Once relegated essentially to back rooms where
purchasing orders were handled, the procurement function is gaining
increased significance in the enterprise while finance departments
become more strategic.
Two factors have caused this increased importance of both finance
and procurement. The first involves the required cost-cutting during
the economic downturn several years ago. As companies could find no new
revenue, the only way to keep a somewhat solid bottom line was by
cutting costs. This drove leaders in internal procurement to become
increasingly creative as they analyzed and dissected where money was
being spent companywide before devising ways to improve and control
As a result, companies began to require more standardized
internal reporting, especially global companies. Through use of more
sophisticated technologies, chief finance officers began to monitor
costs across divisions and make internal comparisons.
The other driver for more sophisticated and precise purchasing and
payment tracking was the passage of the Sarbanes-Oxley Act (SOX). This
act effectively made chief executive officers more responsible and
personally liable for the numbers in their businesses. SOX can become a
safety net for finance and procurement, much like Y2K became an
umbrella for technology departments five years ago.
Back then, as companies headed toward the uncertainty of their
computer systems working in the first day of the year 2000, it became a
relatively easy argument for IT that various systems should be upgraded
or, in many cases, totally replaced. Who wanted to take the chance?
For finance, SOX holds the same promise. With top executives’
personal fate on the line, an argument by a CFO or chief procurement
officer that a certain system, process or strategy should be deployed
to better comply with SOX should not be too tough a sell.
These two factors are leading to stronger – and better – finance and procurement activities.
CFOs and their departments are becoming more important not just
because of the evolved sophistication of cost cutting, but because they
have developed measured ways of how to most effectively and
economically conduct business. And procurement departments have learned
the value of setting standards and how to enforce those standards, as
well as the dramatic impact this can have on the bottom line.
Procurement cuts across all areas. Especially
at larger companies, it can involve processes for the purchasing of
corporate travel, real estate services, facilities management, meetings
and conferences, marketing services, advertising, direct mail, human
resource services, logistics and technology.
Over the past several years, many finance and procurement leaders have
a much more comprehensive view of their businesses. And this helps
convert finance and procurement executives from financial watchdogs to
resources for you.
The finance people now know many best practices and the
procurement folks have mastered how to identify, get and manage the
best deals from the best suppliers.
These abilities are now a valuable (even if not fully appreciated)
asset inside corporate entities.
The “how-to-do-something” cannot be underestimated in business
these days. And now, the finance and procurement leaders have earned
that credential. This presents opportunity throughout the organization
to tap into this knowledge. Now department heads and individual
executives and managers can tap into this expertise to see how they
might use what finance and procurement leaders have learned to improve
their own part of the business.