Why Should Procurement Report Into Finance? ISM, Spend Matters, Machiavelli and More

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We’re in the process of wrapping a joint Spend Matters/ISM snap poll exploring the relationship between finance and procurement, and more specifically, how to get more out of it on a pragmatic level (no one needs another study that just talks about the roots of “misalignment”).

As part of the research, we asked participants why procurement should report into finance. Here were some of the qualitative responses:

  • "Police”
  • Senior Management Influence (especially if no CPO)
  • Ability to control budgets and cash outflows
  • Single source of truth and set of numbers
  • Tie budgets to P&L and to contracts to sourcing (and savings)
  • "Money controls decisions. If you can get finance support, you can implement changes."

One of the more insightful responses suggests that, “Finance has a better relationship with top management and is seen as an asset, where procurement is seen as a necessary evil (step-child) that everyone hides from and wishes would disappear. Finance could actually be the enforcer and get policy compliance and support.”

There’s certainly some truth in this. But more broadly, I might describe the truly benevolent finance department a bit in the spirit of Machiavelli in segmenting and offering advice to different types of princes in his famous treatise (as an aside, my colleague Peter Smith has some great thoughts on the topic of the famous philosopher and procurement).

Regardless, finance must react to what the business has given it from a buying standpoint. And that will rarely be the same twice – whether it ends up overseeing and taking control of a spending police state like a third world country locking down its inhabitants or it more subtly and powerfully influences and manipulates the money and policy decisions as perfectly as an ideal fed governor playing with monetary supply and policy!

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