The role of procurement in finance has increased in importance over recent years. The demand for collaboration between finance and procurement departments is needed now more than ever to improve productivity, efficiency, strategic planning, better decision-making and understanding of the consumer landscape.
There is a need for a stronger relationship between buying and finance departments, for businesses to succeed, and as citied by the Chartered Institute of Procurement & Supply (CIPS), “2023 is shaping up to be a challenging year for chief procurement officers”. Alignment between internal finance and procurement teams will be essential when tackling common issues and uncovering the ability to meet the more strategic goals that drive success in businesses.
Implementing procurement into your financial strategy
Traditionally, procurement falls under finance due to the nature of acquiring goods and services for a business. Unfortunately, it is common to find that despite this link, many procurement and finance teams still lack the basic collaboration needed. They encounter issues with data silos, a lack of visibility, poor communications between people and technologies, which makes it difficult to work efficiently and can get in the way of key deadlines or supplier payments, for example. There is also sometimes a limited understanding of the procurement responsibilities and the impact that the procurement team can have on improving risk management, compliance, and strategic planning for an organisation. These team members are not just focusing on securing the best deal with suppliers, although they can do that too!
In most organisations, the procurement team highlights your spend management, analyses risk, and ensures you spend your money well. The finance team ensures profitability and tracks budgets/forecasting. Greater collaboration between these two functions ensures you get a bird’s eye view of your whole organisation.
Here are the top 5 reasons why procurement should be an important part of any financial leader’s strategy:
1. Cost Savings:
Procurement teams can help save the business money by negotiating better prices for goods and services. By leveraging the buying power within procurement, financial leaders can get better deals from suppliers and reduce costs. This can have a direct impact on the bottom line.
2. Risk Management:
Procurement can help financial leaders manage risk and compliance by ensuring that there is increased visibility of the supply chain, the right suppliers are chosen, with aligned principles that support those of your organisation such as ESG agendas, and that contracts are properly negotiated. This can help protect the company from potential legal and financial risks. Additionally, adoption of technology and automation of the core AP processes in procurement can also help mitigate risk, by removing more possibilities of human error throughout mundane manual data entry/handling. You can learn more about how Advanced supports this through cloud technology.
3. Efficiency:
By having a well-defined and streamlined procurement process, financial leaders can ensure that the right goods and services are purchased at the right time, and at the right price. With additional automation you can ensure all payments are made on time, which will enhance efficiency and supplier relationships.
4. Strategic Planning:
A responsibility of the procurement team is to understand the current market and anticipate future trends, which includes having great knowledge of the current supply chain and spend that your business carries out. Aligning these findings with financial leaders ensures that they can make informed decisions about which suppliers to use and which contracts to negotiate.
5. Increasing productivity:
By connecting finance and procurement processes, and taking advantage of modern technology, businesses can increase the visibility of cross-function data and workflows. Meaning that finance and procurement teams are able to collaborate more efficiently and at a faster pace. This can help businesses/organisations to reach their strategic outcomes quicker.
How can technology improve these collaborations?
Advanced’s Finance and Spend Management software aims to alleviate the pains that finance and procurement professionals face on a daily basis. For example, we can address concerns around the continuation of hybrid working and support this new model through cloud powered technology, meaning that work is globally accessible by all, at any time. This enables further collaboration around the clock. Advanced also drives you to reach strategic goals through greater alignment of teams and technologies, automated services, increased productivity in workflows or core processes, and more organisational transparency for enhanced control in decision making.
Specifically, we understand that for many organisations, having complete oversight of spending allows for increased control, increased efficiency, a greater relationship between procurement and finance teams, and a complete review of internal processes to highlight when and where investment is needed to improve business operations. Our Finance and Spend Management solutions better align finance and procurement teams, to reach a greater understanding around the value of spend. The value is in how organisations spend, not just what they spend.
Would you like to learn more about how our solutions at Advanced can help you to improve collaboration between your finance and procurement teams? Find out more here: Spend Management Software | Advanced (oneadvanced.com)