3 Reasons Why Finance And Procurement Don't Get On

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Editor Coda
Jul 23, 2013

I remember selling e-invoicing to shared services organisations, and always feeling slightly surprised at the first meeting. As I walked up to people in the room to shake their hand and say hello for the first time, Finance would be busy shaking Procurement's hand and vice versa. It was often the first time they had ever met. No wonder, I would tell myself, the world of purchase to pay is so backward. It's such a broken process when carved up between these two silos and the disconnect is damaging. So why is this?

Number 1: Finance and Procurement often have different mindsets. Finance, in many organisations, is seen as a cost, and not strategic enough. A bit of a necessary evil in some organisations. Sucking cost and resource out of the business without giving anything back. Procurement, on the other hand, is full of champions and heroes. They are the white knights that save the company from poor quality products, high spend and bad suppliers. Hoorah for Procurement! is the Procurement motto in many organisations. So, reason number one is MINDSET. Finance and Procurement in the same room can be awkward. Perhaps Finance resent Procurement, and Procurement feel a little superior. The possibility of them actually working together can fill many a Finance professional with a sense of horror.

Number 2: Procurement, and perhaps Finance, don't 'get it'. In many companies Procurement still don't realise the implications to the rest of the business when they don't raise POs. They often fail to see that cash flow forecasting becomes difficult when visibility of commitments is poor. They often fail to see that a PO based invoice can cost 15 times less to process than a non PO. And they often fail to see that if they raised POs properly, they would have a much better grip of their spend management.

Number 3: Procurement is too busy firefighting. For Finance and Procurement to come together, they need to lift their heads out of the trenches of everyday life and realise that a union will actually make their trench wider, more streamlined and stronger, should the trench exist at all! But to get the attention of both functions, and have them operate as one can often be a huge undertaking. It is, effectively, a re-organisation. And this word for many back office functions, can be deemed as terrifying.

The results of alignment are significant. Higher first time match; lower cost per invoice; higher electronic conversion; better payment on time; better cash flow forecasting; better spend management; channeled spend leading to more attractive deals; overall spend reduction; early payment discounting; better control on working capital. The net effect of this can be worth tens of millions per annum to a company.

 

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