We keep finding ourselves drawn to the Chief Financial Officer (“CFO”) – Chief Procurement Officer (“CPO”) relationship story because it is one of the most difficult and challenging within the enterprise today, and, also one with great potential. Those of you on the path to Procure-to-Pay (P2P) excellence, understand that no business relationship is more important than the one between these two C-level leaders. Just ask Dan Warn, a CPO who just told us that “the support of the CFO team was essential [to his recent procurement transformation project]. Without it, your success rate will drop significantly – I wouldn’t have even tried to tackle all three aspects of people, process and technology simultaneously without the support of the CFO and executive leadership team” or others who face real challenges dealing with CFOs who take a very narrow of view of the procurement function.
A recent report from Ardent Partners entitled “The Path to Procure-to-Pay Excellence: Building a More Perfect Union for the CFO and the CPO” argues that the successful execution of an effective and meaningful P2P partnership between finance and procurement requires a solid level of cohesion and visibility across the entire process. The report, which is part of a P2P series sponsored by Basware, is available by clicking here (free, registration required – you may have to page down to view the report).
Yes, the fact of the matter is that finance and procurement are already linked together. This is because the procurement and accounts payable (AP) departments, whether they realize it or not, are working two sides of the same coin and literally managing two parts of the same P2P transaction. While the performance of each group at a high level can certainly drive value for the larger enterprise, it is only after both of these processes are well managed and tightly linked that a P2P organization can begin to realize its full potential and become a truly strategic operation that supports key business objectives.
The level and quality of the procurement and AP linkage can vary dramatically among enterprises in the marketplace today which means that more agile organizations are effectively using their P2P operations as a competitive weapon to gain advantage over their rivals. The potential P2P performance gap that can exist between competitors warrants the attention of the CFO and the CPO as well as other procurement and AP leaders. For the average P2P organization, the immediate opportunities are to drive efficiencies quickly, to become more operationally effective, to expand the scope of those operations for the greatest possible impact, and to ultimately become more strategically aligned with the business. This opportunity demands the attention of the CFO and the CPO as well as other procurement and AP leaders [Sidebar: This is also why a site called “Chief Procurement Officer Rising” commits as much space as we do to ePayables and Accounts Payable Transformation]
Readers who are interested in the CFO-CPO relationship and P2P performance and maturity may also be interested in visiting this site that introduces Basware’s P2P Model which shares insights, metrics, and strategies to help enterprises improve their P2P operations and achieve operational excellence and world-class agility within them.
Andrew,
You are right to keep drawing attention to this critical relationship. However, its importance extends beyond perfecting the P2P process (which is by its nature a tactical foundation to enable more strategic activities) so I would like to see a focus on how the CFO & CPO can unite to increase procurements strategic focus:
1. A company wide definition of savings and how these are measured and captured.
2. Cash Management
3. Risk Management
4. Tax efficient procurement
5. Debt reduction
6. Supporting growth
These are all issues on which CPO’s & CFO’s should be engaged and actively collaborating.
I cover some of these issues myself on Purchasing Practice web site here:
http://purchasingpractice.com/wp-content/uploads/feb-2010-the-cfo-cpo-alliance.pdf
I hope this is of interest to your readers.
Dave
Dave –
I agree that there are other opportunities for the two execs to address and we’ve hit upon some of those areas on your list (esp. 1, 2, & 3) on this site (click the “CFO” tag) and in more detail in a few of our reports.
P2P in this instance really means the larger set of procurement and AP operations (versus the tactical req-to-pay process). Somewhat similar to the different ways that the term “purchasing” is used/viewed based upon geography – for example, the term is generally thought of as a highly tactical process performed within a “procurement” department in the US.
As an industry, we’ve come a long way in developing a common language but, still have some distance to go.
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