Company Procurement and Finance departments failing to work together effectively, finds Lowendalmasaï research

23/02/2015

Lowendalmasaï

  • Only 51% of global organisations have aligned finance and procurement KPIs
  • Misalignment could significantly impact company cost performance

London, 23 February 2015. Research from Lowendalmasaï, the enterprise cost management consultancy that specialises in improving companies’ financial outcomes, shows that procurement and finance departments - two critical functions for corporate financial efficiency - are failing to align their key performance indicators (KPIs).

Lowendalmasaï surveyed the procurement and finance departments of approximately 200 global companies as to the challenges they faced. The results showed that, while relationships between the departments remained strong, there were many areas where both did not fully coordinate.

While 80% of companies have cross-functional teams from both departments working on process efficiency, fewer than 20% work together on supplier innovation. Equally, just 54% of procurement departments recorded savings into company P&Ls: a key indicator to explain and justify cost savings within an organisation, and to make strong management decisions.

Most worryingly, only 51% of companies have aligned KPIs for both departments, leading to a potential disconnect which could damage companies’ capability to properly audit, manage and control costs.

Francis Mainoo, Deputy Managing Director, Lowendalmasaï UK, Ireland and USA, said: “This research highlights the important challenge companies face in ensuring that procurement and finance work together effectively, to minimise cost and drive bottom line performance.

“Worryingly, the disconnect is greatest on common KPIs and terminology: areas that are crucial to ensure that company departments are working towards the same goal.

“For purchasing cost to really perform, finance and procurement must work together.”

 

Research results

Q1. Which areas of your organisation have cross functional teams involving procurement and finance and treasury?

 

Disciplines

% of cross functional teams involving procurement and finance and treasury

Procurement reports into finance

Procurement doesn’t report into finance

Process Efficiency

90%

74%

Budgeting and forecasting

79%

76%

Supply risk

61%

57%

Governance and regulatory

59%

43%

Outsourcing

57%

31%

Performance metrics

55%

50%

Technology utilisation

40%

21%

Cash management

40%

61%

Commodity risk

40%

52%

Currency risk

39%

42%

Supplier innovation

37%

10%

Other

8%

5%

 

Q2. How would you rate your relationship from 1-10 with finance and treasury?

 

Those who report into finance

Those who don’t report into finance

Finance

7.94

6.76

Treasury

7.24

6.08

 

 Q3. Are procurement KPIs aligned with finance and business KPIs?

 

Those who report into finance

Those who don’t report into finance

Yes

62%

43%

No

3%

10%

Partially

35%

47%

 

Q4. Are procurement savings tracked to the bottom line and signed off by finance?

 

Those who report into finance

Those who don’t report into finance

Yes

59%

51%

No

11%

18%

Partially

30%

31%

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