Aligning Finance and Procurement – Phase 1: Understanding the foundations – Aligning CFO initiatives with CPO strategies

As we explained in the In-Depth Guide to this series, finance and procurement play critical roles in shaping an organization’s financial health and operational efficiency. While each function has distinct responsibilities, their objectives often overlap, particularly in areas such as financial reporting, cost management, budgeting and data-driven decision making. When procurement strategies align with finance-led initiatives, organizations gain greater financial visibility, improved efficiency and stronger risk control.

This article explores key CFO priorities of 2025 and how procurement can align its strategies to support them effectively.

For more targeted insight into each stage of the Finance-Procurement journey visit our Guide to Aligning Finance and Procurement.

Finance 2025 initiatives

1. Improving financial reporting and analytics:
   CFOs rely on real-time data and advanced analytics to enhance financial reporting and ensure transparency in decision making. Without accurate procurement data, finance teams struggle to track realized savings, supplier performance and compliance.
   
   Alignment – Procurement can support this goal by ensuring spend data, contract details and supplier insights are accurate, timely and seamlessly integrated into financial reports. By improving spend under management and ensuring contract compliance, procurement helps finance gain a more accurate view of operational costs. Reducing errors in procurement-finance data integration also improves financial reporting accuracy and speeds up decision making.
2. Driving cost management and operational efficiency:
   Cost optimization is a top priority for CFOs, especially in volatile markets where profitability depends on balancing expenses with revenue. However, without procurement’s involvement in supplier negotiations and sourcing strategies, cost-saving opportunities may be overlooked.
   
   Alignment – Procurement plays a key role in validating and delivering sustainable cost savings by negotiating better supplier terms, identifying inefficiencies in procurement processes and ensuring supplier performance aligns with cost control objectives. Linking cost-saving initiatives directly to procurement activities and improving the resolution of pricing discrepancies strengthens the financial stability of the organization.
3. Enhancing budgeting and forecasting processes:
   Budgeting and forecasting require real-time updates and accurate supplier cost data, yet procurement is often involved too late in the process. CFOs need procurement’s insights to anticipate supplier cost trends, contract renewals and pricing shifts that impact financial planning.
   
   Alignment – By integrating procurement-led insights into budgeting and cash flow planning, organizations can improve forecast accuracy and align procurement budgets with financial projections. Reducing variance between planned and actual procurement costs ensures that finance can plan with greater confidence, avoiding last-minute budget reallocations or unexpected cost overruns.
4. Building a scalable data infrastructure:
   In today’s data-driven world, CFOs are focused on developing a robust data infrastructure to support decision-making, financial reporting and regulatory compliance. However, fragmented procurement data can create inconsistencies in financial statements, tax compliance and audits.
   
   Alignment – Standardizing supplier and spend data is one of procurement’s biggest contributions to financial accuracy. Ensuring clean supplier master data and reducing time to resolve procurement-related data inconsistencies allows finance teams to operate with greater accuracy and efficiency.
5. Strengthening cash flow management and liquidity:
   Managing cash flow effectively is a key CFO responsibility, but payment terms, invoice processing and supplier contracts play a crucial role in liquidity management. Poor procurement-finance alignment can lead to missed early payment discounts, delayed invoice approvals and inefficient use of working capital.
   
   Alignment – Procurement helps optimize payment terms and supplier agreements to support liquidity goals. By improving invoice processing cycle times and ensuring higher rates of auto-matched invoices in P2P workflows, procurement enables smoother cash flow management. Capturing early payment discounts further enhances financial flexibility and reduces working capital constraints.
6. Adopting automation and AI for efficiency:
   Automation and AI-driven processes are transforming finance operations and helping CFOs reduce manual workloads, improve accuracy and streamline financial reporting. However, without procurement’s adoption of these technologies, the gains in efficiency remain limited.
   
   Alignment – Procurement can accelerate automation by implementing AI-driven sourcing, contract management and P2P workflows that minimize manual interventions. Reducing reconciliation errors in procurement-related reporting and increasing the percentage of automated procurement processes ensures that finance and procurement can operate with greater speed and accuracy.
7. Aligning financial strategies with ESG goals:
   With growing investor and regulatory focus on Environmental, Social, and Governance (ESG) compliance, CFOs are integrating sustainability into financial strategies. Procurement has a direct impact on ESG goals, as supplier selection, ethical sourcing and carbon footprint reduction all influence corporate sustainability metrics.
   
   Alignment – By tracking supplier ESG compliance and aligning procurement spend with sustainability initiatives, procurement provides the data and reporting necessary for financial disclosures. Increasing the percentage of ESG-compliant suppliers and reporting on Scope 3 emissions ensures that sustainability commitments translate into measurable business outcomes.
8. Expanding strategic partnerships:
   CFOs are continuously seeking strategic partnerships to improve financial performance, whether through technology adoption or external collaborations. Procurement plays a role in ensuring these partnerships drive cost savings, operational efficiency and innovation.
   
   Alignment – By collaborating with suppliers and technology providers, procurement supports finance’s digital transformation efforts and enhances cost management strategies. Measuring supplier-driven cost savings and supplier collaboration-driven projects helps quantify the impact of these partnerships on business performance.
9. Expanding strategic risk management:
   Financial and operational risks — from supplier disruptions to geopolitical uncertainties — are a key concern for CFOs. Without strong procurement risk management, organizations remain vulnerable to supply chain failures, compliance breaches and financial losses.
   
   Alignment – Procurement mitigates these risks by enhancing supplier due diligence, monitoring risk indicators and integrating advanced risk analytics. Tracking supplier risk scores and procurement-driven risk mitigation activities ensures that financial and operational stability are maintained.

Key insight

CFOs and CPOs must work together to align procurement with financial goals, moving beyond cost-cutting to strategic financial planning, risk management and business sustainability. When procurement actively supports finance-driven objectives, organizations gain greater cost visibility, stronger cash flow management and improved financial forecasting — ensuring long-term success.

For further insights into evolving CPO initiatives and the role of digital transformation, we recommend exploring studies from Deloitte and The Economist.

Next up

Look out next week for: Phase 2: Identifying common misalignments and addressing the gaps.

Visit our  ‘Aligning Finance and Procurement’ in-depth guide for practical, structured advice on enhancing finance-procurement alignment.

Read also our use case scenario ‘Aligning Finance and Procurement for cash flow and liguidity.’
Phase 1 – Understanding the Foundations is here.