Amazon Business

The value of procurement: what finance leaders think

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By Dave Lewis, Customer Advisor at Amazon Business

Many organizations determine the success of procurement by the amount of savings generated for them. This is why it’s imperative for procurement teams to accurately capture and report savings and purchasing data.

But according to new research by global consulting firm Protiviti, there’s a disconnect between what procurement leaders claim as savings and what their finance partners give them credit for. The survey of 440 enterprise finance and procurement executives found nearly half of the finance leaders claim that 20% or less of claimed procurement savings are reflected in the company’s bottom line. Over time, this accounting dilemma could have a significant impact on the perceived value of procurement to the broader organization. 

Part of this challenge, according to the study, could be attributed to collaboration—only one out of three procurement and finance leaders say collaboration between their two groups is strong. Though finance and procurement teams intersect frequently, they are often regarded as separate business units with different leadership teams and goals.

The study also found that while procurement considers itself to be effective at managing costs, finance doesn’t always agree. Fifty-six percent of procurement leaders consider their mechanisms to control contract leakage as strong, unfortunately, only 39% of finance leaders agree.

Bridging the gaps between procurement and finance

Despite the perceived disconnect, the procurement and finance professionals surveyed agreed on one thing: Better data leads to a closer, more productive collaboration between the two departments, which requires organizations to have the right tracking and analytics capabilities in place.

Two important attributes of purchasing groups that can lead to a more successful and productive relationship between procurement and finance teams were highlighted by Protiviti.

  • Centralizing functions: The study found that having a centralized buying team combined with a centralized finance team leads to the functions operating as a shared service, which enhances collaboration and efficiency. With organizational tools like approval workflows, PO tracking and invoicing, Amazon Business helps customers who want to streamline and centralize purchasing operations.
  • Using spend analytics in the budgeting and planning process: Procurement organizations naturally spend more time focused on managing planned spend, but they often neglect to include tail spend due to a lack of visibility into unplanned purchases across the organization. By consolidating unmanaged spend to Amazon Business, procurement teams can leverage Amazon Business Analytics, a free, real-time analytics tool, to gain insight into tail spend purchases. Amazon Business Analytics delivers visibility into purchasing activity and lets account administrators view and organize spend by individual, purchasing group or type of spend.

Create your free business account to access real-time analytics about your purchases through Amazon Business.

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Dave joined Amazon Business as a Customer Advisor in October 2014. Today he works with enterprise customers to optimize procurement processes.