Categories: B2B Payments

Building A Stronger Bridge Between Finance And Procurement

With procurement becoming a more strategic unit within the enterprise, much of its power comes in the form of spend management, savings and bottom-line benefits. But, according to eProcurement and spend management company Proactis, organizations can only wield that power within the procurement function if it communicates with the finance department — and, Proactis found in a recent survey, that’s only happening part of the time.

The company released the findings of its latest survey, a study that examines the path to connectivity forged between procurement and finance departments.

“We don’t mean simply sharing next-door offices, swapping emails or teaming up at company away-days — however wonderful those things might be,” said Proactis in its report. “We actually mean working together at a strategic level on how organizations buy and pay for the products and services they need to operate.”

As the survey found, there is plenty of evidence that these two units are working toward building a bridge of strategic collaboration. Most of the finance and procurement senior-level decision-makers surveyed said their CFOs do indeed work hand-in-hand with the procurement department. But, after asking nine key questions to these professionals, Proactis concluded there is more to be done.

“We’ve come a long way since departmental silos. It’s great news that more than half of the professionals we asked are witnessing close cooperation between finance and procurement at the highest level,” said Proactis group marketing director Simon Daswell in a statement. “But it is clear from the survey results that there is still some way to go. Joining forces with the senior procurement manager to better understand and leverage strategic procurement in conjunction with their spend control initiatives may be one of the biggest things that CFOs can do to positively impact their organizations’ bottom line.”

There was one statistic in the research Daswell highlighted: “Forty-six percent of organizations have yet to see full engagement between department leaders, and that could hinder progress of the fundamental improvements that are needed today.”

PYMNTS examines the rest of the data points, all of which point toward the need for a deeper connection between procurement and finance.

Fifty-four percent said their CFOs work hand-in-hand with senior procurement professionals, and an additional 30 percent said their CFOs at least partially do. It’s quite the promising finding, though Proactis did note this leaves nearly half of those surveyed without full communication and collaboration between CFOs and procurement. It also means CFOs don’t have a heavy hand in supplier relationship management, contract management and strategic sourcing — all initiatives that impact bottom line.

Fifty-one percent agree their CFOs help procurement in enabling technology, though nearly one-third said they don’t. Technology is key to cost-savings in procurement, Proactis noted, by automating processes and helping professionals work more efficiently. CFOs may be underestimating the value of a sophisticated procurement system, researchers concluded.

Twenty-three percent of professionals said their CFOs do not wield its influence in the enterprise to boost strategic procurement initiatives, while 32 percent said their CFOs do. According to Proactis, it’s for the benefit of the CFO and the organization as a whole for the finance department to use its voice to ensure the company is giving the support and resources procurement needs.

Thirty-three percent say their CFOs only ‘partially’ help in refining procurement policies, while about one-third are evenly split between “yes” and “no” in answering this question. CFOs have the potential to “dramatically reduce the cost of the goods and services” procured by their organizations if they help the procurement team establish cost-saving policies, Proactis noted.

Sixty-one percent agree there are “many” areas for improvement in strategic procurement, while an additional 16 percent said there are “significant” areas for improvement. Still, more than one-fifth reported there were only a few areas that need work. According to Proactis, “the cost of the procurement process goes directly to the bottom line.” A lack of strategic collaboration between finance and procurement can mean missed savings, contract negotiations and other opportunities to gain a financial benefit for the enterprise.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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