In most organizations, procurement and FinOps are two distinct entities. They’re siloed technologically. And, importantly, they’re responsible for different things. Traditionally, the goal of the procurement team has been to save money for the business and to ensure what-all investments the organization makes match up—that you receive what you order, and that you order what finance paid for. FinOps, meanwhile, is traditionally responsible for reporting on spend-management reports, revenue reports, and other information regarding the overall financial health of the business. One of their pre-eminent goals is to provide governance structure and support to procurement in their daily operations and decision-making.
Traditional distinctions between FinOps and procurement teams are eroding, however, as the scope of their responsibilities shift. Today, procurement teams, for example, are no longer solely focused on cost-savings, but rather on helping the organization execute on long-term business goals, such as those related to increasing sustainability, ensuring supply chain transparency, and mitigating risk. FinOps, meanwhile, are becoming similarly responsible for helping to determine the overall strategic direction of the business.
As a result of all this, the priorities and responsibilities of FinOps and procurement teams have begun to intersect. More and more every day, they depend on each other. But that comes with certain operational mandates. For either to function to the best of their abilities, for example—and to most positively affect business outcomes—they need to be aligned.
Of course, that’s easier said than done. Collaboration between the two teams can get complex. Because they tend to work in distinct technological environments—and possess different working styles and needs—it can be difficult to stay in sync.
But the juice is well worth the squeeze, as they say; collaboration between procurement and FinOps is essential for the long-term success of a business and to ensure that it’s achieving maximum ROI.
Here’s why—along with how to bridge the divide between the two teams.
The benefits of aligning FinOps and procurement
The finance supply chain is the heartbeat of a business. Without it, businesses wouldn’t have enough cash flow to keep running. And procurement and FinOps working together play a critical part in this critical operation.
When the financial supply chain is healthy, businesses have enough cash to pay for everything from supplies to office space to employee salaries. This chain doesn’t rely only on ideal spending operations; it also relies on proper supplier relationship management and valid procurement choices.
Organizations that run procurement and finance as separate entities are leaving themselves open to costly inefficiencies in a number of areas. While procurement can focus on driving more value for lower cost from suppliers, finance is concerned about profitability and working capital. Aligning operational processes with business outcomes across sourcing, procurement, and payables creates the potential to deliver savings and generate business value.
When the procurement and FinOps teams are aligned and share the same objectives, organizations will see positive impact, including better spend management, increased value in tail-end spend, coordinated buyer behavior that enhances compliance, clearer and more consistent supplier relationship management, and enhanced profitability due to better invoice management. Unsiloing procurement and finance help desks and contact centers will also ensure your organization has a more structured approach to handling supply chain queries and isn’t duplicating efforts and draining resources.
To put it in more general terms, when FinOps and procurement are aligned, they make each other better and help increase the overall operational efficiency of your organization. Supporting more seamless and symbiotic collaboration between the two can lead to cost savings, more informed insights, better demand planning, a better understanding of the vendor landscape, better decision-making, and less time-consuming processes.
It also mitigates risk—by helping organizations determine with greater fidelity what technologies to invest in, for example.
How to align procurement and finance
But how, then, to achieve this greater alignment?
We’ll be diving into this more in-depth in an upcoming whitepaper, but for now you should focus on a few key pillars.
Procurement and FinOps teams should work in a supportive manner to plan budgets, create forecasts, and conduct financial reporting and analysis. One way this can play out: Finance sets the budgets and creates spend and revenue reports, and procurement works to stick to those budgets and ensures finance has received and paid for the items.
One important aspect of this transition involves a transformation in understanding. You can foster this by educating both sides on each other’s priorities and KPIs, clarifying who’s responsible for what, and setting goals together.
3) Refine governance structures between the two teams.
FinOps and procurement teams should proactively and eagerly communicate with each other about specific details over time—like those related to payment considerations.
There’s an important generative concern here. For example, FinOps might push for payment terms that work better for their team, like 90-day payments that make it easier to manage cash flow. But these terms might not be suitable (or acceptable) to suppliers who have their own cash flow considerations.
Meanwhile, these terms also make it more difficult for procurement to maintain positive relationships with suppliers. When these teams instead collaborate and align on those particulars, it fosters a much more positive relationship between the organization and suppliers.
Another vector for better collaboration between teams involves the introduction of technologies and practices that automate and integrate processes. These technologies can act as infrastructure supporting the above points. A straightforward but enormously impactful example is how you can use technology to coordinate communication and request-handling between procurement and FinOps in a more structured way.
Consider the way people positioned in disparate departments manage request handling today. Let’s say someone on the FinOps team has something they need from procurement. They’ll Slack someone with that request, and then it’s on the FinOps team member who fielded the request to figure out how to prioritize it and how to respond to it. With no pre-existing structure or hierarchy to help them determine how to do those things—and because this person likely has many other urgent matters they’re responsible for—the request becomes an albatross. (The requestor, meanwhile, has no way of tracking the status of their request aside from bugging their colleague.) At scale, manually “collaborating” in this unstructured way becomes a huge time suck. According to a recent survey conducted by Asana, knowledge workers today burn around 58% of their time and effort in precisely this way—on work that falls in the gaps between processes.
An intelligent request automation platform like Tonkean can automate away much of the manual work entailed in this kind of “in-between” work, while lending structure, support, and tracking to the task of triaging and coordinating responses. In a nutshell, Tonkean adheres unstructured requests to a standardized process that team members on both sides can scale and trust.
It also cuts down on the need for context switching. Collaborators get prompts, notifications, requests, and even forms they need to fill out directly in whatever apps they work in, like email or Slack, anytime something is needed of them. That makes it easy to initiate a procurement request, enforce procurement policy, and coordinate the process steps across departments. And because it all flows through the platform, Tonkean provides a single place for self-service progress tracking.
A siloed approach to procurement and finance operations—in which teams are working side-by-side and not in an integrated fashion—is a serious hindrance to efficient operations. But aligning the two departments helps businesses thrive instead of merely surviving.
By ensuring that both departments understand each other’s values and drives, and by embracing modern technologies to intelligently automate and integrate their operations, businesses can achieve better results while also making the lives of their employees easier.
Click here to learn more about how Tonkean helps you automate the intake and handling of all procurement requests, including budget approvals, vendor selections, and security reviews.