Solidifying procurement’s seat at the finance table

Strategic sourcing has traditionally been tasked with achieving savings for the organization. From a procurement point-of-view, those savings can come in many flavors. However, from a finance point-of-view, there’s only one flavor: what’s on the bottom line.

This disagreement on savings definitions and target amounts leads to further misalignment on the true savings picture for the organization. In some instances, the savings reported by procurement are considered fictional. Over time, this turns a strategic function into a tactical one that’s seen as “just the buyers” with “savings that aren’t real.”

A strategic procurement function, though, can steer the organization through smart spend management acumen—earning a seat at the office of finance’s decision-making table. It prioritizes risk mitigation, relationship management, and trusted partnership for innovation in the supply base. At the same time, it troubleshoots economic pressures and supply chain difficulties and collaborates with other parts of the business.

Bridge the gap

The Chief Procurement Officer (CPO)’s main goal is straight forward: Get the right thing to the right place for the right price at the right time with little to no risk. The trick is to do that while also driving on-time payment and transparency through the entire process.

On the flip side, the Chief Financial Officer (CFO)’s focus is on when cash will come into the organization through sales, the best thing to do with the funds coming in, when cash will go out via payments, and all assets between those milestones.

Find common ground

Here are a few shared interests to start with:

• The CPO wants supply chain continuity, visibility, and savings creation. The CFO wants to navigate economic uncertainty. Collaborating on the overall organizational approach to cashflow, risk tolerance, and ESG drivers—from a finance and procurement point of view—is essential to the procurement team achieving aligned and real savings. This includes proper risk mitigation, transparency into the process, and diversity in your supply chain. It also helps you negotiate savings and be resilient, especially in uncertain times.
• Both parties want to see digital transformation. This drives a better user experience; supports proper accounting, reconciliation, and reporting of cash and assets; and enables automation of repeatable tasks.
• Both teams need top-notch talent and are balancing the role of technology in daily activities with the expectations of these team members.
• The impacts of remote working weigh on both teams. CPOs need to determine how spend will continue to shift to support remote work. It’s on them to provide effective and efficient spend management approaches to these categories (and that includes how to avoid everything being charged to a personal credit card). Meanwhile, CFOs face the challenge of how to make offices an asset instead of a liability.

Become a united front

Together, CFOs and CPOs can accomplish great things. Here are three examples:

• The CFO is making critical decisions to prepare for economic uncertainty. With an understanding of the most important levers for cashflow and costing, the CPO can find ways to meet changing demands and drive the CFO’s plans to completion.
• The CPO’s activities and decisions directly impact the office of the CFO and the organization’s overall financial standing. By aligning master data across the entire landscape, everyone works from the same source of the truth and is empowered to take actions based on those insights.
• Connecting technologies and related processes across teams will allow all sides to provide tangible and usable value. It also supports integration of all procurement and finance activities.

Alignment is critical

Alignment across finance and procurement ultimately drives better profits, visibility into spend before it happens, and cash flow planning. Armed with the vision and mission, procurement can also ensure that the CFO’s desires are being met, especially around what to do with cash while it’s an asset.

Without these teams working in sync, you could end up in a situation where leadership doesn’t understand the importance of certain investments to support business operations. Aim for clear priorities as a business, so all teams are moving in the same direction.

Need guidance on how to make this a reality? Drop us a note and we’ll be in touch.