Aligning Finance and Procurement — Phase 2: Identifying misalignments and addressing the gaps

Our In-depth guide to this series explains the five phases of aligning finance and procurement. In ‘Phase 1: Understanding the Foundations,’ we looked at the differing priorities of finance and how procurement might be aligned. In Phase 2, we identify the misalignments.

Finance and procurement are interconnected functions, yet misalignment between these two teams is a common challenge. Finance centers on managing budgets, optimizing cash flow and ensuring profitability, while procurement plays a key role in controlling spending, managing supplier relationships and driving sourcing strategies.

Procurement is often brought into financial discussions too late, making it difficult to integrate procurement-driven savings into financial planning. At the same time, finance may not have full visibility into supplier costs, contract terms or procurement-driven risks, leading to budgeting inaccuracies and inefficiencies in cash flow management.

Understanding where these disconnects occur is essential to building a cohesive, data-driven approach to procurement-finance collaboration. 

Here are some examples of these misalignments.

Funding challenges that limit Procurement’s ability to drive value

A major misalignment between Finance and Procurement teams stems from funding challenges that restrict Procurement’s ability to execute cost-saving initiatives effectively. Without proper funding and early involvement in financial planning, procurement is often left reacting to financial decisions instead of proactively contributing to them.

One common issue is the ‘use it or lose it’ approach to budgeting, i.e., Procurement teams rush to spend unused budgets at the end of the year to avoid reductions in the following cycle. This leads to inefficient spending and missed opportunities to redirect savings toward strategic investments, such as supplier innovation, automation and  sustainability initiatives.

Finance teams can address this issue by involving Procurement earlier in the budgeting process, allowing for more strategic resource allocation and ensuring procurement-led savings contribute to overall financial stability.

Procurement’s role in supporting CFO-driven financial objectives

Procurement and Finance often measure success with different KPIs, which can create further disconnect. While Finance looks at budget variances, cost forecasting and working capital, Procurement traditionally focuses on cost reduction, supplier performance and compliance.

This misalignment can result in procurement’s impact being undervalued in financial planning. Procurement should shift from a cost-cutting function to a value-creating function by aligning its goals with finance-driven cost optimization, supplier payment terms  and risk mitigation strategies.

For example, Procurement can enhance cash flow management by negotiating supplier payment terms that align with Finance’s liquidity goals. Measuring early payment discount capture rates and supplier contract compliance ensures that procurement-driven cost savings contribute directly to financial efficiency.

The impact of disconnected workflows on efficiency and compliance

Another area where misalignment creates inefficiencies is in workflow integration between Procurement and Finance. When procurement data is not fully integrated with financial systems, finance teams struggle to track real-time spending, leading to errors in financial reporting and compliance risks.

Disconnected workflows result in:

• Delayed approvals for supplier contracts and payments.
• Inaccurate budget forecasting due to incomplete procurement data.
• Increased compliance risks due to lack of oversight on supplier agreements.

Procurement teams can enhance financial accuracy by standardizing supplier contract management, integrating procurement data into financial dashboards and reducing invoice processing cycle times. Aligning procure-to-pay processes with finance-driven controls ensures smoother financial reconciliation and improved spend visibility.

Expanding Procurement’s role in financial planning

One of the most significant misalignments occurs when Procurement is not included early enough in financial planning and budgeting. When Procurement is brought in after budgets have been set, cost-saving opportunities are limited and procurement teams must work within financial constraints rather than shaping cost strategies proactively.

Organizations can address this gap by:

• Embedding procurement in financial forecasting discussions.
• Using procurement data to improve budgeting accuracy.
• Shifting from reactive cost-saving measures to proactive financial planning.

Tracking procurement-driven budget forecasting accuracy and supplier cost variance ensures that Procurement’s insights are used to support financial stability and improve cost predictability.

Technology’s role in bridging the Procurement-Finance gap

Technology plays a crucial role in resolving misalignment challenges between finance and procurement. However, many organizations struggle with fragmented tech stacks that do not fully integrate procurement and finance functions.

For example, procurement systems may track supplier spend separately from financial reporting tools, making it difficult for CFOs to gain a comprehensive view of organizational spending. Implementing end-to-end source-to-pay solutions allows Procurement and Finance to work with real-time, shared data so that both teams can operate with greater transparency and efficiency.

Procurement can support digital transformation by:

• Assessing current technology gaps in procurement-finance integration.
• Standardizing procurement data to align with financial reporting requirements.
• Encouraging the adoption of AI-driven spend analytics for better decision making.

Measuring the percentage of procurement data integrated into financial systems and the accuracy of procurement-driven financial reports ensures that technology investments directly support alignment efforts.

Prioritizing issues using a value-based framework

Organizations often struggle to determine which Procurement-Finance misalignments should be addressed first. A structured approach can help prioritize issues based on:

1. Total value potential – How much business value is at stake?
2. Ease of implementation – How difficult is the solution to implement?
3. Technology readiness – Are digital solutions available to address the issue?

By mapping these factors into a 2×2 prioritization matrix, finance and procurement teams can tackle the most critical misalignment issues first to address the high-impact, easily implementable solutions before more complex challenges.

Key insight

Addressing Finance-Procurement misalignment requires a combination of early collaboration, workflow integration, shared KPIs and technology adoption. Organizations that bridge these gaps can expect more accurate budgeting, stronger cash flow management and greater procurement-driven cost efficiencies — ultimately strengthening overall financial performance.

Next up

Look out next week for: Phase 3: Structuring the collaboration

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

Visit our ‘Aligning Finance and Procurement’ in-depth guide for practical, structured advice.