Generally, different departments in an organisation work individually and strive to fulfil their unique goals and functions. However, as organisations have come to realise, prioritising the objectives of a company as a whole not only improves the way teams work but also provides a sense of purpose and direction to the employees. Even though finance and procurement departments are so heavily intertwined, they tend to work individually, which hampers the company’s overall productivity.
So how can a finance executive get these departments to collaborate well? An executive finance online course is dedicated to teaching new and aspiring finance executives the ins and outs of the role of a CFO and how they can make various departments cooperate to further the goals of the company.
In the following post, we take a detailed look at the relationship between the procurement and finance teams and how a finance executive can help them cooperate better in an organisation.
Are the roles of finance and procurement departments radically different?
Finance and procurement departments serve different purposes in an organisation. The procurement department is responsible for sourcing the raw materials required to sustain operations while saving money for the business. In organisations with significant supply chain operations, procurement teams provide crucial information on suppliers and vendors, allowing contract managers to plan their spending ahead of time.
On the other hand, the finance department sets spending limits and is responsible for paying whatever the procurement teams order for the business. They are also required to create fiscal management and revenue reports and tabulate any other information surrounding the financial health of the business.
When you look at the larger picture, the roles of procurement and finance teams are heavily intertwined. Finance teams decide spending limits and procurement teams ensure that the products they get are within the budget. Procurement teams analyse the revenue reports to make smarter decisions and support their daily operations. Online finance courses help aspirants understand these processes better.
However, it is these same intertwined roles that create complexity when these departments want to collaborate on a feature. With a ton of data being generated at each step of the process and a ton of processes happening concurrently, it is difficult to keep track of everything without implementing proper technologies. An executive finance online course is designed to help aspirant CFOs drive the digital revolution and manage all the data more efficiently.
How to get finance and procurement teams to collaborate well?
In an efficient organisation, finance and procurement teams must support each other to plan a spending budget for procurement teams and conduct financial analysis. Executive finance programs can provide the insights necessary to drive this collaboration more effectively. Here are the key areas where finance executives must focus their efforts.
Align key performing areas
One of the first duties of a modern finance executive is to understand the departmental goals of finance and procurement teams and the reasoning behind them. While it is necessary for teams to collaborate, each team has their unique functions and objectives that it must fulfil. For instance, procurement teams should be able to identify and understand the impact of their business decisions on the ROI.
Similarly, finance teams need to understand the reasoning behind the facets that the procurement teams prioritise, i.e., vendor relationship management and cost avoidance. When the two teams collaborate, they can demonstrate a net positive impact of their actions on the organisation’s proceedings.
Clarify responsibilities, but stay empathetic
To facilitate effective collaboration, it is crucial to set up responsibility parameters on either side and outline who is responsible for what. Activities should be assigned depending on the team’s strengths, which ensures that nobody is doing more than required. However, on a complex topic like expenses, where each team has an inherently different approach, it is especially important for either side to be empathetic to the other side’s position.
Finance teams prioritise accounts payables, spending, and invoice processing, while procurement teams prioritise compliance, supplier relationships, and negotiations. For the most effective collaboration, each team needs to understand how the other side views expenses and implement the best practices.
Set spending goals together
We have discussed the roles of the finance and procurement teams above. For finance teams to set realistic budgets, it is crucial for the procurement teams to be involved in the process. Procurement teams view “cost savings” as a decrease in the price of the commodities, while finance teams equate cost savings with year-on-year savings.
If two teams do not collaborate when setting budgets, the finance team will be essentially blind to the insights that the procurement teams have. They might allocate a budget more than necessary, leading to waste, or they might set unrealistic limitations without considering price fluctuations.
Enable emerging technologies
A modern finance executive is expected to embrace emerging technologies for automating processes and centralising data. When the entire organisation is equipped with technologies for automating workflows, the collaboration process will become much smoother and more efficient. Both teams will have real-time visibility into the insights that either team have, allowing the organisation to improve contract adherence and expense management.
Backed by emerging technologies, modern organisations can make secure on-time payments and even early discounts in certain situations. In addition, procurement teams can identify supplier performance and avoid partnering with those who do not offer the best value.
Discuss payment considerations
Finance short courses online will help you understand that the perspectives of procurement and finance teams when it comes to payments are vastly different and do not align. It is crucial for either team to understand and embrace this difference. If both teams are stern in their stance, it can lead to strained supplier management.
In such scenarios, both teams need to work together to address payment issues and align on at least a few aspects. Finance teams need to understand the downsides of certain cash flow strategies and construct a more balanced cash strategy. Only then can procurement teams maintain positive relations with the vendors and negotiate better deals in the long term.
The traditional approach of finance and procurement teams working individually works, but is by no means the most productive and efficient way of handling operations. While the functions of these two departments are different, the net objective is to drive the profits of the company and for that to happen, these departments will need to collaborate and set goals together. An executive finance online course can enable aspirant finance executives with the skills needed to ensure that finance and procurement teams work as partners to achieve common goals.