Maximizing profitability, reducing costs and managing financial risks are key to the role of the CFO. Yet some CFOs are missing a trick when it comes to optimising the substantial cost-savings opportunities available through procurement.
Procurement represents around a third of total costs in financial services, while for manufacturing businesses this figure rises to a significant 60% to 70%. But without active engagement from the CFO, procurement teams are unlikely to be able to right-size this spend.
CFOs can elevate procurement by launching and championing a procurement savings program that has the buy-in and attention of the board. They can also act as a ‘broker’ between the procurement department and budget holders, ensuring that the two are aligned and moving in the same direction.
Procurement represents around a third of total costs in financial services, while for manufacturing businesses this figure rises to a significant 60% to 70%.
By setting a budget challenge upfront, the CFO can position procurement positively, as working in partnership with budget holders to help meet cost-savings targets. The alternative is for procurement to achieve the desired savings and for the CFO to remove these savings from the budget at the end of the process, which is likely to cause frustration among budget holders and potential hostility towards the procurement team.
The key point to remember is that the CFO has a pivotal role to play in the procurement program and should be proactively involved throughout the process – rather than wait until year-end to find out whether the claimed savings have hit the bottom line.
Creating tangible savings that the business will recognise is essential. But it’s also important that the business gets credit for making the savings. Procurement is a key enabler, but it’s the business that has to do the hard work to achieve the required results.