Spend Management is a business function in which businesses gain visibility, establish controls - consisting of system controls and organization policies, in order to manage their business spend. The function involves managing the full lifecycle - from Sourcing and selecting the suppliers, establishing contracts, purchasing and managing payments to suppliers. The objective of this business function is to ultimately reduce operating and other costs associated with doing business. These costs typically show up as direct and indirect spend.
Whether it is the money spent on goods or services for direct inputs (raw goods and materials used in the manufacture of products), indirect material (office supplies and other expenses that do not go into a finished product), or services (temporary and contract labor, print services, etc.), a company needs a mechanism by which they are not only able to save money but also control costs.
In an enterprise, spend management is managing how to spend money to best effect in order to build products and services. The term is intended to encompass such processes as outsourcing, procurement, e-procurement, and supply chain management.