Finance and Accounting

Optimising finance and procurement collaboration for enhanced efficiency and improved budget

Cost savings and budgeting efficiency are among the top priorities for businesses operating in times of growing uncertainties and potential disruptions. However, many plans to cut costs end up being ineffective and cannot demonstrate a tangible impact on the bottom line. In many cases, the reason behind this failure is the lack of finance and procurement collaboration.

These two departments have shared goals of saving costs, improving process efficiencies, and reducing risks but work in silos, rather than with each other. This approach to treating them as two distinct entities is often the reason for many process inefficiencies and has a negative impact on the overall organisation.

Barriers to finance and procurement collaboration

Despite their different roles, there is a significant crossover between the two departments. A collaborative approach to financial planning is necessary to develop an effective business strategy, manage the supply chain, and gain a competitive advantage. However, the lack of a common language and poor understanding of the shared goals often results in a hostile relationship between the two departments.

Some of the common barriers getting in the way of finance and procurement collaboration include:

• Lack of inter-department communication
• Lack of mutual trust
• Fear of change

These collaboration barriers can result in failed cost-reduction efforts, leading to budgeting and operational inefficiencies.

Collaborative financial planning best practices

Breaking down departmental silos to foster collaboration between finance and procurement can be challenging. However, establishing clear and consistent lines of communication between the two departments is a significant first step towards collaborative financial planning. Some of the main factors the finance and procurement departments can collaborate on include:

Defining clear roles and responsibilities

Both departments take different approaches to budget and spend management. Defining clear roles and responsibilities and understanding how each team approaches different issues is crucial to avoiding confusion, aligning finance and procurement goals, and ensuring smooth collaboration.

Creating shared goals and align KPIs

Aligning the goals and KPIs of the two departments is fundamental for successfully implementing integrated finance and procurement strategies. This helps both departments understand each other’s goals, create shared objectives, and add collective value to the company.

Balancing payment terms with vendor relationships

The finance and procurement departments have different outlooks on payment considerations. The finance department wants to ensure efficient cash flow management, whereas the procurement department wants to build and maintain positive supplier relationships. Discussing these considerations is the key to achieving a balance between the two and finding a mutually beneficial solution.

Understanding inventory

Inventory management is another area where the two departments have differing goals. The procurement department wants to maintain optimum inventory levels to meet stakeholder needs and avoid stock-outs. In contrast, the finance department wants to monitor the value of holdings and keep the inventory levels low. Understanding the nuances of inventory, the consequences of stock-out and acknowledging the resources necessary to carry large inventories can help simplify inventory management and optimisation.

Establishing common language and terminology

A lack of common language and terminology is one of the biggest challenges in finance and procurement collaboration. For example, cost savings for finance may just be lowering expenses, whereas procurement may consider negotiating stable costs and value-added services as cost savings. Establishing common language and reporting terminology can help overcome this gap and build trust and accountability between different finance and procurement stakeholders.

Leveraging technology

With the right technology, collaboration, communication, and information sharing becomes easier. With an efficient integrated procure-to-pay solution, your finance and procurement team can work together to enhance visibility, reduce risk, increase efficiency, and improve budgets.

Benefits of integrated finance and procurement strategies

As businesses continue to focus on developing holistic strategies, integrated procure-to-pay solutions are fostering collaboration between the finance and procurement departments. Here are some of the key benefits of embracing integrated finance and procurement strategies for modern businesses:

• Improved productivity
• Optimised savings
• Data-driven strategic decisions
• Enhanced cash flow control
• Reduced risk
• Enhanced supplier relationships
• Enhanced stakeholder satisfaction

How can Infosys BPM help in collaborative financial planning?

As businesses strive to dismantle departmental silos and adopt a holistic approach to their strategies, integrated procure-to-pay solutions have emerged as key facilitators for finance and procurement collaboration. Infosys BPM procure-to-pay services comprise a broad spectrum of accounts payable solutions to help you manage everything from transactional (invoice management, reconciliation, and master data) to niche activities (spend analytics, procurement insights, and supply chain finance). With Infosys BPM, you can leverage next-gen technology to improve efficiency and ensure effective collaborative financial planning.