Three ways procurement must build bridges with finance

Daniel Ball
2 September 2015

Procurement and finance teams share a lot of common ground, with both trying to achieve cost savings, improve process and governance and control risk.

But our recent CPO Viewpoint survey, which questioned 200 professionals on how they saw the relationship between procurement and their business colleagues, showed a concerning lack of synergy between these two supposedly close-knit teams.

While it is true other business functions surveyed, such as marketing and IT, showed an even greater disconnect with procurement, poor collaboration between finance and purchasing gives more cause for concern, since these teams are generally expected to work well together.

In the research 66 per cent of finance executives claimed the procurement team actually acts as a hindrance, which really underlines the unfavourable light in which procurement processes are viewed by some senior finance managers.

This could of course be put down to finance not fully understanding the value of procurement. Most finance professionals cited cost savings as being procurement’s primary value add, but they completely overlooked or discounted other key responsibilities such as reducing supplier risk. And even though it is seen as their primary function, only a third of finance respondents think procurement actually leads on cost saving drives, the vast majority seeing it as a support function to finance-led initiatives.

In contrast procurement’s view of finance was better. Some 46 per cent of procurement respondents cited a ‘very close’ relationship with finance, compared to only 22 per cent of finance saying the same about procurement.

Reassuringly finance believes procurement has the potential to deliver greater business value, with a high proportion of finance respondents feeling procurement merits a position on the board.

With such a major perception gap to contend with, how can procurement professionals build a closer relationship and ensure an improved reciprocal understanding?

It’s a complex issue, but there are some simple steps that can make a big difference:

Make some noise. Procurement is notoriously shy about singing its own praises, but without a clear demonstration of returns, business impact, savings and other achievements there is little chance of anyone understanding its value. Tools such as e-sourcing, analytics, SRM and savings trackers can be priceless in helping automate, illustrate and ratify achievements for comparatively small investment.

Establish clear ownership parameters. Assign key activities to one department as the clear leader, basing your decisions on team strengths and fit. This will prevent fighting over who leads what and ensure that credit accrues accurately to the leading team.

Collaborate on technology use. Procurement and finance too often take a silo view of technology. Ensure finance is involved in implementing the new tools alongside procurement so that you realise the benefits jointly and are more likely to use them collaboratively.

There’s no doubt finance-procurement relationships would benefit from better collaboration, and it’s up to those in the profession to help finance understand the wider purpose of procurement and appreciate how it maintains and improves business performance. Hopefully then finance can develop a more positive understanding of the important functions that procurement delivers and the outcome for the whole business can be greater.

Daniel Ball is director at Wax Digital

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