In part 6 of 17 in this series on procurement/finance collaboration, we continue our countdown, from least to most important, of the top ways finance can help procurement to jointly improve spend and supply management. The rankings come from a joint Spend Matters and Institute for Supply Management research study, which is still open to practitioners. (Participants can win an Apple Watch or 1 of 10 Spend Matters PRO memberships.)
Coming in at No. 12 is procurement’s desire for finance to provide more resources to improve contract, savings and spend visibility. So many research studies have shown CFOs don’t trust the spending and savings numbers procurement is using. This is no big secret, and procurement isn’t happy with the data quality either. But if you do a root cause analysis, you’ll find those same organizations are investing inadequately in building the capabilities for spend analysis, contract visibility and savings tracking.
You’d think every CFO would want a report detailing how much money could be saved by reducing duplicate payments, overpaying for contracted items with risky suppliers and so on. Similarly, you might think CFOs would want similar visibility into contracts and associated financial obligations, or the ability to fast track negotiated cost reductions and other factors – such as volume variances, currency and spec changes – to a resultant impact on planned and actual budgets. Yet when it comes to investing, such rational thinking falls by the wayside relative to other priorities.
In previous posts, I have discussed some guerrilla tactics to overcome this Catch 22 situation of justifying analytics projects here, as well as more than a dozen – and counting – evolutionary steps to build spend and contract visibility. Companies with better visibility can gain both earlier and better spend influence, which in turn generates superior savings. The final study will quantify these results. But for now, if you’re struggling to engage finance in building this visibility, please reach out to me if you want to discuss your situation.
In the next part of this series, I’ll focus on how finance can help procurement by getting control over the supplier master, both from a policy and governance standpoint and from a process and data standpoint. This is a foundational capability that, if not mastered early on, will poison any procurement transformation, not just one in P2P.