Executive Briefings

Procurement and Finance Groups, Unite!

This has been a tough year for procurement groups, with gaps still found in their alignment with finance organizations. In fact, only 52 percent collaborate or facilitate cooperation with their finance partners, according to a recently AMR Research survey with 78 organizations. In another survey with over 800 firms conducted by a spend management company, 31 percent rated their procurement organizations' relationships with finance as non-existent or weak. And while procurement is typically the leader across the organization for spend management initiatives, only 33 percent of procurement departments partnered with finance groups to develop and execute improvement initiatives that furthered the success of their company.

Collaborative relationships drive sustainable enterprise performance value, directly reducing expenses as well as improving working capital and margins.

In a recent webcast, attendees noted that economic uncertainty has driven 57 percent of organizations to proactively develop plans that focus on strengthening their relationships with suppliers and internal customers, one of which is finance. Procurement groups often struggle with how to prove that their cost containment and savings have hit the right budgeted areas and impacted product costs. Although cost reduction projects are driving real value into the enterprise, they're often hidden within business unit and division numbers. For example, the benefits that operations gain from cost containment and savings are positive, but most organizations take this great work done by the procurement group and bury it in the numbers so that the division as a whole shines in the spotlight. This typically means that procurement's work isn't recognized as achieving results and breeds discontent as a result.

Finance is then added to the mix to verify the numbers. In most cases, the group finds unaudited plans and reported savings, in addition to the savings results hidden and buried in operational results.  Although it recognizes that procurement has done the cost savings plans and execution for operational efficiencies and improvement to costs of goods sold, the finance group hasn't typically been involved in the front end of the cost savings and working capital improvement process, which means it's backtracking and auditing the activities of procurement. As a result, procurement organizations spend more time defending themselves on their reported numbers versus improving their business performance and results. Unfortunately, these two functions become defenders of their own turf and business processes, instead of cooperatively working toward business performance improvements.

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This has been a tough year for procurement groups, with gaps still found in their alignment with finance organizations. In fact, only 52 percent collaborate or facilitate cooperation with their finance partners, according to a recently AMR Research survey with 78 organizations. In another survey with over 800 firms conducted by a spend management company, 31 percent rated their procurement organizations' relationships with finance as non-existent or weak. And while procurement is typically the leader across the organization for spend management initiatives, only 33 percent of procurement departments partnered with finance groups to develop and execute improvement initiatives that furthered the success of their company.

Collaborative relationships drive sustainable enterprise performance value, directly reducing expenses as well as improving working capital and margins.

In a recent webcast, attendees noted that economic uncertainty has driven 57 percent of organizations to proactively develop plans that focus on strengthening their relationships with suppliers and internal customers, one of which is finance. Procurement groups often struggle with how to prove that their cost containment and savings have hit the right budgeted areas and impacted product costs. Although cost reduction projects are driving real value into the enterprise, they're often hidden within business unit and division numbers. For example, the benefits that operations gain from cost containment and savings are positive, but most organizations take this great work done by the procurement group and bury it in the numbers so that the division as a whole shines in the spotlight. This typically means that procurement's work isn't recognized as achieving results and breeds discontent as a result.

Finance is then added to the mix to verify the numbers. In most cases, the group finds unaudited plans and reported savings, in addition to the savings results hidden and buried in operational results.  Although it recognizes that procurement has done the cost savings plans and execution for operational efficiencies and improvement to costs of goods sold, the finance group hasn't typically been involved in the front end of the cost savings and working capital improvement process, which means it's backtracking and auditing the activities of procurement. As a result, procurement organizations spend more time defending themselves on their reported numbers versus improving their business performance and results. Unfortunately, these two functions become defenders of their own turf and business processes, instead of cooperatively working toward business performance improvements.

Read Full Article