In this first of a 17-part series on collaboration between finance and procurement, we start a countdown (from least important to most important) of the top ways that procurement would like to see finance helping procurement to jointly improve spend/supply management. The rankings come from provisional results of a joint Spend Matters and Institute for Supply Management research study that is still open to practitioners (participants can win an Apple Watch or one of 10 Spend Matters PRO premium memberships).
Coming in at #17 is procurement’s desire to have finance “Help get legal involved appropriately in the contracting process as an enabler and partner.” Although this desire is technically at the bottom of the list, the average rank for those who listed it was between 4 and 5 out of the 17 issues. Frankly, this issue was cited predominantly by those companies that are earlier in their procurement journey. For these companies, the legal department often seems to have a latent desire to work in procurement and get involved in negotiations. Unfortunately, this is a poor use of their time (or law firms they spend money on) – which is not cheap.
Modern procurement organizations partner with legal to rationalize their standard terms and conditions into clause libraries that are assembled intelligently into contract templates and ultimately the contracts themselves in order to reduce variation, ensure utilization and only draw in legal when supplier paper has to be used and/or when special conditions exist. But, this transition is not always easy (and it’s a similar battle for procurement, too, to create standardized cost models, RFx templates, etc.), and it’s critical for the CFO to help both groups focused on segregating their duties properly while also standardizing their processes and knowledge to improve efficiency and effectiveness.
In the next edition of this series, we’ll focus on how finance can help procurement help coordinate and prioritize risk/compliance activities out to the supply base.