Buyers Meeting Point procurement by Kelly Barner

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Guest Post on the Ivalua Blog: The Annual Budget Process as a Contact Sport

Guest Post on the Ivalua Blog: The Annual Budget Process as a Contact Sport

If your company closes its books with the calendar year, there is a good chance the budget review process is quickly approaching. With it come the games departments play – and they are not child’s play by any means. The annual Budget Games are at minimum a contact sport, and at their most extreme a blood sport.

The rules are timeless and well known:

  • The largest budget carries with it the most influence in the organization. We are expensive, so therefore we are valuable.
  • Requests for increases indicate big plans and are intended to communicate vision, while a group that can do the same or more with less lacks ambition and imagination.
  • Perhaps the most dangerous rule for procurement is: if you don’t spend it, you lose it. This unfortunately equates realized savings with a loss of influence, a frustrating indication of how our efforts are often perceived.

Procurement’s role in the process varies greatly from company to company. As cutthroat as the Games can be, there is no such thing as a bystander and each role has its own advantages and liabilities.

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Guest Post on the Ivalua Blog: Can Technology Cure Procurement’s Budget Blues?

Guest Post on the Ivalua Blog: Can Technology Cure Procurement’s Budget Blues?

Budgets are concrete things, based in fixed numbers. But it’s amazing how much time is spent discussing budgets subjectively. Much like the spend procurement brings under management, finalizing a budget can be managed with the 80/20 rule: 80 percent of the time should be dedicated to discussing 20 percent of the spend. The trick is to discuss the right 20 percent!

Procurement technology can play a bigger role in budgeting than it does today. When spend categorization aligns with projects and line items in a budget, the whole process becomes more fact-based. Past budgets can be compared to actual spending for an improved understanding of where forecasting was the most (or the least) accurate. Projects that never took place will be easier to spot, as will overages by cost center or supply requirement.

Predictable categories of spend shouldn’t be the main focus. Assuming the need was properly anticipated, only minimal changes (if any) are likely to be required from one year to the next. Instead, more benefits come when discussion centers on investment opportunities with upside, or those that carry specific risks.

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