Why Procurement people need to speak the language of finance

That’s an expression we’ve heard increasingly over the last few years. Usually in this context: “Procurement have to speak the language of Finance in order to succeed”.

The argument is that:

  1. A CFO is often the CPO’s boss, so we better speak his /her language; or there goes our bonus!
  2. Even if they’re not our boss, CFOs are important people, so if we in the procurement profession want to have influence with them, we need to “speak their language”.
  3. Really, the language of finance is the general language of business, and we need to be seen as wider business people who understand that.

 

That’s all fair enough, although a bit of me thinks that maybe CFOs should also learn the language of procurement as well, but let’s leave that for another day.  We should also be sensitive to our own environments. In some organisations, the operational side of the business may dominate, and the CPO may be better advised to learn the language of the Chief Operating Officer (of throughput, quality stats, utilisation, stock turn and so on).

In a public sector organisation, it may be language of the Minister or Chief Executive that is more important, and that may well relate to policy goals rather than finance – but the same principle applies, in terms of how we align ourselves with the key decision makers and executives.

So even with those caveats, it would still seem sensible for most procurement people to ensure they do understand that “language of finance”. With that in mind, we’re starting an occasional series on that topic here at Spend Matters UK / Europe. As you’ll quickly find out, I’m not an accountant, although with a degree in Maths and Management Sciences I’m fairly numerate, at least in theory, and have a working knowledge of finance from previous jobs and running my own business.

But what I hope to bring to it rather than a technical discussion or description (that you can probably find just as usefully in Wikipedia or 100 other sites), is some thought around the particular procurement angle relating to the financial language. So not just what the “acid test” or “quick ratio” means – but how does that impinge on procurement, or how can we use it to emphasise our contribution to the organisation?

We’ll start the new series shortly with a look at company valuation and share prices. And we’re very happy to receive suggestions for any particular financial language that you think we could usefully feature and perhaps provoke some discussion.

Voices (3)

  1. Tony Lockwood:

    Isn’t it more important that all senior executives talk the same language – the language of their business. In this way all functions – finance, operations, procurement etc will be pulling in te same direction. Now there’s a thought!!

  2. Vegas Child:

    I agree with Gordon re the wider point (and so disagree with your point 3 Peter). I’d prefer that Procurement speak the language of their customer – be that Finance, Marketing, IT, Ops etc. Talking our own Procurement language to our customers is part of the reason we get into such a mess

  3. Gordon Murray:

    I think it is important for us to understand the language of the CFO to the extent that finance and accounts have been a core business subject for many years and within CIPS qualifications – watching Newsnight would also help improve genral business awareness.. But I think there is a wider issue you have touched upon. For example, if we want to break into Marketing spend – I’m not suggesting you need to go to the lengths I went to but I took a DipM (out of interest) and was a result was able to talk in ‘marketing’ as a procurement person – what I’m saying is if you want to gain influence in a spend area you better make some effort to put yourself in the budget holder’s shoes.

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