Is there a disconnect between finance teams and procurement teams? A new survey of 2,005 procurement leaders in the U.S. and the U.K. suggests there is for some companies, and it may ultimately be affecting their bottom lines.
Released Tuesday, the report from California-based contract lifecycle management company Agiloft showed that about one in 10 respondents said they have no shared metrics between chief procurement officers and CFOs. The lack of shared metrics was cited among the biggest obstacles preventing companies from “closing the gap between what procurement negotiates and what finance realizes.”
Other barriers cited were lack of contract data visibility, selected by 14% of respondents, along with manual processes that create exceptions that go unseen (23%).
Agiloft’s survey included responses gathered from 2,005 chief procurement officers and other procurement leaders Aug. 5-20.
The majority (61%) of the respondents described their relationship with finance leadership as “collaborative” during budget cycles but operating with “separate scorecards day-to-day.”
“… procurement and finance have a functional working relationship, but not one in which procurement’s claimed savings are systematically validated against finance’s actual outcomes,” Agiloft officials wrote in the report. “Negotiated savings reported in procurement dashboards may never be confirmed as realized savings in the P&L.”
For what it’s worth, the survey results showed that utter separation between finance and procurement was a relative rarity among respondents, with just 1% of them saying the teams are “siloed” with “no shared accountability metrics.”
A little over a quarter of respondents (29%) characterized their relationship with finance as “tightly aligned,” with shared KPIs between teams.
The finance-procurement relationship, or lack thereof, can have consequences, per Agiloft. “Too much value is getting lost somewhere between the signed contract and the systems that are supposed to enforce it, and most finance leaders have limited visibility into that gap because it doesn't show up as line items,” said Jason Barnwell, Agiloft’s chief product officer, in an email to CFO.com.
Just over half of respondents (52%) said that they failed to collect on a contractual remedy within the past year because it was not “tracked or triggered in real time.” A similar share of respondents (54%) said that about 5% to 15% of their supplier spend flowed “outside of contracted agreements.”
Barnwell said he’d encourage CFOs to approach so-called “maverick spend” as “a controls issue, the same way they'd treat any other leakage in revenue or expense recognition.”
“The good news is this is a controllable risk,” he added. “CFOs are dealing with tariffs, currency swings, and supply chain disruption they can't do much about, but contract compliance leakage is different. … This is a straightforward place for a CFO to look for additional value capture because the money was never lost. It's sitting in a contract waiting to be collected.”
