Convincing the CFO of Procurement’s Impact Through Category Analytics
The procurement function has made enormous strides in its strategic significance within the organization. Nonetheless, skepticism still exists among other executives about how procurement can create value.
Chief financial officers (CFOs) are ultimately responsible for overseeing the organization’s working capital. They may be skeptical about procurement’s ability to align with the overall company mission, especially if it isn’t clear how procurement is taking advantage of savings and helping with the bottom line.
Here are a few ways procurement leaders can change the conversation and show the CFO how it delivers financial value.
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Analyzing High-Level Category Trends
Most executives are short on time, so it’s often best to start with high-level trends when diving into the nuances of each product category under procurement’s jurisdiction. Using data analytics, procurement leaders can obtain category-based transactional data to demonstrate where savings have been achieved and how categories are changing based on internal and external factors.
Ideally, this data will allow procurement leaders to show which categories have enjoyed the most cost reduction and how procurement has successfully managed inventory with the rest of the organization. It can also be an opportunity to show the CFO how procurement has reduced "maverick spend" and achieved good governance.
It’s also an opportunity to discuss points of failure and address any concerns the CFO may have about how procurement will remedy its shortcomings moving forward. This can be a difficult conversation to have. However, demonstrating that procurement is taking a constructive approach to opportunities for improvement can help to lift the CFO’s skepticism.
Leveraging Automated Pricing and Discount Analysis
CFOs want to know that procurement is taking advantage of every possible discount and pricing advantage. Through the deployment of automated tools and next-generation procurement platforms, procurement can search for discounts effortlessly.
Even if procurement teams don’t advantage of discounts directly, they can be used as leverage in negotiations with suppliers to secure new benefits. Effective discount management can help the company improve suppliers’ liquidity and earn greater returns on investments.
Generating Predictability
Ultimately, CFOs look to procurement for financial predictability. They need to be able to report confidently to other stakeholders about the company’s profit and loss, its liquidity, and its supply of products and services.
Procurement savings can be lost due to several factors, including pricing overcharges, supplier non-compliance, and poor savings tracking. Using automation and robust analytics, procurement teams can mitigate savings leakage and ensure sustainable negotiated cost savings over time.
Procurement must be able to demonstrate that it is delivering predictable results to the business. Not only will this give the CFO peace of mind, but it could also open opportunities for discussions of new investments and initiatives within the function.
Don’t Miss ProcureCon Indirect West
Organizations thrive when every business unit collaborates, solves problems, and generates value. Procurement has an opportunity to demonstrate its impact on the business through robust category analytics. With the right solutions in place, procurement leaders can easily generate reports and visuals to show other executives how the function is taking advantage of discounts and making the company’s finances more predictable.
Ready to learn the latest category analytics strategies? Don’t miss the next ProcureCon Indirect West conference happening from April 11th to April 13th at Sheraton Grand at Wild Horse Pass, Phoenix, Arizona.