Tuesday 7th May, 2013

Management consultancy, Effico say that procurement professionals need to work more closely with their finance colleagues. Too often procurement fails to show how the savings they claim correspond to real financial benefits. In the latest Efficio Viewpoint article Show me the money! Principal Ian Bolger says procurement professionals need to provide evidence that they are able to cut costs on behalf of their organisations.

He says procurement sometimes doesn't take a rigorous enough approach to defining the financial basis on which they are working and getting volume and pricing assumptions ratified by budget holders, leading to a lack of accountability for declared savings. The early involvement of finance in the planning stages of sourcing projects will provide much more credibility for the eventual measurement of any savings achieved. Procurement should work in tandem with finance to ensure that forecast savings are “baked into” the strategic business planning process, Bolger says.

He concludes: “Savings achieved by better procurement will remain a source of contention and leave both budget holder and finance officer questioning your credibility unless you can respond to the demand to “show me the money” by clearly tracking procurement savings to the P&L.

“But get it right and the benefits from aligning savings with budgets are huge. It can mean better alignment with budget holders with mutual accountability and co-sponsorship of procurement projects.”