More collaboration benefits finance and procurement functions
New research from Proxima finds that tighter collaboration between finance and procurement departments can unlock a range of benefits. Edward Winterschladen, an Executive Vice President for Europe at the procurement consulting firm, explains why.
Proxima’s survey of finance leaders of both sides of the Atlantic reveals that the finance function – now pivotal to setting business strategy and in many cases the ‘right-hand’ of the chief executive – is increasingly appreciating the value of procurement. Over half of finance leaders (54%) said that good procurement practices are imperative to the financial success of their businesses.
A further 44% described good procurement practices as ‘quite important’, with only 1% and 2% respectively saying they were not important. This clearly demonstrates that the vast majority of finance leaders already see how important good procurement is to their company.
But what do they value most? The research found that finance leaders were most likely to describe procurement as a ‘savings delivery function’ for their business. This reflects what many in the procurement industry have seen in recent years – the procurement function is considered by the C-Suite as a way to drive down costs.
It could be argued that some of the turmoil we have seen in recent months in the business world comes back to this point. For too long many finance and business leaders have focused relentlessly on costs, at the expense of having supply chain visibility and resilience. This has been shown by the Covid-19 pandemic to be short-sighted.
While finance leaders surveyed describe procurement as a ‘savings delivery function’, they also said that procurement should in fact be measured against ‘revenue generation’. This suggests that the mindset is certainly there among finance leaders for views of procurement to shift.
From costs to strategic value
It is now up to procurement leaders to seize this opportunity. In many organisations that will have already started. In our industry conversations in recent weeks it has been notable how business leaders have admired how procurement has really stepped up to the table in helping manage the impact of Covid-19.
While the immediate business survival period is beginning to subside in many organisations, there are new challenges that procurement is at the heart of tackling. This includes how to manage risk around the uncertainty of how the coming months will unfold. But in some cases it will also mean supporting major changes to how a business operates or launching entirely new workstreams in an extremely short period of time.
This all means that collaboration between finance and procurement leaders has never been more important. For companies to make the most of the opportunities that the coming months will bring then a new relationship, which is based on understanding how procurement can add value and not just cut costs, will need to be forged between finance and procurement.
The use of data to facilitate this cooperation is key. More than half of finance leaders reported that ‘most of our decisions’ about the business they work in are data-led, with better use of data enhancing the decision-making process for strategy and operations. However, as it stands, a notable cohort of finance leaders are not having access to both timely and accurate supplier data, impacting on their decision making.
