It’s the beginning of the holiday season, so procurement and finance are all preparing for the year-end hockey stick budget spending.
Sometimes it happens by default. Projects are running behind. And you know you are going to come drastically under budget, so you spend like it’s on-fire in your pocket instead. Fear of loss is a thing (especially when it comes to money!)
Which depending on your organization, could be a big no-no.
Valid Budget Spending
Let’s start with the obvious. There are absolutely times where holiday spending is warranted. Are you a salesperson and need to send gifts to your clients? Check – you’re in the clear.
There are also certain items such as subscriptions or fees that can be paid towards year-end, milestone payments that have come due, and a plethora of other justified purchases.
But, this isn’t what I’m talking about, since those purchases are justified.
Funny story about it though. When I first started at Amgen it was almost a legendary story. Management needed to pull forward some expenses by year-end. Basically, they needed to spend the remaining budget dollars to properly manage EPS (earnings per share).
One department decided to help out. And they spent it on brooms. Thousands of brooms. I’m still not sure what happened to all those damn brooms, but I’d sure love to find out! (Holiday gifts anyone?!)
Bad Budget Spending
So what am I talking about when it comes to bad holiday spending? Well, here are a few of my favorite examples:
- Anything against company policy for holiday spending/purchasing
- Increasing scope/adding new services to account for negotiated savings
- Frivolous holiday / branded items
- In the olden days – excessive lunches, parties, or bar-tabs
- Anything over $25 bucks that (in the US) can be viewed as taxable wages!
Or another way of saying – spending just for spending sake!
My Advice: Spend your budget as if it was coming out of your own pocket!
Let’s be real for a minute. Everyone wants to act like it’s coming out of their personal checking account when they go to cut their budgets (the horror, the blood!!). But it’s always a different reaction when it comes to spending it. People generally spend it like the company has cut them a blank check.
Caviar and bottles of Dom Perignon for Christmas lunch? Seems reasonable. What about company branded Louis Vuitton travel luggage? I’m sure that’s what they are doing at Walmart too.
Running light on project hours? Just throw another resource at it for sh*t and giggles. Sourcing and procurement negotiate 100k of savings, why not spend it on another low-priority project?
All of these things make my eye twitch. Excessively. But they have gone on at almost every company I have worked for. And it has been one of the most aggravating aspects of working in FP&A and Sourcing/Procurement. Especially when people somehow forget to notify payroll of these gifts, to have the appropriate taxes taken out of their paychecks!
Yes, I realize it is YOUR budget. But do you realize it is the COMPANY’s money?! Can you honestly say that if your family budget was under 5k for the year, you’d spring on the same stuff? Probably not.
And that’s why no matter who/what you are spending your business budget on, spend it wisely. Spend it like you were writing a personal check from your bank account. Why? Because I guarantee what you find is acceptable, will drastically change. Your entire perspective on spending will change.
And when you do, just know your favorite friends in Strategic Sourcing and Procurement are more than happy to help the cause! (Because that’s what we get paid for!)
We’re not the ‘procurement police’ nor do we intend to be. We are simply here to help you make good business decisions that can drive change (and hopefully ROI for your company!). And that’s why we are such an important part of any business and should be leveraged when you need it the most (the holidays!).
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