Dynamic and competitive economy forces companies and also market leaders to constantly strive for the improvement of their performance. Procurement process optimization is one of the methods for achievement of that goal. Especially high potential in this respect is hidden in the capabilities of improvement of cooperation between procurement and financial departments in a given enterprise.
First of all, proper flow of information
Procurement department is responsible for the supply of all products and services to a company, which are necessary to achieve its business goals. The more the procurement department is aware of the company financial standing, the more effective and economical its activity is.
For example, if the enterprise has currently cash reserves, the procurement department may order a larger batch of products at a higher discount rate. The procurement department may also propose earlier repayment of liabilities to suppliers in consideration of an additional discount.
However, if the financial department informs that problems with liquidity may occur in the near future, the procurement department will negotiate the extension of deadlines of upcoming payments with suppliers, so that the company situation related to the liquidity doesn’t deteriorate even more.
The negotiations with suppliers in such situations are, as a rule, much more profitable and efficient than sudden seeking for opportunities to obtain additional cash means fast, e.g. from banks.
In order to maximize its contribution to the enterprise success, the procurement department should not only be provided with information about the enterprise financial standing by the financial department.
The company financial director has, as a rule, excellent knowledge about the enterprise priorities. If he submits that data to the procurement department manager, it will be possible to develop, e.g. an optimal procurement strategy for different groups of products and services which are necessary for the company.
The financial department has usually the required knowledge for hierarchizing the enterprise procurement demands, thanks to which a procurement division can organize the supplies of products and services while maintaining relevant priorities.
Cooperation as a key to optimization in many areas
Obviously, these are only the examples of how the cooperation of the procurement and financial departments may improve the company functioning. The research conducted among the IT, finance and procurement managers during the Marketplanet OnePlace conference (Sopot, March 2016) confirms that such cooperation provides the capabilities of optimizing the company actions in many areas, e.g.:
- budget control and management (26% of indications);
- expense analysis (25%);
- agreement management and settlement (23%);
- cashflow forecasting (14%);
- obligation fulfillment (12%).
Good organization of a procurement process resulting from the cooperation of the procurement and financial departments will be possible in practice only if the enterprise implements proper IT solutions.
Nowadays, modern procurement software supports not only procurement planning and procurement project management, but also communication with suppliers, their qualification and assessment, automatic processing and handling of invoices and agreement management, as well as tender management, also pursuant to the Public Procurement Law Act.
Good cooperation between the procurement and financial departments does not only depend on the will of the company management board or the managers of individual divisions, but also on whether they have proper tools in this respect.
The lack of such tools or implementation of ineffective solutions may result in the situation that instead of gaining the afore-mentioned numerous benefits, the company has organization problems arising from the misunderstanding between the procurement and financial departments.