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How Finance and Procurement Can Work Better Together to Drive Efficiency
When the finance and procurement teams work separately, it can take longer to get approvals, go over budget, and miss chances to save money.
But what if they work together as strategic partners? Companies can make choices faster, work better with suppliers, and make more money.
Having the finance and procurement teams work together gives you an edge over your competitors.
Before, finance was more about keeping costs down and making sure that rules were followed.
On the other hand, procurement has been more about finding suppliers and making deals with them.
But as efficiency and flexibility become more important, their jobs are becoming more and more linked.
Whether it’s making the purchase-to-pay process easier or making spending decisions right away, working together is the key to success.
This article talks about why finance and procurement need to work together, what gets in the way of this, and how to make your workflow more connected and data-driven with the right tools and processes.
Why Finance And Procurement Need To Work Together?
Even though finance and procurement manage different aspects of the business, it is crucial for them to work together for the overall success of your business.
Firstly, let’s focus on the work of the finance team. They are responsible for managing the cash flow in the organization — handling budgets, monitoring money, and payment schedules.
On the other hand, the procurement team focuses on getting the best deals on goods and services, maintaining supplier relationships, and meeting the business needs.
Now, it is apparent, like the day, how both teams work on similar goals but different processes. So, they need to communicate to ensure that the organization’s goals are met.
For instance, with the proper communication, you can mitigate syncing issues, budget issues, and slow business processes. Reducing the risk of losing money and reputation.
So, when the two teams work together, they make a closed-loop system that helps in managing budgets and vendors. Making financial reports more efficient and informative.
Key Areas Where Finance And Procurement Work Together
To keep things running smoothly and add value to the business, the finance and procurement teams need to work together in a few important areas.
Finance and procurement teams can get more done, lower their risk, and keep track of all their spending from request to reconciliation by working together in these key areas.
This is where working together really helps:
1. Budget Planning And Forecasting
Finance looks at the company’s finances as a whole, but procurement knows a lot about what the company will need to buy in the future.
When these groups work together to make budgets, they make sure that decisions about what to buy are in line with the organization’s goals and cash flow projections.
People can save money before they sign contracts if they work together early on.
2. Supplier Evaluation And Onboarding
When picking vendors, finance looks at things like compliance, payment terms, and the risk of working with a supplier. Purchasing looks at quality, price, and how well something works.
Businesses can lower their financial risks and build strong relationships with their suppliers by working together to set standards for suppliers and the onboarding process.
3. Purchase Approvals And Compliance
When there aren’t clear ways to get things approved, people often spend too much money or take too long to buy things.
Finance and procurement should agree on the paperwork that needs to be done, the minimum and maximum amounts, and the order in which approvals should happen.
Automating these steps makes sure that purchases follow both internal and external rules without any delays.
4. Invoice Management And Payment Cycles
When the finance and procurement systems aren’t connected, it’s common for invoices to be wrong, payments to be late, and entries to be made twice.
When both teams can see order details and vendor contracts, they can automate matching invoices, which makes it easier to pay.
This not only makes vendors happy, but it also gives them discounts for paying early and reduces the need for manual rework.
What Tools Bridge The Gap Between Finance And Procurement?
Most of the business operations can be managed together. However, to combine finance and procurement, you will need certain tools that support their overall integration.
For instance, if your company is still relying on old and traditional digital tools for interdepartmental communication, the process will be delayed.
Moreover, there will be mismanagement of data inputs and approval requests. Maybe the finance and procurement department input the data twice. This way, you will miscalculate the result.
So, you need to incorporate integrated tools and solutions that will help in integrating the processes of both departments. And, help them to run efficiently.
Modern procure-to-pay software is a single platform that lets finance and procurement teams handle the whole buying process, from request to payment.
So, you don’t need the entire manual supervision for the management of the customer buying process. This way, you can reduce the chances of making an error.
Moreover, the new integrated system lets you check the data on purchase orders. So, the finance team can look into the budgets and the procurement team can choose the vendors.
Additionally, this integrated model will help you to monitor the budgeting and automate the payment schedules. So, it provides a one-stop place for requests and payment invoicings.
And, you get to make informed decisions on the workflows based on the invoices. Making the overall process faster and efficient.
Combining Finance And Procurement For Business Success
Remarkable as it may seem, when you can combine procurement and finance, you can cross the limits of business success. However, it is not possible without the agreement of both teams.
So, they need to have an open conversation on how things will be done, what the plan flow is, and when the products need to be delivered.
With the combined teams, you can easily work together to save money, achieve business objectives faster, and make informed decisions.
So, set the right goals and align the combined efforts to get the business success you need. And, with tools like the procure-to-pay software, bridge the gap and enhance your brand visibility.
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