How Can Procurement & Finance Work Together More Successfully?

Yes, we have a brand new Spend Matters briefing / best practice paper, which looks at the sometimes troubled relationship between finance and procurement, and suggests some ways it can be improved.

Leading eProcurement solution provider Basware is our partner for the paper and have done a great job on the design (not my strong point) of “Procurement & Finance – A Fine Purchase-to-Pay Romance Or The Best Of Enemies?” It’s not just the cover, either – the great graphics continue inside …

You can download the paper now, free on registration here, and this is an extract to whet your appetite.

 

Introduction

“Elizabeth Taylor and Richard Burton. Samson and Delilah. Kermit and Miss Piggy. Perhaps you have been in that situation personally - you can’t live with them, you can’t live without them.

And that has often seemed to describe the relationship between procurement and finance in major organisations. The two functions and the people who work within them are in many ways linked closely and even inextricably, yet there has often been considerable tension between the parties. That is true even when procurement reports into finance, which it does in perhaps a third of all organisations. Where it doesn’t, the tension can run over into outright conflict, much like Burton and Taylor really.

The procurement role is all about helping to spend the organisation’s money well, so that should align perfectly with finance goals around managing the balance sheet and profit-and-loss account successfully. Yet the areas of potential conflict also seem to be extensive. They can include the focus of finance on savings, budgets and unit cost reduction, which can at times drive procurement into behaviour that does not align with other budget holders and stakeholders around the organisation.

The need for financial control is also clear, but that can also lead to procurement playing a role it does not feel comfortable with, as it looks to gain stakeholder credibility. But even areas where the two functions in reality share the same goals and interests can be a source of disagreement …

One of those areas is around the purchase-to-pay process. That covers the activities supporting the acquisition of goods and services from the perspective of data, administration and payment - so “onboarding” suppliers, the requisitioning and ordering process, delivery, receipt, invoicing and payment.

This P2P process is clearly of interest and relevant to the procurement function. It may not be the most exciting element of procurement, compared to negotiating deals and investigating new suppliers in Thailand, but if it goes wrong, everyone will know about it and procurement’s reputation will undoubtedly suffer. It is also of vital interest to the finance team, as it impacts commitment accounting, budget setting, monitoring and reporting, cash flow (and therefore the balance sheet), fraud issues, and ultimately the P&L.

So in this short briefing paper, we want to outline three issues around P2P that can cause this tension between procurement and finance, and four areas where it should usually be possible to find common cause quite easily. And for those three problem areas, we will also make some suggestions on how they can be converted into more positives for both functions”.

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To read on, please download the paper now, free on registration here, and we hope you will find it useful and interesting – and enjoy the great graphics!

 

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