CPSM 1B1 : Preparing and Administering Supply Management Department Budget

Are you familiar with the connection of supply management department budget to your company’s strategic plan? The second Part of the CPSM Exam 1 comprises of 32 questions in Cost and Finance. Thus, it is important for you to understand how to prepare and administer the budget of the Supply Management Department.






As a procurement professional it is not enough that you know the mechanics in budgeting, but it’s essential for you to understand how and why the supply management department budget is connected to the company’s strategic and operational goals.

The perfect setup is that a company’s strategic goals should guide and dictate the supply management department’s budget plan because it is in the budget that you put the money.

Every strategy document, intent and implementation should consciously try to align with the organizational mission as well as the Supply Management Department budget so that the overall organization can move forward.

If your company’s mission includes continual education and training of employees, this only means that employee training and education should be part in your budget. You also need to consider how many hours of time off for training should be provided. By doing so, you will be able to budget the money of your company and the time off of personnel in your company.

Don’t budget stuff just because it was included last year. You have to strategize and remove mismatched priorities on your budget. Try to ask the following questions as you budget:

  • Is this contributing to the company’s mission?
  • Are the funding and expected results fitting?
  • Are gaps between financial support and expected results clear and well expressed?


Budgets are the most convenient way of reviewing progress towards the goals of the organization and its units including the supply department.


Here are the Steps in Budgeting:

A)   Review goal and objective alignment

B)   Define needed resources (e.g., trainings, equipment, furnishings)

C)   Estimate the dollar value of resources

D)   Present the budgets/obtain the appropriation

E)   Variance analysis


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