What Leads to Procurement and Finance Falling Out?

Yes, we have a new Spend Matters briefing / best practice paper to tell you about, and one thing is beyond argument – it has the most striking front cover of anything we’ve written in recent years!  (You can see part of it in the picture with this article). That’s thanks to the folk at leading eProcurement solution providers Basware, our partners for the paper. They 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 graphics continue inside …

You can download the paper now, free on registration here, and we hope you will find it useful and interesting – and enjoy the great graphics! Here is an extract to whet your appetite, another example of the pressures that can lead to disputes and falling out between procurement and finance.

 

“Transformation in isolation" – procurement and finance not joined up

Too often, when an improvement programme is undertaken, procurement and finance try to optimise their ‘Ps’ (purchase or pay) in isolation, causing friction and inefficiencies in the wider process. Benefits flow when the two parties work together and the whole end-to-end process is optimised.

As a starting point, each party needs to understand fully how the process works from the other’s perspective, as we said in the previous section. Then any initiatives to drive performance improvement must involve both areas of the organisation. Whether it is introducing a ‘no purchase order, no pay’ policy, or implementing a whole new P2P system, it is essential that work is collaborative.

The tensions emerge when one party acts without consultation, with a knock-on effect on the other. It can be either party originating the action; so perhaps finance start delaying payments to suppliers because of cash flow issues, but without talking to procurement. Suddenly, procurement finds that small but business-critical suppliers are on the point of going bust. Or procurement agrees with a large supplier that they will submit consolidated, monthly electronic invoices – but don’t consult finance, who find that they are presented in a manner that means the cost lines cannot easily be allocated to individual internal cost centres as they need to without manual intervention.

The solution: as in our previous example, communication and understanding between the parties is key. But in addition, any transformation, improvement or implementation programme in the purchase-to-pay field needs to be seen as a joint effort between procurement and finance. Whilst one or the other might take the lead, depending on the exact nature of the tasks and the goals, it is imperative that this is approached together.

“Every successful P2P project I have been involved with over the years had shared leadership and involvement from both procurement and finance.  But don’t forget about other stakeholders, both internal and of course suppliers too. They all have important roles to play”.  (Guy Allen, ex CPO, Fujitsu & Santander)

 

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