Tag Archives: budget

“Your Procurement Project Has No Budget. Prove You Need One.” Too Harsh Or Just Right?

Been asked to justify every single expense for your procurement project? Here’s how to implement a strategy that works to do this.


Picture this (and maybe you don’t need to because it has already happened): you’re successfully managing a procurement project – one which you consider to be critical to the organisation – then the unthinkable happens: The CPO approaches you and says “Times are tough and we’re cutting costs. As of today you have no budget. Prove to me why you need one.” 

It sounds extremely harsh; not to mention unrealistic! But is it? Reevaluating everything from the group up is one of the big supply chain and procurement ideas we think will change everything in 2021. But how do you successfully adopt such an approach, and what benefits can it bring? 

What are the benefits of working from the idea of a ‘zero budget?’ 

It’s a well-established fact that most of us in procurement are trying to save our companies’ money right now, but we’ve all equally acknowledged that simply asking our suppliers for a blanket discount is not only inappropriate, but just won’t deliver the savings we need. So what should we do instead? 

One effective cost control method is to imagine you simply don’t have a budget for the procurement project you want to undertake. To start this process, you meticulously analyse every single line item in your project, and attempt to justify its existence. This strategy, which is effectively the opposite of relying on historical purchasing patterns, enables you to rethink and justify everything you’re doing – and hopefully figure out how to control costs more effectively in the interim. 

This approach, which does require a considerable amount of time and effort, has in years gone by been dubbed ‘too harsh.’ But how about during years like the one we’ve just had? It may well be realistic, appropriate and, most of all, needed. 

How do you restart the planning process for your project with no budget?

If the idea of justifying every single line item cost in your procurement project sounds like a lot of work, it’s because it is. But it certainly isn’t no pain for no gain, as the level of analysis required enables you to innovate and cut costs in ways you never would have imagined. 

In order to implement a such a strategy, experts recommend the following: 

  1. Get into the mindset of ‘you have no budget. Prove to me you need one’: As harsh as this sounds, this is the exact mindset you will need in order to truly justify every single expense. 
  2. Get management’s buy-in: The analysis required to implement such an approach will likely take time (it may take weeks or even months), so buy-in from the CPO and above is necessary. 
  3. Know that training and dedication will be required: When committing to such an approach, there is no point trying it, and then reverting back when it’s too hard. It’s an all-or-nothing approach and you need to see it to the end for it to be effective. 

In addition to the above, there is one essential question you need to ask yourself when implementing this strategy, and it might be a truly uncomfortable one. Discover what it is, and many other game-changing ideas, in our compelling whitepaper 100 Big Ideas for 2021.

A Waste Of Time Or A Gold Mine? Why You Need To Classify Your Spend Data ASAP

Classifying your spend data? A big waste of time, surely … or a crucial step that needs to be taken without delay? The Classification Guru Susan Walsh explains why this needs to happen immediately.


So, picture the scene: it’s budget time and as far as you can see everything is under control, the bottom-line balances out, you’re in the black and life is good. But, are you really getting the full picture? You’ll never know unless you accurately classify your spend data.

You may already be thinking about it; or can’t justify the time or resources; or it might be something that you think is just a complete waste of time or money. Let me tell you why it isn’t, and you should have your spend data classified as soon as possible…

First things first, there’s that full picture I mentioned. If you’re only using your General Ledger codes, I can guarantee that they are wrong! Now, I know that’s a bold claim, but it is based on years of experience of working with GL codes. More often than not they’re used by people who don’t necessarily understand or know what they’re logging or the importance of accuracy. The result? Items logged under random GL codes.

Now, have a think about your department budgets: Karen in marketing’s maxed hers out, but she’s just placed an order for 5000 new leaflets to be printed. How? In my experience, it’s been snuck into someone else’s budget. Think about marketing and sales, would an order for 5000 leaflets really look out of place in a sales budget? Probably not, unless you look a bit closer. And this means you’re not really getting a true picture of what’s going on at ground level or what you might need for specific areas of your business. You can’t increase the marketing budget if you don’t know they’re spending it all.

We also, unfortunately, need to mention the possibility of fraud or embezzlement. It’s not pleasant to talk about and no one wants to think the worst of their staff or suppliers, but it can and does happen. Someone may have tried to mislead or take advantage of you in some way and if the spend data is messy or they’ve been clever it can be very difficult to spot. This is why it is also a very good idea to have an external party look over it, because then nobody has a vested interest in hiding what’s in the data – they’re just classifying it!

Now, I’m not saying it is a quick and simple process, good classification can take weeks and weeks … and weeks! But it’s worth the wait when you get back your brand new, shiny data set with all this new and organised information. Then you’ll probably say to me, what do I do with this now?

Well, the first thing you do is actually look at what you really spend your money on and find out if you could or should be negotiating better rates with your suppliers because the data’s shown you’re actually spending a lot more than you thought you were or have been automatically accepting price increase when there’s much better deals out there!

Then once you’ve done that, you’ll probably want to review your processes because, as I said before, I can almost guarantee something will have been flagged up during the classification process which indicates spend isn’t being accurately logged.

Ultimately, it’s all about saving you money and that’s no bad thing for anybody. Now, more than ever, it is so important you know where your businesses’ money is being spent and I am sure every single person who has their spend data classified will find at least one hidden surprise – like a data Kinder Egg! (Sorry my American friends, they’re not banned in the UK!)

So, although you may be put off by the upfront cost of having your spend data classified, it will save you money in the long run and the benefits to your business are pretty massive.

Susan Walsh is the founder of The Classification Guru, a specialist in spend data classification, supplier normalisation and taxonomies.  You can contact her at [email protected] https://www.procurious.com/professionals/susan-walsh