You could say procurement and finance teams are two horns on the same goat – one pointed right and the other pointed left. While they operate as distinct departments, organizations rely on both functions to move business forward. Procurement spends money, while finance focuses on profitability, which is why the groups sometimes find themselves stubbornly at odds.
But when dysfunction between procurement and finance goes unchecked, bad business outcomes follow. Opportunities are lost, procurement costs rise, suppliers walk away and revenue, in turn, falters.
In fact, a recent survey conducted by Medius explores challenges and opportunities between procurement and finance. It shows that while disconnects exist, collaboration is essential for companies wanting to build supply chains that are secure, add value and can support business growth. Following are some of the survey’s key findings, including what can be done to improve relationships between both crucial business functions, and why a better partnership is necessary for organizational success.
Supplier journey issues persist
Suppliers expect to be paid on time and when they aren’t, business suffers. Nearly one-quarter (24%) of finance respondents report customers cancelling orders stemming from inaccuracies or delays in paying suppliers. Further, 22% of procurement respondents report that late payments prompted a supplier to refuse to work with them, which forces procurement to purchase from a more costly replacement.
And unfortunately, more than half (53%) of respondents admit their onboarding process is overly complex, while most (79%) surveyed finance folks say they’ve never taken time to ensure it works as it should for all stakeholders. Put simply, unsatisfied suppliers are bad for business.
You’ve got (lost) mail
In some companies, invoices are apparently here, there and everywhere – and are often hard to locate. More than half (54%) of finance respondents report invoices are lost in the mail or in the AP system occasionally or frequently. Adding fuel to the fire, 79% of finance respondents say the sheer volume of invoices they manage has caused payment delays at least once in the last year, with 15% reporting this as a frequent occurrence. Compound the challenge by knowing that 50% of the same group say procurement occasionally fails to provide them with the information needed to pay suppliers on time.
Working better together
So far, it might seem like a lot of finger-pointing is going in, but the truth is, procurement and finance often have a good working relationship. For instance, two in five respondents claim finance and procurement work well together, although they recognize there’s room for improvement, particularly when it comes to bettering communications. When the who’s to blame cycle or the disconnected, manual or siloed systems are improved through technology, everyone wins.
The procurement-finance tug-of-war stemming from using outdated manual processes and disconnected systems that are prone to errors, omissions and backlogs in supplier payments, can be eliminated through technology.
Technology helps tame the beast
An integrated, automated accounts payable and procurement process solution – one that uses technology like AI and ML – could benefit both groups and the company as a whole. A smoother purchasing and payment process, enabled by modern technology, helps ensure invoices are more easily found and managed, suppliers are paid quicker, and disparate goals can come together to improve overall spend and cost visibility.
By integrating eProcurement and accounts payable systems, procurement and finance can unlock horns and collaborate better through connected insights, clearer visibility of processes and payments information and a more cohesive, cooperative approach to their respective roles. Because when they maintain strong supplier relationships that are improved by things like paying them on time, they can retain better business reputations that will not only make their daily tasks easier and more efficient – but boosts their company’s overall performance.