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Spend Velocity

Spending pattern analysis and anomaly detection

Overview

Spend Velocity (also called Cost Dynamics) applies physics concepts to spending analysis. Just as velocity measures speed of motion, Spend Velocity measures the speed and acceleration of your spending.

This dashboard catches subtle changes that other analyses miss — the slow subscription creep, the viral software adoption, the zombie vendor still getting paid.

The Physics of Spending

Velocity

How fast is spending growing?

Velocity = (Current Spend - Prior Spend) ÷ Prior Spend

Example: If you spent $10,000 last month and $12,000 this month:

Velocity = ($12,000 - $10,000) ÷ $10,000 = 20%

Acceleration

Is growth speeding up or slowing down?

Acceleration = Current Velocity - Prior Velocity

Example: If velocity was 10% last month and 20% this month:

Acceleration = 20% - 10% = 10% (accelerating)

Positive acceleration = spending growth is increasing Negative acceleration = spending growth is slowing

Health Score

The Score

Spend Velocity Health Score (0-100) measures the health of spending patterns:

Score Grade Meaning
80-100 A Healthy, controlled spending
70-79 B Good with minor anomalies
60-69 C Some concerning patterns
50-59 D Multiple issues detected
Below 50 F Significant spend control problems

Higher is better.

Key Metrics

Header Metrics

Metric Description
Health Score Overall spend health
Total Spend Spending in the period
Average Monthly Velocity Typical monthly growth rate
Acceleration Change in velocity
Accelerating Vendors Vendors with increasing velocity
Alert Count Number of spend anomalies

Detection Models

Spend Velocity uses seven specialized detection models:

1. Velocity & Acceleration Tracking

What It Detects: Vendors or categories where spending is growing rapidly, especially when growth is accelerating.

Why It Matters: Catching cost increases early, before they become significant.

Indicators:

  • High velocity (rapid growth)
  • Positive acceleration (getting faster)
  • Velocity above threshold (default 20%)

2. Boiling Frog Detector

What It Is: Named for the metaphor of a frog in slowly heating water. Detects incremental price increases that are individually too small to notice but compound over time.

What It Detects:

  • Subscriptions with creeping price increases
  • Service contracts with annual escalators
  • Vendors slowly raising prices

Example: A vendor charges $1,000/month. They increase prices 3% per year. After 5 years, you're paying $1,159/month. Each increase seemed small, but the total is significant.

Threshold: Default 25% cumulative increase over 180 days.

3. Shadow IT Detection

What It Is: Identifies software and services that spread "virally" through the organization without IT/procurement oversight.

What It Detects:

  • Tools adopted by multiple employees independently
  • Departmental software subscriptions proliferating
  • Unauthorized SaaS spreading

How It Works: Tracks when payments to a vendor appear from multiple cost centers or departments, especially new-to-the-organization vendors.

Threshold: Default 5 employees using a tool within short period.

4. Anomaly Heat Signatures

What It Is: Statistical outlier detection using standard deviations.

What It Detects:

  • Spending significantly above or below normal
  • Unusual transaction patterns
  • One-time large purchases
  • Missing expected regular payments

How It Works: For each vendor/category, calculates the mean and standard deviation. Flags amounts outside 2.5 standard deviations.

5. Commitment Cliff Analysis

What It Is: Compares purchase order velocity to actual spending velocity.

What It Detects:

  • Overcommitment (POs far exceeding actual purchases)
  • Undercommitment (spending exceeding planned)
  • Timing mismatches between commitments and spend

Why It Matters: POs are future commitments. If PO velocity diverges from spend velocity, something is changing.

6. Seasonal Pattern Recognition

What It Is: Identifies cyclical spending patterns and flags when current behavior doesn't match expected seasonality.

What It Detects:

  • Missing seasonal spend (you usually spend more in Q4, but not this year)
  • Unusual timing (spending that normally happens in March happens in February)
  • Seasonal vendors with unexpected activity

7. Zombie Spend Detection

What It Is: Identifies vendors you're still paying but haven't actively purchased from.

What It Detects:

  • Subscriptions for departed employees
  • Unused software licenses
  • Services no longer needed
  • Auto-renewing contracts forgotten

Threshold: Default 90 days of payments without new purchases.

Dashboard Sections

Velocity Overview

Summary gauges showing:

  • Overall velocity trend
  • Acceleration direction
  • Number of anomalies

Vendor Velocity Table

Column Description
Vendor Vendor name
Current Spend This period's spending
Prior Spend Last period's spending
Velocity Growth rate
Acceleration Change in velocity
Flags Active anomaly alerts

Detection Alerts

Grouped by detection type:

  • Boiling Frog alerts
  • Shadow IT discoveries
  • Statistical anomalies
  • Zombie vendors

Each alert shows:

  • Vendor/category affected
  • Magnitude of issue
  • Recommended action

Trend Charts

  • Velocity over time
  • Top accelerating vendors
  • Anomaly frequency trends

Using the Dashboard

Weekly

  1. Review any new anomaly alerts
  2. Check acceleration trends
  3. Investigate flagged vendors

Monthly

  1. Review Boiling Frog detections (slow creep)
  2. Check for Shadow IT spread
  3. Audit Zombie vendors
  4. Analyze seasonal patterns

Quarterly

  1. Comprehensive spend velocity review
  2. Vendor negotiation planning (based on velocity data)
  3. Policy adjustments for spending control
  4. Shadow IT cleanup initiatives

Configuration Options

Access via Settings → Spend Velocity:

Velocity Thresholds

Setting Purpose Default
High Velocity Flag when monthly growth exceeds 20%
Acceleration Threshold Flag when acceleration exceeds 15%

Boiling Frog Settings

Setting Purpose Default
Detection Window Days to look back 180
Cumulative Increase Total increase to flag 25%

Shadow IT Settings

Setting Purpose Default
Employee Threshold Users before flagging 5
Growth Period Time window for spread 90 days

Anomaly Detection

Setting Purpose Default
Standard Deviations Outlier threshold 2.5
Minimum Data Points Required history 6 periods

Zombie Detection

Setting Purpose Default
Inactivity Period Days without new purchase 90
Minimum Amount Threshold to flag $500

Best Practices

Investigate Acceleration, Not Just Velocity

High velocity might be planned (new project, seasonal). Acceleration indicates things are changing — that's when to dig in.

Review Boiling Frog Quarterly

Slow creep is designed to avoid notice. Set a calendar reminder.

Shadow IT Isn't Always Bad

Sometimes employees find great tools. Review Shadow IT discoveries as potential adoption candidates, not just violations.

Kill Zombies Promptly

Every zombie vendor is pure waste. Audit quarterly and cancel aggressively.

Connect to Contracts

Pair velocity analysis with contract renewal dates. Negotiate before renewal when you have leverage.

Common Questions

Why is high velocity sometimes okay?

Growth requires spending. A vendor with 50% velocity growth may be supporting a 50% revenue growth. Context matters.

How do I distinguish signal from noise?

Focus on:

  • Recurring patterns (not one-time spikes)
  • Multiple alert types on same vendor
  • Material amounts

What's a good velocity target?

Spending velocity should be at or below revenue velocity. If revenue grows 15%, spending growing 15% is neutral. Growing faster means shrinking margins.

Can I track by category instead of vendor?

Yes, the dashboard shows both vendor-level and category-level analysis.

How far back should I look?

Default lookback is 180 days for trend analysis. Longer periods provide more stable baselines but may miss recent changes.

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