Procurement ❤️ Finance

Lari Numminen

Head of Marketing

Should procurement love finance or finance love procurement? Surprisingly that was the topic that raised the most conversation across all of our Sievo webinars last year. While we covered a whole variety of exciting topics including machine learning, supplier delivery performance and spend forecasting, it’s reassuring that this emotional topic kept closest to hearts.

What were the two sides of the argument?

Procurement should love finance

One natural argument is that procurement should share more love with finance. It raised the important point that almost half of the savings procurement claim to make actually get recognized by finance.

Value Leakage from Procurement to Finance

To improve collaboration, procurement should set targets and define performance measurement in the language used by finance. It should move away from talking about contracted savings and focus on realized savings.  Finally, procurement should be more transparent about the value it creates by isolating results of proactive savings projects from the total spend development.

Finance should love procurement

The other side of the argument is that finance should really love procurement.

Procurement is a critical function to drive value creation. For many businesses, procurement activities cover over ½ of all costs. While many corporate strategies focus on increasing sales, it’s worth remembering that a drive to achieve procurement savings can have an equal important impact on the bottom line.

Procurement As a Value Driver

Modern day finance teams should also love procurement because they can prove their contribution with reliable data. At Sievo, we often talk about the spend bridge, where procurement isolates different value drivers impacting spend. Some value drivers like currency or market fluctuations are less controllable by procurement, but isolating and openly talking about their impact improves transparency.

Spend Bridge in Procurement

Let’s all rekindle the love

Ultimately both procurement and finance should love each other because they both play important and interdependent parts in the business family. The key to love is building more transparency and trust.

If you’re looking for more ideas to rekindle the love with your colleagues, listen to our full webinar recording, which is now available on demand.

From Sievo with ❤️

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