Beyond A/P Alone: Summarizing the Core Benefits of Finance and Procurement Alignment

So far in this series examining finance and procurement alignment, we noted that the coordination between the two functions, especially within the accounts payable and transactional purchasing areas, can bring greater savings opportunities that can be achieved with each individual function pursuing its own initiatives. In particular, we observed that when procurement and accounts payable had aligned systems, processes and goals (ideally in that order) they achieved savings significant beyond what each function can deliver individually. There are also some good data points and examples in these observations as well, for those who’d like to take a look back at them (see posts here, here, here, here and here).

In particular, we noted that the following types of savings programs be achieved or enhanced through functional finance and procurement alignment, centered primarily on purchasing and accounts payable coordination:

  • Capturing and realizing negotiated sourcing value
  • Processing/functional efficiency
  • Improved operational performance

Case study data support the different types of core savings levers that are available. Consider how Merit Energy realized a 71% supplier enrollment rate for e-invoicing and self-service portal access (both drivers of processing/functional efficiency) and was able to realize a 40% level of early payment/discount acceptable for those invoices it offered at a discounted rate, which accounts to roughly $4 million in savings per $1 billion in total spend volume at the APRs it was using, according to a case study by the company and Taulia.

These numbers for core coordination-based savings are not at all atypical. Yet these areas are not the only sources of savings that are possible from finance and procurement alignment. When aligning systems, processes and goals, procurement and finance have a range of additional levers at their disposal. This can include enhancing savings opportunities through:

  • Coordinating working capital optimization
  • Spend opportunity identification
  • Market opportunity identification
  • Supplier/vendor management programs

As our analysis continues, we will double-click on these three areas and provide additional case examples. Then we’ll provide insights about the additional levers, above, as well.

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