Basware report identifies finance priorities- procurement take note!

Basware, purchase to pay and e-invoicing solutions providers, have issued their “2011 Cost of Control – Fuzzy Finance” report.  The heading is not the most enticing I’ve ever seen, but “Cash Flow Visibility Compromised by Fuzzy Finance - Increased interdependency of financial systems leading to cash flow visibility concerns”, contains some important messages for Finance and Procurement executives.

We’re increasingly convinced that Finance leaders are going to want to get closer to procurement execs and functions in 2012 - we see it as one of the major trends for next year. And there are a number of reasons for that. Some are obvious – pressure on costs in a difficult time, for instance. Others are less so, such as the increasing need and desire for finance to have better visibility and control of financial flows into, across and out of their organisation.

In this report, concern about the visibility and forecasting of cash flow was a prominent theme. And ironically, the increasing sophistication of financial systems and networks (including supplier networks) may be actually making the job harder – “71% of global CFOs and finance directors in the survey are concerned that greater levels of reliance between different finance systems present cash flow visibility challenges”.

Another significant point for procurement was that the finance community are putting slightly less emphasis on cost savings than in the same survey a year ago, with the focus shifting to cash management issues and visibility instead. That has obvious issues for procurement and certainly suggests we need to be working closely with finance colleagues across the whole P2P process and systems.

Over the coming 12 months ‘reducing overall purchase costs’(-8%) and ‘maintaining and improving margins’ (-6%) both decreased as the main priorities amongst key financial decision makers, compared to 2010. In their place have emerged priorities more focused on financial management....  planning, budgeting, and revenue forecasting (64%), increasing profits and top line performance (59%) and cash flow and working capital management (55%), all of which have increased as a priority since 2010.

It is also interesting that the CFOs were actually increasingly optimistic about the future -  “CFO confidence in their own company performance increased 7% over the course of the year to 51%”.

Perhaps things would be different now, a few months on from when the fieldwork was carried out. But there was a  pretty high degree of confidence in their own organisations’ ability to thrive – good news for once!

All in all, for those of us in the profession who report into Finance (as I did for most of my time as a CPO), it’s vital that we learn to understand their drivers and priorities, and indeed “speak their language”. We’re not suggesting every procurement professional has to get an accounting qualification; but we need to get on the same wavelength. So take a look at this report – available free to download here- it will help you get a feel for what is front of mind perhaps for finance colleagues.

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