TL;DR
- A new CFO uncovered $4.2M in savings through a simple procurement audit using AP data and Excel
- 1,100+ vendors revealed massive duplication, unmanaged spend, and weak compliance
- Tail spend, duplicate vendors, and auto-renewing contracts were the biggest leakage points
- The entire audit took 15–20 hours over 30 days — no consultants or new software
- Savings flowed directly to EBITDA, improving operating income by 50%
- A structured procurement audit gives CFOs visibility, control, and fast financial impact
The Audit That Changed Everything
Jennifer Walsh became CFO of MidState Manufacturing on a Monday.
By Friday, she’d reviewed the financials, met with her direct reports, and started preparing for her first board meeting.
Everything looked fine. Revenue trending up. EBITDA stable. Cash flow manageable.
Then her controller mentioned something in passing: “We have 1,100+ active vendors. Does that seem high to you?”
Jennifer paused. For an $85M revenue company, that did seem high. But she didn’t know what “normal” was.
That casual question triggered a three-week procurement spend audit.
What she found: $4.2M in annual savings opportunity hiding in plain sight.
Here’s exactly how she did it—and how you can run the same audit in your company.
Why This Audit Matters
Most CFOs inherit procurement as an afterthought. Your predecessor focused on financial statements, investor relations, and strategic planning. Procurement was “someone else’s problem.”
Except it’s not anymore. It’s yours.
And here’s the uncomfortable truth: In most mid-market companies, 40-60% of external spend flows through channels Finance doesn’t see.
That’s not $40-60K. On $100M in external spend, that’s $40-60M in unmanaged purchasing.
The procurement audit surfaces this invisible spend and quantifies the opportunity. It doesn’t require consultants, new software, or a six-month project.
Jennifer did it in three weeks with AP data, Excel, and focused effort.
The 3-Week Procurement Audit (Jennifer’s Process)
Week 1: Pull the Data and See What You Inherited
Step 1: Get 12 Months of AP Data
Jennifer asked her AP team for a simple export: – Vendor name – Invoice amount – Invoice date – Department/cost center – GL account
“Pull the last 12 months,” she said. “Every vendor, every invoice.”
Two days later, she had a spreadsheet with 14,000+ rows.
Step 2: Clean and Categorize
The data was messy: – Same vendor listed three different ways (“ABC Corp,” “ABC Corporation,” “ABC Co.”) – Inconsistent cost center coding – Generic GL descriptions
Jennifer spent an afternoon cleaning duplicates and grouping vendors into broad categories: – IT & Software – Professional Services – Facilities & Maintenance – Office Supplies – Marketing & Advertising – Logistics & Freight – Other
You don’t need perfect categorization. Just “good enough to see patterns.”
Step 3: Run the Basic Math
Jennifer created a pivot table and sorted by total spend.
What she found: – Total external spend: $34M (40% of revenue) – Top 20 vendors: $21M (62% of spend) – Tail spend (<$50K/vendor): $6.2M across 340 vendors – Total vendor count: 1,100+
Red flag #1: For a company their size, 1,100 vendors was 3-4x higher than benchmark.
Week 2: Find the Duplicates and Calculate the Leakage
Step 4: Hunt for Duplicate Vendors
Jennifer sorted vendors by category and looked for overlap.
What she found:
IT & Software: – 4 different IT resellers selling similar hardware – 3 software vendors for overlapping tools – 2 cloud service providers (AWS + Azure) with no clear split
Office Supplies: – 3 vendors (Staples, Amazon Business, local supplier) – Same items at different prices
Facilities Management: – 2 HVAC contractors (different buildings, no consolidated contract) – 3 janitorial services
Total: 14 duplicate vendor relationships
Step 5: Calculate the “Duplicate Penalty”
Jennifer picked one category to model: Office Supplies.
Current state: – Vendor A: $82K annual spend – Vendor B: $54K annual spend
– Vendor C: $39K annual spend – Total: $175K
Consolidated scenario: – Combined volume: $175K – Negotiated discount: 12% (typical for this volume) – New total: $154K – Savings: $21K annually
She repeated this across all 14 duplicate categories.
Total duplicate consolidation opportunity: $287K annually
Week 3: Examine Contracts and Find Auto-Renewal Costs
Step 6: Build a Contract Calendar
Jennifer asked department heads and legal: “Send me every contract over $25K annually.”
It took three days of follow-ups, but she compiled a list: – 42 active contracts – Total value: $18M annually – Average contract age: 3.4 years
Step 7: Check Renewal Terms
Jennifer reviewed each contract for: – Auto-renewal clauses – Price escalation terms (annual increases) – Last renegotiation date – Termination notice requirements
What she found:
8 contracts set to auto-renew in the next 6 months: – IT support: $340K/year (10% annual escalation, 5 years old) – Marketing agency: $180K/year (3% annual increase, 4 years old) – Logistics provider: $420K/year (CPI-indexed, 6 years old) – 5 others totaling $710K
Step 8: Benchmark and Calculate Savings
Jennifer researched market rates (industry reports, peer CFO network, vendor calls).
Example: IT Support Contract – Current cost: $340K (after 5 years of 10% escalation) – Market rate for same scope: $285K – Opportunity: $55K annually
She repeated this for all 8 auto-renewal contracts.
Total contract renegotiation opportunity: $380K annually
The Final Tally: Jennifer’s $4.2M
After three weeks, Jennifer had her numbers:
| Category | Annual Opportunity |
| Duplicate vendor consolidation | $287K |
| Contract renegotiations | $380K |
| Tail spend rationalization | $1.2M |
| Payment term optimization | $850K (working capital) |
| Maverick spend compliance | $1.5M |
| Total Opportunity | $4.2M |
On $85M revenue at 10% margin, that’s a 50% improvement in operating income from procurement alone.
How to Run Your Own Version (30-Day Plan)
You don’t need three weeks. Here’s the condensed version:
Week 1: Get the Data
- Pull 12 months of AP data (vendor, amount, date, department)
- Clean duplicates and categorize spend
- Calculate: Total spend, vendor count, top 20 concentration
Time required: 4-6 hours
Week 2: Find the Duplicates
- Sort by category, look for overlapping vendors
- Model consolidation savings (assume 5-15% volume discount)
- Identify 3-5 quick wins
Time required: 3-4 hours
Week 3: Review Contracts
- Compile list of contracts >$25K annually
- Note renewal dates and auto-renewal terms
- Benchmark 3-5 largest contracts against market
- Calculate renegotiation opportunity
Time required: 4-6 hours
Week 4: Build the Business Case
- Total up all savings categories
- Translate to EBITDA impact
- Draft your board presentation
Time required: 2-3 hours
Total time investment: 15-20 hours over 30 days
The Tools That Make This Faster
Jennifer did her audit manually. You don’t have to.
Three free tools designed for CFOs:
1. Procurement Health Scorecard (2 minutes)
Quick assessment to identify your biggest blind spots before you start the audit.
Output: Maturity grade, prioritized focus areas
2. Quick Win ROI Calculator (5 minutes)
Plug in your basic spend numbers, get instant opportunity sizing.
Output: Estimated savings by category, CFO-ready business case
3. The CFO’s Procurement Blind Spots (eBook)
Step-by-step guide to finding and quantifying procurement leakage.
Output: Chapter-by-chapter audit methodology
What Happened Next: Jennifer’s Board Presentation
90 days after that first board meeting, Jennifer presented her findings.
“We completed a comprehensive procurement audit. Currently, 58% of our spend is under active management. We’ve identified $4.2M in annual savings opportunity across five categories. Here’s our roadmap to capture it.”
The board approved: – Budget for procurement technology ($120K) – Headcount for procurement manager (1 FTE) – Executive authority to consolidate vendors
Year 1 results: – $2.8M in realized savings (67% of opportunity) – Vendor count reduced from 1,100 to 640 – Spend under management increased from 58% to 81%
Jennifer’s promotion to SVP, Finance & Operations came 14 months later.
Your Audit Starts Now
The procurement opportunity in your company is real. It’s not theoretical, and it’s not “nice to have.”
It’s $3-8M in annual savings on $100M spend, flowing directly to EBITDA.
The only question is whether you find it before or after your board asks.
Jennifer found it before.
Related Reads:
