Procurement’s Message to Finance: Do This, Not That!

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In an as-a-service economy, business functions are increasingly moving to a business services model to maximize their value to the enterprise – both individually within the function, but also collectively across the functions. This should especially hold true with procurement and finance. They should be inextricably linked in terms of spend management (i.e., getting the most from your spending – whether internal or external), risk management and so on.

Yet these 2 functions aren’t so well optimized as I discussed in this recent post, but if procurement is going to help finance, it needs to point out where finance is potentially destroying enterprise value itself (often unknowingly).  I was going to title this blog post "How Finance is Failing Procurement", but thought it might be a bit too harsh.  But, the problem is very real.

So, how bad is it? Well, we currently have an active research poll with ISM to help procurement organizations make the case to finance on its actions that are destroying the most value. If you go through the list below, you’ll understand the scale of this misalignment and why we’re trying to collect this data.

But to do this, we need your help! The short version of the poll takes only about 5-7 minutes and is basically geared around the question below regarding what finance needs to do differently. The long version takes about 15-20 minutes, but gets you entered to win an Apple Watch or one of 10 Spend Matters PRO monthly subscriptions.

I’m presenting provisional results at next week’s ISM Conference, and I’m going to take a snapshot of the data this Friday and need some good provisional data to present! So, if you are a practitioner, and enjoy our content, I would like to personally appeal to you to take the 5-7 minutes to help the profession build this case for change. If you are a provider, I would greatly appreciate if you could pass this on to any of your practitioner contacts this week. (Forward this study link.) Thanks!

And here’s the question in question….

How can finance reduce misalignment with procurement and unlock impactful value for your firm? 

Please choose all that apply that would have a favorable and meaningful impact on your performance.

  1. Don't reduce working capital at the expense of supplier health and TCO
  2. Look beyond headcount reductions for project justifications
  3. Provide more resources to get spending, contract and savings visibility in place (for mutual benefit)
  4. Include procurement in upstream strategy and planning activities (M&A, JVs, innovation, tax efficiency, variabilization, etc.)
  5. Fix the "use-it-or-lose-it" budgeting process that encourages end-of-period spending
  6. Establish a more effective procurement involvement/approval policy and process
  7. Be an advocate, enabler and leader for strategic cost management processes/practices
  8. Help manage external expenditures with the same rigor that is applied to internal expenditures
  9. Provide internal auditors and controllers as change agents to help procurement
  10. Treat procurement as a true partner and a profit center rather than just another cost center
  11. Don't try to use the general ledger as a spend data warehouse
  12. Move A/P from a payment efficiency focus to a spend management effectiveness focus
  13. Measure procurement on value beyond purchase cost reductions (especially PPV)
  14. Help get legal involved appropriately in the contracting process as an enabler and partner
  15. Help coordinate and prioritize corporate risk/compliance activities that should be taken out to the supply base coherently
  16. Get a supplier master data management process and policy that works for everyone
  17. Invest in needed supply risk management capabilities to help protect the business

Discuss this:

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