What a baseline is, and what it is not
The tail is the long list of suppliers procurement does not actively manage. Gartner describes tail spend as spend on noncritical goods and services from vendors that procurement does not actively manage. CIPS, the Chartered Institute of Procurement & Supply, notes it has been defined as the 10–20% of spend accounted for by 80% of an organisation's suppliers. Your own split will differ, which is exactly why you measure it. For the bigger picture, see our tail spend management guide.
A baseline is:
- A record of what happened, built from transactions you can trace.
- A set of written rules: period, scope, categories and what you call "tail".
- The reference point every later month is compared against.
A baseline is not a savings target, a forecast or a budget. It does not say what you should spend. It says what you did spend, so later changes can be judged on facts. If you want to understand why reported savings often fail to show up in the P&L, read why savings never reach the P&L.
Why it matters at around $2M a year in indirect spend
At that size, indirect purchasing is usually spread across several departments, a few corporate cards and many suppliers that each receive small amounts. Each purchase looks harmless. Together they are hard to see, because they sit in different places: bills in accounting, card lines in statements and reimbursements in expense reports.
A baseline puts those pieces in one table. It answers questions finance and operations already ask: how many suppliers do we actually use, which ones did we pay only once, how much was bought without a purchase order, and which departments buy most of the tail.
Step 1: Fix the period and the scope
Use the last 12 complete months, so seasonal purchases are included once. Then decide what is in and out, and write it down:
- In: indirect goods and services: office and facility supplies, MRO, IT accessories, software and subscriptions, professional and facility services, marketing materials, travel-related purchases if you manage them.
- Out: payroll and benefits, taxes, rent and loan payments, intercompany transfers and direct materials that go into the product you sell.
The exact list matters less than applying it the same way every month.
Step 2: Pull the data from where it lives
You need three sources:
- Accounting (bills and payments). In QuickBooks Online, Intuit's help article explains how to run Expenses by Vendor Summary from Reports → Standard reports. Choose your 12-month period, choose Cash (payments made) or Accrual (including open bills), run it and export to Excel. Pick one basis and keep it.
- Corporate card statements. Export transactions for the same period with merchant name, date, amount and cardholder.
- Expense reimbursements. Export the lines that are really purchases from suppliers, not travel per diems.
Put all three in one sheet with the same columns: date, supplier, amount, source (bill, card, reimbursement), department and description.
Step 3: Clean supplier names
The same supplier often appears under several names: a legal name in accounting, a shortened merchant name on the card, a typo in an expense report. Merge them under one supplier name and keep a mapping table, so next month's data is cleaned the same way. This step usually changes the supplier count more than any other.
Example. A facilities team buys cleaning supplies from one local distributor. The bill for the monthly order is entered in QuickBooks Online under the distributor's legal name. An urgent top-up is paid with a corporate card and shows a shortened merchant name. A third purchase comes back as an employee reimbursement with the supplier written by hand. In the raw data that looks like three suppliers; in the baseline it is one supplier, bought through three channels, and the channel split is exactly what you want to see.
Step 4: Assign simple categories
Give every line one category from a short list your team can maintain, for example: office supplies, facility and MRO, IT hardware and accessories, software, professional services, facility services, marketing, logistics and freight, other. A short list applied consistently is more useful than a detailed taxonomy nobody updates.
Step 5: Decide what you will call "tail"
There is no single correct cut-off. Choose a rule that fits your books and write it down. Common approaches:
- Suppliers outside the group that makes up most of your spend (for example, everyone below your top suppliers by annual amount).
- Suppliers under a fixed annual amount that your team agrees on.
- Suppliers used only once or twice in the year.
Use the same rule for the baseline and for every later month. If you change the rule, rebuild the baseline with the new rule, or the comparison is meaningless.
Step 6: Record the baseline numbers
Keep the baseline to a handful of numbers that you can recalculate every month:
| Measure | What it tells you |
|---|---|
| Total indirect spend (12 months) | The size of the scope you defined |
| Tail spend and its share of indirect spend | How much sits with the suppliers you defined as tail |
| Number of active suppliers, and number in the tail | How fragmented buying is |
| One-time suppliers | Purchases that never became a relationship |
| Number of tail transactions | Workload: invoices, card lines and approvals to process |
| Spend with a purchase order created before the purchase | How much went through a controlled route |
| Tail spend by department and by category | Where to look first |
| Spend by channel (bill, card, reimbursement) | How people actually buy |
Date the baseline, save the file and the rules, and ask finance to sign off on the scope. That signature avoids arguments later about what the starting point was.
Step 7: Measure the same way every month
Each month, rerun the same extracts, apply the same supplier mapping, categories and tail rule, and compare against the baseline:
- Compare like with like: the same month last year for seasonal categories, or a rolling 12 months.
- Separate volume from price where you can. More spend can simply mean more activity.
- Note one-off events (an office move, a new site, a large project) so they do not distort the trend.
- Watch the share of spend with a purchase order before the purchase, and the number of new one-time suppliers. They show whether purchases are moving into a controlled route.
Common mistakes
- Mixing cash and accrual between months, which moves spend from one month to another.
- Leaving card and reimbursement spend out. That is often where the tail lives.
- Changing categories or the tail rule midway without rebuilding the baseline.
- Treating the baseline as a target. It is a reference, not a promise.
- Building it once and never again. A baseline is only useful if the monthly numbers are produced the same way.
Where software helps
Building the first baseline is mostly a spreadsheet exercise. The harder part is producing the same numbers every month without rebuilding them by hand. That is easier when purchases go through one route that records the request, the approval, the purchase order, what was received and the invoice matched against both.
Tail Sourcing Essentials does that for teams of 1 to 10 users. An Admin or Procurement Manager approves each request before the purchase order is issued. Budgets show committed vs spent before anyone approves. When goods arrive, the receipt is recorded, and each supplier invoice is matched to its purchase order and receipt before it is approved and synced to QuickBooks Online (US companies only). Your baseline stays in your hands; the software keeps the monthly record consistent from the day you start.
FAQ
How many months should a tail spend baseline cover? Twelve complete months is the usual choice, because it includes seasonal purchases once. If your business changed a lot during the year, note it and keep the 12 months anyway, so later comparisons use the same period length.
What counts as tail spend? Spend with suppliers that procurement does not actively manage, usually many suppliers with small amounts each. Set your own rule (for example, suppliers below an annual amount, or suppliers used once or twice) and use it consistently.
Should card and expense-report purchases be included? Yes. Card lines and reimbursements are often where tail purchases happen. Leaving them out makes the tail look smaller than it is.
Is a baseline the same as a savings target? No. A baseline records what was spent and how. Targets, if you set any, come later and should be measured against the baseline with the same rules.
How often should the numbers be updated? Monthly is enough for most companies. Use the same extracts, supplier mapping, categories and tail rule each time.
Can I build the baseline from QuickBooks Online alone? QuickBooks Online gives you bills and payments by vendor. Add card statements and expense reimbursements for the same period, because those purchases may not appear under the supplier's name in your books.
A tail spend baseline turns scattered bills, card lines and reimbursements into one dated reference you can measure every month. When you want that monthly record to come from a single purchasing route, see Tail Sourcing plans and pricing.
