Benefits of integrating procurement and finance operations
Explore the key benefits that integrating procurement and finance operations can bring to your organization. From improved cost savings and control to enhanced financial reporting and beyond, discover what’s possible through integration.
The integration challenge
The integration of procurement and finance operations refers to the alignment and coordination of activities between the procurement and finance departments within an organization. Although integration typically leads to improved overall operational efficiency, cost management, and financial control throughout the procurement process, in our experience, tight integration between procurement and finance operations is the exception rather than the norm.
Why integrate procurement and finance operations?
Organizational size and complexity
Larger organizations with diverse operations and multiple business units may find it more challenging to integrate procurement and finance operations. The complexity of managing functions across different regions, business lines, and subsidiaries can make integration impractical or less efficient.
Functional expertise
Procurement and finance operations require different skill sets. Procurement teams typically focus on sourcing, category, vendor, and contract management, while finance teams deal with financial analysis, budgeting, and reporting. Separating these functions allows each team to specialize.
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Based on our experience and benchmarks, a more integrated, end-to-end, process-driven approach to procurement and finance operations can result in a 20% to 40% uplift in realized savings, a 10% to 30% improvement in operational efficiency/cost, and a better end-user experience. Below are six reasons to consider integration.
Improved sourcing savings
By integrating procurement and finance operations, organizations can achieve better cost control and savings. Finance can work closely with procurement to negotiate favorable contracts, identify cost-effective suppliers, and optimize purchasing processes. This collaboration enables the identification of cost-saving opportunities such as bulk purchasing, volume discounts, and better pricing terms.
Improved cash flow
Integration enables better management of working capital and cash flow. Finance can align payment terms to procurement activities for optimal use of cash resources. Efficient procurement processes can minimize the time between goods receipt and invoice payment—reducing the cash conversion cycle. Integration promotes streamlined processes to rid inefficiencies and help reduce headcount. Automating processes to reduce manual tasks can amplify this.
Improved vendor management
Collaboration between procurement and finance facilitates the development and maintenance of strong supplier relationships. By aligning objectives and strategies, organizations can negotiate better contracts, improve supplier performance, and foster long-term partnerships. Finance can provide procurement with insights on supplier payment history and creditworthiness, enabling informed decisions and ensuring timely payments.
Accurate financial reporting
Integration enables better alignment of procurement data with financial reporting processes. Accurate and timely capture of procurement-related information—such as purchase orders, invoices, and payment details—enhances financial reporting accuracy and transparency. This helps organizations make informed decisions, facilitates budgeting and forecasting, and supports compliance with accounting standards.
Strategic decision-making
Integrated procurement and finance operations provide a holistic view of spend data, supplier performance, and financial metrics. This data-driven approach empowers organizations to make informed strategic decisions such as identifying cost-saving opportunities, optimizing sourcing strategies, and driving supplier consolidation. By leveraging comprehensive insights, organizations can enhance profitability, optimize working capital, and gain a competitive advantage.
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Ready to start the integration journey?
At Deloitte, we offer a range of support services for our clients—from finance and procurement operations services to application management services to information technology support, and more. Our business operations support services provide deep end-to-end finance and procurement process expertise, leveraging our 175+ years of experience serving clients globally. This includes source-to-pay, record-to-report, order-to-cash, tax, treasury, internal audit and controls, and more. Download our full report to learn how we can help you.
