When it comes to buying and paying for products and services, there can be a tremendous organizational benefit in the form of spend management and bottom-line savings when procurement and finance operate in close partnership. However, a new study shows organizations have a long way to go to obtain optimal levels of collaboration in this area.
While cooperation between finance and procurement is growing, there’s still be room for improvement. Nearly half of those surveyed agreed there was a need for greater collaboration between CFOs and Procurement. In today’s enterprise, both Finance and Procurement can deliver significant value in areas that impact the bottom line such as supplier relationship management, contract management and strategic sourcing.
61% agree there are “many” areas for improvement in strategic procurement. A lack of strategic collaboration between finance and procurement can mean missed savings, lengthy and fragmented contract negotiations and other missed opportunities to gain financial benefit for the enterprise.
32% say their CFOs wield great influence in the enterprise to boost strategic procurement initiatives to ensure procurement is giving the support and resources it needs.
33% say their CFOs only ‘partially’ help in refining procurement policies. As a result, organizations are missing out on opportunities to dramatically reduce the cost of the goods and services.
Proactive teaming between the CFO and CPO is integral to building a world-class supply management capability focused on capturing a competitive advantage from the company’s largest cost – say A.T. Kearney experts in a recent CFO.com article. According to the firm’s 2017 Assessment of Excellence in Procurement study, pro- procurement collaboration leaders are capturing a wealth of value, including nearly three times higher return on supply management assets. In addition, they are seven times more likely to experience a high impact from innovation.
Innovative organizations are recognizing the need to streamline procure-to-pay (P2P) processes so they can seize spend management and bottom-line savings opportunities, and leapfrog market Laggards and quickly propel themselves into the Leaders category. Arming the enterprise with the ability for suppliers to dynamically request early-pay discounts fundamentally changes the game, providing a win-win for both sides of the P2P value chain (fostering business enhancing relationships). It delivers the fastest payments to suppliers, while maximizing discounts (i.e. cash returns) for buyers – easily exceeding traditional (slow time-to-value) investment alternatives.
To maximize the potential of this paradigm shift, dynamic discounting needs to be coupled with next-gen invoice automation to ensure companies capture every possible discount available.