The importance of good relations between the CFO and CPO
Traditionally the CFO and CPO have been at odds with one another. The finance department wants to maintain a hold on the purse strings to ensure that the company can prosper in a healthy and maintainable way whilst the procurement office, by their very nature, want to spend.
The key to a good working relationship between the two functions lies in the nature of the company’s procurement strategy.
How to Measure Procurement Savings?
Part of the problem lies in how each department measures savings. The procurement department might pat itself on the back for negotiating a discount on a high-volume order. However, the finance officer considers it a saving if the actual invoices – realised savings – are lower this year than last.
Agreement Is Needed
In order to foster a good relationship, the CFO and CPO need to agree a procurement strategy. Procurement savings are an essential part of the financial health of the company and both parts of the company need to be working together to realise them.
A key feature of a procurement strategy that procurement and finance can agree on is one where procurement are trusted with enough budget control that they have an incentive to save. Where the finance office is reluctant to allow the procurement office to spend they will attempt to maximise the amount requested and then spend that sum to ensure they can point to savings made when, in reality, no saving was made.
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