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Why Are Procurement And Finance On Different Tracks?

Why Are Procurement And Finance On Different Tracks?

 By Ellen Leith, January 28, 2014, Procurementleaders.com

 

 

 

 

 

 

In this guest post, Procurement Leaders invites Accounts Payable News’ Ellen Leith to look at the disconnect with finance and why some organisations are seeing benefits from aligning procurement and finance under P2P.

If you happened to go to any conferences covering Purchase to Pay (P2P) last year, it’s likely that at some point you’d have heard, or taken part in a discussion about the extent of collaboration between the different areas of finance, Accounts Payable (AP) and procurement. It should be obvious that if, as an organisation, you’re trying to increase efficiencies, and are perhaps in the process of better P2P workflow implementation – that the different areas of purchase to pay should function well, interact well; cross-department.

And yet, for the most part, procurement and finance have developed separately, with different and sometimes conflicting KPIs, reporting to different areas of the business – and in many organisations, now operate entrenched in their own siloes. And once something becomes entrenched, it becomes part of the culture, until it simply becomes “the way things are done”.

However, the downturn in the economy, coupled with increased technical capabilities has driven a trend towards closer co-operation. In a manual environment, finance and procurement may exist almost in isolation, but the truth is that the activities of each can have a related and wide-ranging impact on the organisation’s bottom line. The increased visibility that comes with the implementation of technology, particularly in terms of being able to measure key metrics, has had the effect of pushing an underlying opportunity into the daylight.

These days, those working within the different departments can’t afford to view themselves as separate entities. A lighter, more agile workforce needs to use all the tools at their disposal to make sure the team runs efficiently and cost effectively. Of course, moving from a siloed environment to a more integrated one is never going to be a simple transition – but by far the most difficult element of the change to manage is cultural. And in a challenging business environment, it’s always tempting to keep things the way they are. Involving all stakeholders, not just C-Level executives at the start of the process is an essential part of the change management programme.

And yet an organisation today is far more likely than it was in the past to have a head of P2P, or a global process owner overseeing the area as a whole. And in a research piece commissioned by APN last year, we found that where an organisation was headed up by someone with that remit, there was a corresponding success rate in purchase to pay functionality and collaboration. In fact, one national bank has stated that it plans to go one step further this year, and following a successful transformation piece last year, plans to house all the areas of P2P in one area with no distinct divisions – just one Purchase to Pay department.

While there’s still some resistance to collaboration, the results for those who see the benefits and are able to drive cultural and process change forward are apparent. As one head of P2P who was speaking at a recent APN roundtable workshop put it; “A dysfunctional finance team cut off from procurement is like a pantomime horse – the back end follows the front, but they’re not really sure where or why and the front is blind to whatever chaos is following in its wake.”

She concluded: “The simple fact is that a team which is connected works better, produces better results, saves money and has better overall visibility, which of course also helps in terms of compliance.”

Ellen Leith is the editor of Accounts Payable News.

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