One never really knows what the coming business environment will hold. We are in the midst or quite possibly at the tail end of one of the longest market expansions in modern times. History tells us one thing, nothing lasts forever. Given this undeniable truth, it behooves organizations to plan and take appropriate steps for market and economic changes that may lie ahead. We have most recently seen heightened volatility on a much more regular basis than may be becoming more of the norm than the exception. Along with this, tight and uncertain credit markets ensure that having cash and maintaining direct access to it will remain a priority of the first order for most finance and procurement leaders over the next few years. This has resulted in a business environment that allows for much smaller margins of error than in earlier times and means that many organizations will face a constant evaluation of business processes and cost structures that are designed to squeeze every last dollar out of operations.
These strong business forces have helped to align the focus and agenda of the Chief Procurement Officer (CPO) with the top priorities of the Chief Financial Officer (CFO). They have also helped awaken many CFOs to the large opportunities that exist within the Procure-to-Pay (P2P) process to support key enterprise strategies. It has become increasingly clear that for an enterprise to achieve operational excellence within both its procurement and finance operations, the CPO and CFO must enjoy the benefits of a healthy inter-departmental partnership and achieve alignment on cash management, savings, and P2P performance. To this end, we look below at five ways that the CFO-CPO relationship can be strengthened or improved.
Five Ways to Improve the CPO-CFO Relationship
As more CFOs and CPOs gain awareness regarding the opportunities that exist within their current P2P operations and begin to champion P2P transformation initiatives, more enterprises will invest resources to improve and ultimately automate the function by deploying P2P solutions. Ardent recommends the following strategies and approaches for CFOs and CPOs seeking to form a more perfect union within their P2P operations.
- Formalize the finance and procurement partnership – If the partnership between finance and procurement is going to be long-term and meaningful, it is vital that both groups are on the same page as it relates to their responsibilities, goals and objectives. These areas (and the larger relationship) should be developed in a formalized manner with regular interactions and status checks.
- Link and automate a holistic P2P process – An ability to compete with the Best-in-Class for P2P gold takes practice, determination, and focus. Individuals and organizations must strive for greatness if they are to achieve it, or even begin to approach it. One game-changing strategy is to automate and link the entire P2P process. If technology budgets today are not available, start by manually, but holistically, linking the processes together. Then work aggressively to build a strong business case for change.
- Design for Success – The development of a Best-in-Class P2P program takes among other things, sponsorship, effort, collaboration, vision, expertise, and a supporting technology infrastructure; superior program design also remains a critical element in the speed and level of P2P excellence and financial agility that is ultimately achieved.
- Set aggressive supplier enablement goals and leverage third party assistance when needed – Against the backdrop of rapidly evolving supply chains, how organizations communicate, collaborate, and transact with their trading partners and the enabling platforms that they utilize take on increasing importance to business operations. Leveraging solutions and solution providers that enable more suppliers, more quickly, accelerates the “time to value” in a P2P initiative and allows the trading partners to divert resources away from the tactical aspects of the relationship and focus on the more strategic ones.
- Mine the hidden cash trapped within the P2P process – The establishment and implementation of advanced cash management strategies can be extremely valuable to the financial stability and well-being of the enterprise; it also provides a great reason for procurement and finance to collaborate. Cash management must become a core competency for all finance and procurement teams.These two groups should collaborate in the development and execution of cash management strategies that include B2B payments, early payment discounts, supply chain financing, spend analysis, sourcing management, contract compliance and more.
Conclusion
An increasing number of CFOs and other executives have made the realization that an operating environment that values cash, profit margins, and risk mitigation is one that that plays to the primary skills and capabilities of a P2P operation. For enterprises striving for P2P excellence and for financial agility in its management of cash, collaboration between finance and procurement is now a requirement. Solutions that automate the P2P process can provide an ideal platform for this collaboration between the functional partners while also serving to help unify and focus the two teams on the most pressing enterprise objectives.
