Measuring Procurements Financial Impact: RONA

Dave Henshalle-learning, Influence, StrategyLeave a Comment


It is becoming increasingly important that procurement is able to measure and report its impact on company performance, using metrics the CFO will understand and accept. RONA or Return on Net Assets, is one such metric.

 

RONA, is a financial measure that helps to express the relationship between profit, sales, expenses and total assets. RONA demonstrates how a company generates profit.

dollar signFor example the impact of cost reductions, sales increases and inventory reductions are measured by RONA.

The goal of each company is to reach more sales at lesser costs by using fewer assets. Buyers contribute to this goal by keeping inventory levels low and by reducing costs and expenses.

Of course, there are many other important metrics that CPO’s must understand and use, but RONA provides a clear quantifiable measure of procurement’s contribution.

Nuff said …

What measures do you use?

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Learn more about procurements impact on company performance at the Purchasing Practice Academy