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Aligning Finance and Procurement – Phase 5: Sustaining alignment success with shared KPIs
Following on from Phase 4 — Leveraging technology to bridge the Finance-Procurement gap — of our In-Depth Guide to aligning finance and procurement, Phase 5 looks at how to measure and sustain that success.
Achieving true alignment between finance and procurement goes beyond initial collaboration — it requires ongoing monitoring and measurement of shared objectives. While traditional KPIs often emphasize cost savings or budget control, aligned organizations take a more strategic approach, tracking performance indicators that reflect the joint impact of finance and procurement on business outcomes.
As noted in ‘Phase 3: Structuring the Approach,’ organizations define governance processes and integration workflows that include the creation of shared KPIs. Once these KPIs are in place, the focus shifts to a critical follow-up phase: monitoring and measuring their impact on alignment success. Tracking performance over time is key to measuring the business value the collaboration is delivers.
The following sections explore how shared KPIs can be monitored to support financial reporting and budgeting, measure procurement’s impact through supplier performance, compliance and cost savings and optimize alignment efforts through tracking best practices.
How procurement KPIs support financial reporting and budgeting
CFOs rely on accurate financial reporting and forecasting to drive business decisions. However, procurement plays a critical role in reflecting cost-saving initiatives, supplier contracts and spend management efforts in financial statements and budget planning.
To align with financial reporting goals, procurement teams should:
- Validate and accurately report procurement savings to finance.
- Track spend under management to determine how much organizational spend is strategically controlled.
- Compare actual procurement costs against financial forecasts to improve budget accuracy.
- Supplier pricing trends and contract renewals should inform financial projections.
- Category-based budgeting should align with corporate financial strategies.
- Procurement-driven cost avoidance efforts should be included in financial reports to reflect true cost control impact.
- Variance between planned and actual procurement costs should be monitored to adjust financial forecasts dynamically.
- Forecast accuracy of procurement-driven expenses should be tracked so that finance teams operate with real-time insights.
By embedding procurement cost tracking into financial planning, organizations ensure that procurement’s contributions enhance financial stability and budget accuracy.
Measuring supplier performance, compliance and cost savings
Procurement’s success is often measured by supplier performance, contract compliance and realized savings. However, to fully align with finance, procurement teams need to quantify how these factors contribute to broader financial goals.
1. Supplier performance tracking:
A high-performing supplier base contributes to cost efficiency, operational stability and risk mitigation. Procurement teams should:
- Track on-time delivery rates to prevent supply chain disruptions that impact financial planning.
- Measure contract adherence to ensure supplier agreements align with financial goals.
- Monitor supplier lead times and service quality to minimize procurement-related delays.
These supplier-related KPIs help finance teams anticipate supply chain risks, cost fluctuations and operational inefficiencies.
2. Compliance and risk management:
Procurement plays a key role in aligning supplier contracts and sourcing decisions with compliance and regulatory standards. Organizations should:
- Track procurement compliance rates to avoid financial and legal penalties.
- Monitor supplier risk scores to identify potential disruptions before they impact business operations.
- Ensure environmental, social and governance compliance for sustainable sourcing and investment reporting.
3. Measuring cost savings and procurement impact:
While cost savings remain a primary procurement objective, not all savings contribute equally to financial performance. Procurement teams should:
- Differentiate between realized savings (direct financial impact) and cost avoidance (prevented future costs).
- Track procurement-driven cost reductions as a percentage of total spend.
- Link procurement savings to working capital improvements to support cash flow management with cost-saving initiatives.
By properly categorizing and reporting procurement savings, finance teams can accurately measure procurement’s impact on overall business profitability.
Best practices for tracking and optimizing alignment efforts
In the monitoring and follow-up phase, sustaining alignment between finance and procurement requires consistent KPI tracking, active stakeholder engagement and full data transparency. Organizations can optimize their alignment efforts by applying best practices that make procurement’s contributions to financial success continuously measured, visible and actionable.
1. Establishing a centralized KPI dashboard:
A unified financial-procurement dashboard allows both functions to track:
- Procurement spend and savings data alongside financial forecasts.
- Supplier risk assessments and compliance rates to anticipate financial risks.
- Budget variances linked to procurement performance for real-time financial planning adjustments.
Having a single source of truth helps procurement and finance operate with aligned data and insights.
2. Defining shared ownership of KPIs:
Procurement and finance must jointly own key alignment metrics to ensure accountability and transparency. This includes:
- Cross-functional meetings between CFOs and CPOs to review KPIs regularly.
- Collaboration between FP&A and category managers to refine budget and spend forecasting.
- Agreed-upon methodologies for savings validation to ensure procurement-driven savings are reflected in financial planning.
By assigning clear ownership for each KPI, organizations ensure that finance and procurement actively contribute to common business goals.
3. Leveraging automation for real-time KPI tracking:
Technology plays a critical role in ensuring finance and procurement teams track shared KPIs efficiently. Organizations should:
- Adopt source-to-pay solutions to automatically capture procurement spend and contract data.
- Integrate procurement-finance systems to ensure real-time updates on cost savings, budget variances and supplier risks.
- Predict procurement cost trends and improve financial forecasting with AI-driven analytics.
By automating KPI tracking, organizations improve accuracy, reduce reporting errors and keep the finance-procurement collaboration data-driven.
Key insight
Monitoring and applying shared KPIs — established during the ‘Structuring the Collaboration’ phase — ensures that procurement’s contributions to financial performance are measured, reported and optimized. By tracking supplier performance, compliance, savings validation and budget forecasting accuracy, organizations can create a unified financial-procurement strategy that enhances cost efficiency, financial transparency and long-term business sustainability.
Visit our ‘Aligning Finance and Procurement’ in-depth guide for practical, structured advice on enhancing finance-procurement alignment.
More in this series:
Read also our use case scenario ‘Aligning Finance and Procurement for cash flow and liguidity.’
