A Shocking Hackett Finding — Treasury, DPO and Procurement Alignment: Taulia Connect Dispatch

Treasury procurement alignment

Earlier today, Hackett’s Amy Fong gave a phenomenal talk, taking the audience on a journey through a range of Hackett purchase-to-pay (P2P), treasury and payables benchmarks, KPIs and recommendations. I’ll cover a number of the highlights from the presentation in a separate post, but I wanted to share one quick highlight that jumped out at me.

It’s a radical finding, in fact. Specifically, in a 2015 Hackett Payment Practices Poll, the firm found that treasury departments primarily want to implement solutions “to provide supplier financial liquidity rather than direct working capital improvements.”

This finding may seem minor, but it’s not. It essentially shows treasury is more closely aligned with procurement and supply chain goals than many likely think. This specific finding came out when Hackett asked respondents the percentage days payables outstanding (DPO) improvement attributed to treasury solutions. These were the responses:

  • 60% of respondents shared “no improvement” because the “key motivator [of investing in solutions] is to provide financial liquidity to our supply base”
  • 20% showed 0-5 days DPO improvement
  • 8% showed 5-10 days DPO improvement
  • 13% shared more than 10 days DPO improvement

Curiously, another finding from the same poll is that 40% of respondents reported as a challenge when implementing treasury solutions that the approaches “only focused on large suppliers, therefore suboptimizing the projected return on investment.”

Here are my quick observations on the findings:

  • Treasury is more aligned with procurement and supply chain goals around payables financing programs than many think.
  • Procurement should start a conversation with treasury to align P2P and trade financing investments (or vice versa). The points of common ground between stakeholders will likely be surprising, and the barriers to collaboration are likely to be low given this alignment.
  • Many organizations obsess over DPO as a metric, but perhaps we should look at it more like the purchase price variance (PPV) within procurement — i.e., more a red herring than a gold standard.
  • For more on working capital and DPO, see our past coverage on the topic.

Stay tuned for more live coverage from Taulia Connect. And as always, I welcome your thoughts and comments.

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First Voice

  1. Bill Kohnen:

    Very interesting and matchs my experience that the potential of trade finance is in fact less a motivation than solutions providers suggest and often companies value the efficiency aspects on the payment process more especially if they have the cash. Also have heard the criticism that it is still hard to get SME’s onboard.

    My gut feeling is that while the survey is valid for those questioned that any company that has a treasury solution or at least buys into a P2P concept would be predisposed to such answers. On the otherhand companies that are struggling or that are still stuck in a 20th Century operating mode would not even respond or be part of the survey set.

    Still interesting results and something solutions providers should take note of so they develop and sell solutions that address what customers really want.

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