It surprised me when I first came into the procurement world that not everybody knew what a taxonomy was, I even had someone confuse it with taxidermy! I thought it was used in all procurement departments all over the world, but I was wrong. In fact, it is often overlooked, which can be frustrating as it’s an incredibly useful tool for data organization.
Just like in spend data classification, the definition of tail spend is subjective. Some organisations classify tail spend at the bottom 20% of spend, while others might set a financial level such as £100,000 or £1 million.
According to CIPS, tail spend “can often be referred to as rogue spend or maverick spend, is usually small value purchases that are conducted by the organisations outside of a contract and often outside of the awareness of the procurement team.”
Can you imagine standing in the middle of a snow blizzard without a COAT on? No… me either. It doesn’t sound like a particularly fun way to spend an evening and let’s face it, no one wants to be exposed to the elements. But guess what? Your data is the same. Think about all the consequences for your health if you were to be stuck out in freezing, stormy weather without a layer of protection on: snotty nose, shivering or, even worse, hypothermia and frostbite.
Finance departments use GL codes to track spend. We’re looking at items like office supplies, marketing or maybe a specific project within the business. However, what finance are looking for and what procurement are looking for can be two quite different things.
The Trouble With GL Codes
Firstly, if you're only using your general ledger codes, I can almost guarantee they are wrong! In my experience working with GL codes, I would say 90% of them are unreliable. You'll almost always find something classified under a GL that shouldn't be there.