One world, 2 views: Why the CPO and CFO should work together

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Within any company, procurement is responsible for the buying of goods and services in the best possible conditions whilst also ensuring cost optimisation and savings; whereas finance’s main job is to plan and manage company money, making sure the business can access cash in sustainable ways.

The role of CFO is changing. The pressure placed on the financial departments of companies is quickly changing. Traditionally, they would provide the data that executives used to inform important business decisions, but they wouldn’t necessarily make those decisions themselves. However, with recent shifts in the availability of tech tools as well as a shift in openness to non-traditional financial resourcing solutions, finance departments are becoming able to take on a much more strategic role.

So is the role of CPO. The world of global trade is rapidly changing. Also, the rise of digital financial processes during disrupted supply chains calls for leadership that extends beyond the board of directors. Moving beyond earnings reports and the occasional roundtable discussion, businesses need a practitioner’s eye and a strategic mind. Sourcing challenges caused by the pandemic and the rising inflation put procurement professionals to meet the challenges of guarantying consistent cash flow and keeping healthy supplier relationships.

And, ever since the great recession, and now the global pandemic, the two have become allies. for their mutual benefit. As CFOs become strategic partners to the CEOs, many are finding useful support in a solid partnership with procurement. Having leaned on procurement to cut costs during the pandemic and current supply chain issues, enlightened CFOs are now leveraging the office of the CPO more effectively to generate value that goes beyond just cost savings.

CPOs that have managed to establish a best-in-class procurement function, are finally getting that desired seat at the table with executive leadership, and turning spend management into a business essential. Moreover, both the CPO and CFO are involved in long-term strategic planning, which means understanding Finance and Procurement processes but also the business strategy. This way they can make recommendations that are in favour of a long-term strategic business plan.

Gone are the days when these 2 departments were influencing different areas of the same organisation. Due to a huge growth in the amount of technology used by most organisations, there is more and more overlap between the areas the CPO and CFO need to be involved in.

One world, 2 views

There are 2 possible views for organisations to look at the relation between procurement and finance.

  • The CPO needs to seek advice from and align with the CFO in order to create greater business efficiencies. CPOs need to assign procurement focal points that can speak the finance language. This will allow a better and stronger interconnection for a common objective.

  • The CFO should seek advice from the CPO regarding the direction in which the procurement organisation is heading. They need to set a regular cadence of financial reviews with the CPO to ensure that procurement priorities and investments are aligned with overall corporate goals.

Stay tuned for part 2 of this blog series as we look at how a good CPO - CFO relationship can fuel a strategic procurement function.