28 May 2010 | Steve Still
Procurement departments bypass finance officers in more than half of companies, a survey has revealed.
The annual Cost of Control report, which hopes to shine a light on the views of finance departments globally, said the problem undermined confidence in financial data and meant long-range cost management was difficult.
The second study of its kind published by purchase-to-pay software company Basware asked 550 finance executives around the world for their opinions and priorities.
Of those quizzed, it found 51 per cent of procurement teams reported directly to the board, which it concluded left CFOs in the dark and caused “poor visibility of key financial information”.
Professor Markus Maedler, who worked on the report, said the limited visibility left businesses struggling to make informed decisions and effectively forecast and manage costs.
In 27 per cent of cases procurement reports to finance with board visibility, and in only 15 per cent of cases would the departments report to finance with no board access.
Businesses surveyed also revealed 61 per cent of overall company spend is managed by the procurement department.
Maedler said: “In its second year, the Cost of Control report is picking up on the growing realisation among finance professionals that there is something utterly wrong with the internal visibility to financial information at many companies.
“CFOs are concerned that they do not have crucial information about where pockets of profit and risk reside. Successful cost management, efficiency improvements, inter-departmental collaboration and ultimately, company profits and risk, all rest on the same anchor of good financial information.”