Procurement Says It Saved the Money. Why Can’t Finance Find It?
A negotiated result does not become enterprise value until it is implemented, adopted, reflected in the forecast or budget, and validated. Disagreements between Procurement and Finance often begin because each function measures a different point in that journey. By Quentin A. Tse, Founder and Principal, Arazzo Advising
The disagreement may not be about the number
Procurement may calculate savings by comparing an agreed baseline with a newly negotiated price. Finance looks for what changed in the budget, forecast, income statement, cash position, or working capital. Both views can be reasonable—and still describe different results.
A signed contract does not prove the outcome
Value can disappear after the agreement if pricing is loaded incorrectly, employees continue buying elsewhere, demand or volume changes, implementation is delayed, specifications prevent adoption, or the financial baseline was never agreed. A signed contract records a commercial decision. It does not prove the operating or financial outcome.
Finance belongs at the beginning
I learned this across several operating environments. At GE, financial awareness wasn't reserved for Finance; leaders were expected to understand how their decisions affected the business's economics. At Intel, Finance and Procurement worked together on should-cost models, assumptions, business cases, and whether savings were actually reaching the budget. When I became CPO for Siemens Medical Solutions North America, I hired a Finance Manager who understood sourcing and supply chain to report into my organization and serve as the liaison to Finance. The intent was deliberate: establish the baseline and financial logic before the sourcing work began—not debate the result's credibility afterward.
Six checks between a negotiated result and observed value.
The work is not complete at signature. Each of these conditions must hold before a negotiated result can be treated as realized business value.
1
Agree on the baseline
Define the starting price, volume, demand, timing, and accounting treatment with Finance.
2
Define where the value should land
Distinguish earnings, cash, released capacity, and reduced operating risk. They are valuable, but they are not interchangeable.
3
Identify the operating changes required
Determine which contracts, purchase orders, catalogs, specifications, behaviors, systems, or budgets must change.
4
Assign ownership
Name who can authorize each change, who will implement it, and who will manage exceptions.
5
Watch the first transactions
Check whether the decision survives actual orders, invoices, deliveries, adoption, and operating conditions.
6
Validate the observed result
Compare what happened with the agreed baseline and have the responsible financial and operating owners confirm the effect.
What must leaders be able to answer?
The useful question is not simply, “How much did Procurement save?” Ask instead: What was the agreed baseline? What changed in the business? When should the effect appear? Where should it appear? Who owns the handoffs? What evidence will confirm that the value was realized? That is the difference between reporting a negotiated result and managing enterprise value.
Is the value reaching the business?
If a promised result doesn't appear in the numbers—or no one can explain where it should—start with one value stream, one baseline, and the next decision.