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How does Finance view Procurement?

March 12th, 2010 · by Hari Candadai · 2 Comments · best practices

Here are some nuggets that Andrew Bartolini, Aberdeen Group shared earlier this week on a webcast - ‘Assessing the CFO’s View of Procurement’ - on how you can start building bridges between Finance and Procurement. This is a key focus area for companies enjoying best in class performance - those that are noted for superior performance and ability to manage enterprise spend more efficiently and effectively.

Andrew divides organizations into three groups and prescribes actionable advice for each:

  1. Laggards - If you have not done anything or just getting started. Immediately start collaborating with your finance peers and start measuring and reporting on procurement performance KPIs. Establish a plan to drive regular formal and informal communications with Procurement and Finance.
  2. Industry Average - If you are already working on developing those relationships. Use data from Procurement metrics to educate internal and external stakeholders. Get your CFO to champion a major procurement initiative each year - this can result in extraordinary rewards.
  3. Best in Class. Collaborate on compliance and audit process. Cascade performance objectives from the enterprise to Procurement department and its staff.

In addition to the webinar replay, the full report - The CFO’s View of Procurement: Work in Progress - is available here.

Any other ideas that may have worked for you in fostering relationships between Procurement and Finance?

Hari Candadai is Director of Solutions Marketing for Ariba and author of The Return to Profitability: Spend Management Priorities to Accelerate Savings and Drive Long-Term Growth, a global study of spend management priorities and strategies.

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2 responses so far ↓

  • 1 Tim Cummins // Mar 12, 2010 at 1:20 pm

    At IACCM, we have undertaken various studies of the way Procurement is viewed by both Finance and Legal (and we also undertake more extensive analysis of stakeholder views as apart of our Maturity Assessments for individual companies). It is clear that in many cases Procurement struggles with image; they are seen as an organization with high operational importance and little if any strategic influence. I do not agree that ‘best in class’ is focused on compliance and audit. I think this is a basic expectation of competence. To gain real status, Procurement must become far better at assisting the CFO to meet wider targets of revenue and profit growth, demonstrating their contribution by market and risk intelligence, supporting innovation and competitive difference etc. Ironically, the harder Procurement works to achieve traditional measures of savings, the lower it tends to fall in overall esteem. Best in class groups are those where the leadership has grasped broader business goals and is actively demonstrating how their services are ensuring these are achieved.

  • 2 Barbara Crowley // Mar 21, 2010 at 5:05 pm

    Purchasing is often bypassed by Finance because its work is undervalued and unappreciated. In companies where I’ve worked, senior management (taking Finance’s lead) often purchased items directly, choosing their own suppliers without sourcing justification.

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