Indirect Procurement – Get finance on your side

 This is a guest post by Pauline King

One of indirect peoples’ favorite self-barriers is the idea that finance is an adversary – or at best a reluctant partner. There are endless articles on the importance of the relationship between procurement and finance. But how do you actually improve it?

 The reality is, changing ways of working is especially difficult because often finance simply doesn’t understand what indirect is delivering. And they don’t understand, because they don’t have all the information they need. So, it’s up to indirect to take action.

One mid-sized client had exactly that dilemma. They had done a lot of the groundwork around savings definitions and reporting – a great starting point. They even had a great finance business partner, Jasper. But there was disagreement about savings and not a lot of bottom-line results. He and David, the head of indirect, weren’t as synced up as they thought. They did have regular reviews, but they didn’t get underneath the savings at an individual project level, instead staying at a dashboard level. Additionally, no up-front baseline setting was done. All this meant that, due to a lack of detailed information, the CFO was suspicious of the indirect numbers and KPIs.

How to change that?

First - a reality check on what a bottom-line relevant saving is. David had done a great piece of work on a capital investment project resulting in a lower price to the initial bids. David kept arguing that this was a saving that should count to his target.

But this was clearly not a bottom-line saving. Daniel looked pained, but Jasper relaxed in his chair and said, ‘finally, exactly’. Although Daniel was disappointed in that moment, it changed the dynamic allowing for a closer and more aligned understanding of the numbers.

With this better understanding, we turned to setting, up-front, baselines and agreed calculations for all material projects. One by one!

This gave Jasper more visibility on each project and also what the whole year would look like. He understood what the team was delivering and, importantly, could stand behind the numbers himself. Jasper took this new understanding up the line within finance, ultimately bringing the CFO on-board. He had become an advocate.

Coming to agreement together on savings definitions and spending the time to agree the numbers at the beginning of each project, instead of the end, was a game changer and as a result the savings from the indirect team started to get to the bottom-line. Credibility!

So, take a hard look at how you think about your finance partners. Are you ready to be brave, take the lead and change it?

Stay tuned for more about the ways of working between indirect and finance!

Pauline King is a strategic leader skilled in delivering rapid and sustainable operational change, specializing in indirect procurement. 

Her company, Heykins indirect, focuses on improving indirect procurement in small and mid-sized companies so as to bring rapid bottom-line impact.

Interested? Let’s talk – send her a message on:

https://www.linkedin.com/in/pauline-king-28880a15/

pauline@phking.ch