Common Goals in Finance and Procurement

Procurement and Finance in businesses today are starting to realize and share the responsibility for both cost and risk reduction when it comes to reducing operating expenditures, cutting transaction costs, mitigating liabilities and identifying innovative ways to increase the Company’s profits.
The global financial recession is still with us, however many executives are beginning to listen and hear the bench¬mark performance numbers that show the types of savings that are possible from greater collaboration between Procurement and Finance.
Functional, Process automation and analytical initiatives such as e-Sourcing, P2P, Contract Management and Spend Analyses are making these returns possible. Take for example the types of returns that enhanced straight-through processing automation and change management can bring in the accounts payable function. By integrating tools and processes together in this area, procurement and finance can together reduce maverick spending, reduce potential fraud, better leverage existing contracts and lower operating costs.
Focusing on such strategies as procure-to-pay sav¬ings implementation, organizational (and supplier) compliance, overall spend visibility and supplier relationship management, Procurement and Finance are starting to increase their collaboration, taking joint ownership of opportunities to remove redundant time consuming functional and process inefficiencies.
Procurement and Finance share common goals: the need to achieve rapid savings, the need to monitor / control external risk factors also the need to take full advantage of technologies and processes that enable greater transparency and opportunity. To open up the relationship potential between procurement and finance, a number of organizations have already started to collaborate in a range of initiatives. Shared services and outsourcing being an example of assisting procurement and finance organizations to improve operating efficiency and effectiveness. However, companies that focus on the AP and P2P processes will achieve the greatest returns by first addressing and automating as much of these processes as possible before migrating to a shared services or outsourcing environment , Shared services requires extremely tight Procurement and Financial collaboration.

Procurement and Finance collaboration targeting P2P processes and systems will yield the most rapid, tangible savings results of any technology-based coordinated effort. P2P systems enable a plethora of hard dollar cost reduction benefits by reducing off-contract purchases, lowering purchase volume in general and improving operating efficiency. Such efforts will also help companies reduce risk by building greater visibility into purchasing and payment controls, enhance company-wide and supplier compliance
Without a shadow of doubt, procurement and finance collaboration will assist companies weather the storm through better cost reduction and risk mitigation strategies and approaches. However to maximize the likelihood for success, not to mention rapid returns, it is critical to target the right programmes based on organizational priority , potential savings and value they will create for the business. At the same time, it is important to enlist the support of all areas of the business in the initiatives so that finance and procurement are seen as a collective agent of positive change rather than an adversary. Internal marketing should ensure that everyone feels the impact through budget modification based on the results of the programme. It also requires definition of metrics and measurements to quantify programme returns. By far the most important factor is that it requires the technology and process automation that can drive rapid results versus the type of systems and process paralysis that we have seen in many ERP implementations for years.
In conclusion there have been many discussions on the Internet of late in various forums that have discussed the relationship of Finance and Procurement. However, it is important to realize that closer collaboration and the use of enabling technology will enable companies to weather the current economic storm.

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One Response to “Common Goals in Finance and Procurement”

  1. graham0921 Says:

    Reblogged this on Dr.Dot's Daily Dose and commented:

    Here is a Re Blog, based upon observations in recent months that Both Procurement and Finance seem to have once again become silo’d and decisions are being made in isloation of each other without consultation.

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