Editorial team AccountingWEB.co.uk
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How finance can work smarter with procurement

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5th Aug 2015
Editorial team AccountingWEB.co.uk
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Andrew Finn, Wax Digital’s finance director, discusses how finance should seek to improve its working relationship with procurement.

Finance and procurement are often considered bedfellows in business, due to the synergies that exist between their roles and processes. So it’s surprising that research has shown significant disparity in these departments’ attitudes towards their working relationship and who leads who on matters of purchasing.

In Wax Digital’s recent CPO Viewpoint research just 22% of senior finance executives said they work very closely with their procurement counterparts. Moreover the study showed that only 12% in finance see procurement as highly effective and only 6% said that supplier selection is a joint initiative between the two.

According to the research the issues appear to lie in general perceptions, the delivery of tangible business value, cost saving conflict and leadership friction. So how should finance seek to improve its working relationship with procurement?

1. Communicate as well as collaborate

Finance and procurement must collaborate on specific processes but do they actually communicate? So few of them seem to work closely with each other and the perception of procurement as a hindrance is concerning. Finance and procurement should step out of their analytical comfort zone and get to know what each other is objectivised on, how they work and what challenges they face.

2. Set mutual value measures – beyond cost savings

While the majority of finance heads agreed that they had achieved ‘procurement value’ over the past 12 months, most of them viewed that value as being purely in the form of cost savings. Are cost saving edicts stopping procurement focusing on the broader business value it can deliver? Finance teams should consider what broader value procurement can offer – such as reducing supplier risk or improving business performance through supplier choice – and set the right balance of value measures.

3. Determine leadership and ownership parameters

In some senses finance and procurement seem to be operating as sibling rivals. Whether in the sourcing of good, compliant suppliers or the management of Purchase to Pay processes, finance and procurement share common interests and the two departments are often working in relay, passing the baton to one another. Finance needs to agree leadership and ownership boundaries with procurement so that both can deliver.

4. Focus on strategic spend priorities

The two departments in question appear to starkly disagree over future corporate spending priorities with finance citing systemsreal estate and employee benefits, and procurement citing energyfacilities management and supply chain inventory. Finance should seek to apply procurement’s expert sourcing skills and technology in the right areas to ensure that the business’ most strategic goals are delivered efficiently and effectively.

By closing the perception gap between itself and the procurement function finance can add value to the business and ensure greater collaborative success.

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