How to Report Realized Savings Without Becoming an Accountant

There’s a long-standing debate in Procurement about how to track realized savings. Are you responsible for tracking them dollar for dollar, or is there a better way?

On a recent live session with Art of Procurement, our client Yannick Caharel, Global Head of Procurement at Christian Dior Couture, explained how he and his team are solving this issue without becoming something similar to a secondary accounting department. 

The problem with realized savings tracking

You’re no stranger to the skepticism around Procurement performance claims. Even your raw data is a prime target for questions. In this environment, you may wonder what options are available to you outside of measuring realized savings dollar for dollar against projected procurement savings, even if it is time-consuming.

However, to say that it’s time-consuming is an understatement. As Phillip Ideson and SpendHQ’s Chief Product Officer Pierre Laprée agreed, measuring savings exactly so that they are unquestionable is a massive undertaking, and it comes with a few unacknowledged downsides:

• Talent turnover – talented procurement practitioners can grow frustrated when their work is more financial control than procurement.
• Distraction from other projects – there’s no shortage of work for Procurement to do. Instead of chasing and comparing data for reporting purposes, you could be identifying savings opportunities and other strategic projects.
• Tactical and administrative focus – Procurement is already known as a cost center. If you spend your time filling out a balance sheet of total costs instead of pursuing strategic sourcing initiatives, you’re just reinforcing that opinion.

As Laprée explained, if you’re considering a dollar for dollar reconciliation approach, you need to think about it from a cost-benefit point of view. Ask yourself “What more will I learn if I marry my savings numbers with the actual spend numbers?” If you don’t have a clear, beneficial answer related to bottom-line improvements, it’s likely a waste of your time.

Here’s what Laprée and Caharel recommended instead.

Make everything you do visible

When you don’t have exact data around realized savings, you need to replace it with something equally compelling. Otherwise, your trust and alignment with the rest of the business will suffer. The most reliable way to solve this issue is to report on your performance instead, not so you can focus on how great you and your team are, but so you can still tell the impact story from a different angle.

That means tracking everything–your projects, your goals, their reported and projected outcomes, their delays–everything. Tracking your performance with this level of granularity is far easier and completely within your control, but it answers almost all of the questions the business could ask about realized savings in a given time frame.

As Caharel explained, “People really trust what they see… [Procurement Performance Management] allows me to see an online platform where we record all the projects, all the budget, all the savings, all the documentation, and so on. It allows me to make the link with Finance, with top management, and so on. So I’m not anymore doing 60 pages of presentation. The moment I go to New York, Shanghai, or Dubai, I just log in to the PPM module so we have a proper business review based on true projects, true realization whether it’s identified, completed, ongoing, or so on.” 

This level of granularity matters because, as Laprée, a long-time Procurement expert, admits, even exact data around realized savings will never be perfect. But when you can lead the conversation by thoroughly documenting everything Procurement has been involved with, you can answer the once uncomfortable questions about what your work really means for the business.

Get Procurement and Finance on the same page

Of course, just because you have a way to answer questions and skepticism, that doesn’t mean you won’t experience pushback. But to Laprée, these are roadblocks that are easy to clear.

It starts by understanding that some of the trust issues between Finance and Procurement come from a lack of transparency. Solving this issue and building a bridge with Finance starts when you have clear guidelines around what Procurement contributions drive value and which ones don’t. 

“Not all projects, not all value is created equal. There are things we expect to hit the P&L and some not. And that’s okay, but you have to be clear about that, so you need proper policies and you need alignment with the business.”

For Laprée, this alignment comes from being on the same page about what constitutes value and how the team identifies performance. “The main problem I’ve seen when discussing with Finance on my savings in my life was because we did not agree on the baseline in the first place.”

So how can you set baselines and definitions that Procurement and Finance both agree on? Lapree explains that initiating the conversation with Finance makes all the difference. “Whenever you have a project in your pipeline, put some governance with Finance. ‘Do we agree on the baseline? Do we agree on the type of benefits we expect? Do we agree on the ambition as a whole? Check. Then reporting the savings is just a consequence of that…The problem of trust immediately disappears.” 

Build and maintain alignment with value stories

Defining value with Finance and other business units usually involves more than a single, quick conversation. You’ll need to know how to convince, explain, and demonstrate why certain factors and metrics matter and others don’t. You’ll also need to understand how to cultivate these inter-departmental relationships to make way for these conversations in the first place.

In other words, you’ll need the soft skill of storytelling. The point we covered in this blog was part of a larger conversation on how to develop that skill by combining high-quality data with communication skills to tell meaningful value stories. Together with Art of Procurement’s Phillip Ideson and Kelly Barner, we spent an hour exploring 

• How telling better ‘value’ and ‘data’ stories can enhance procurement’s internal brand and impact
• The importance of properly addressing your audience with the metrics and KPIs that matter to them
• Why measuring value and then presenting it properly is such a powerful combination

To listen to the full live session and learn how you can move beyond presenting and defending your data, click here to watch the full session.