What is spend data classification?

My background is specifically in spend data classification and working with procurement teams, so this is where my knowledge and experience comes from. Whatever area of data you work in, this chapter will give you information and tips to help you work more efficiently and accurately.

Turning to trusty Google to get a definition for spend data classification, the first thing that came up was my very own definition! My definition states that spend data classification is the categorisation of financial data into groups or ‘buckets’ of spend using a taxonomy or category tree.

The next best definition I found was from the cloud-based spend analytics solution Accelerated Insight (2021), which states ‘Spend Data Classification is the process of grouping spend data for similar goods or services, assigning them to predefined categories using a Taxonomy document’.

If I broaden the search to data classification, which covers a much wider range of different types of classification, Technopedia provides a good definition:

My definition of data classification would be similar to my definition of spend data: data classification is the categorisation of data into groups or ‘buckets’ using a taxonomy. I want to define spend data classification in business terms, not technical terms. The biggest area of error in data comes from people inputting data/information who are not experts in the field and are intimidated by the technical terms used when working with data.

Spend data classification requires a different skill and knowledge base than master data classification, because classifying spend data is subjective and very much depends on the context. Rarely is there a black or white, yes or no answer in spend data classification. There can be multiple correct answers for the same supplier and it's all about agreeing to those standards internally, especially if you have multiple people working on the data.