Key Benefits to Keep in Mind
Tail spend management offers several advantages, including:
Better Cost Control
You gain a clearer picture of your spending patterns, helping you identify waste and negotiate better prices.
Improved Supplier Management
Reducing the number of low-volume suppliers streamlines procurement and strengthens key supplier relationships.
More Compliance
Tail spend is often unmanaged, which increases the risk of policy breaches. With proper tracking, you reduce that risk significantly.
Increased Efficiency
Automation tools and standardised processes save time for your team, reducing manual approvals and follow-ups.
How to Start Managing Tail Spend
Getting started with tail spend management requires a clear plan to identify, control, and streamline overlooked purchasing activity.
Step 1: Identify What Counts as Tail Spend
Define which purchases fall into the tail. Look at order volume, frequency, and supplier type.
Step 2: Preview Past Transactions
Use your procurement data to find patterns.
Look for repeat low-value transactions and rogue spending.
Step 3: Consolidate Suppliers
Group purchases with fewer, more reliable suppliers. This can lead to discounts and better service.
Step 4: Automate and Monitor
Invest in procurement tools that flag tail spend and automate low-risk purchases within set limits.
Step 5: Educate Your Team
Make sure staff know which suppliers to use and how to stay within approved channels.
Make Small Expenses Work in Your Favour
It’s easy to overlook minor purchases, but when you add them up, the impact is far from minor. Tail spend management gives you more control, improves compliance, and ultimately strengthens your bottom line.
Take the time to review your current spend practices and introduce small changes that can deliver long-term results. By doing so, you’ll unlock real value from the part of your budget that often goes unnoticed.
