Difference between Finance and Procurement

Finance is from Mars, Procurement is from Venus

Despite sharing financial processes, software systems and one commonly reporting to the other, finance and procurement teams often behave like they’re from different planets, suggests new research.

Just 22% of senior finance executives say that they work ‘very closely’ with their procurement counterparts, in research conducted by Redshift on behalf of eProcurement software company Wax Digital. In contrast 46% of procurement people said their relationship with finance was very close, but finance is also twice as likely to see the relationship as ‘not close’.

The research study questioned over 200 senior decision makers in procurement, finance, IT and sales and marketing about their respective relationships and working practices.

Additionally only 12% in finance view the procurement team as highly effective in their role and only 6% said that supplier selection is a joint decision between its own managers in partnership with the procurement function.

“In spite of their common ground and position within most organisations finance and procurement seem to be suffering from some major communication gaps, with misaligned objectives also being common. Better collaboration, whether through talking to one another more, or using technology to join up processes, could help both teams deliver greater value and realise corporate objectives.”

Daniel Ball, Director, Wax Digital

In fact currently 66% of finance respondents said that procurement hinders their departments’ progress in one or more ways, almost a third citing ‘restricting the free choice of suppliers’ and a quarter claiming procurement ‘extends the time taken to process orders’.

Positively however the majority of finance functions think that they have achieved value in cost savings terms in the past 12 months, however a quarter of procurement chiefs said that finance had not saved at all. And while 66% of procurement say that they ‘led’ cost saving initiatives for the finance department, only 33% in finance actually agree.

The planets of procurement and finance are also misaligned over future spending priorities suggesting a further communication gap or resistance to where procurement becomes involved in the function’s activities. For example, finance’s most common spending priorities for the year ahead are systems (22%), real estate (20%) and employee benefits (20%), but these are all low on procurement’s list of where it intends to help finance; it has prioritised supply chain inventory (26%), facilities management (20%) and energy (18%) instead.

About the research

The CPO Viewpoint research was conducted by Redshift in 2015, involving 200 interviews with equal samples of procurement, finance, IT and sales & marketing department decision makers in medium to large UK organisations.