The role of a CFO isn’t just about crunching numbers. They’ve become the linchpin of all business operations, including procurement and payment.
Statistics show a strong correlation between an efficient procurement process and healthy organizational performance.
Today, less than 20% of companies use a guided/Amazon-like buying experience in their procurement processes. 73% of customers use manual invoice processing, which delays payment. Subsequently, the average lead time to recognize an invoice today is 14 days!
Keeping this in mind, CFOs must ensure the organizational procurement function is optimized and uses the latest financial reporting tech, irrespective of the industry. There’s a need for CFOs to reimagine the procurement process from the lens of digital transformation.
CFOs must realize that the current business environment is centered on swift adaptation and response to diverse challenges, such as supply chain bottlenecks, regulatory compliance, or technology integration into various operations.
Role of CFOs in Procure-to-Pay Management
IMA research suggests that CFOs are no longer simply seen as financial leaders concerned only with financial reporting.
In strategic procure-to-pay (P2P) management, the role of a CFO has evolved greatly, requiring them to focus on cost-cutting measures, manage supply chain disruptions, liaise with the right vendors, manage procurement, and ensure finance compliance.
Not to mention technology integration in business operations to forecast and minimize risks. However, since most businesses still rely on manual record keeping, invoicing, and financial reporting, the task is inherently challenging and complex.
Key challenges and complexities in modern procure-to-pay processes
P2P processes are crucial for organizations aiming to optimize resources and strengthen supplier relationships. They enable efficient resource acquisition and financial management. As a result, CFOs can effectively incorporate requisitioning, sourcing, purchase order processing, goods receipt, invoice handling and financial reporting, payment processing, and reconciliation.
However, a poll revealed that one-third of the respondents in a webinar weren’t aware of what their organization was doing to transform its procurement processes.
A transformation of the traditional procurement journey into a crucial, streamlined, and value-centric approach is much wanted today. Modern procure-to-pay processes come with their fair share of challenges and complexities and CFOs must adapt to these changes and find innovative solutions for both financial reporting and financial compliance.
Globalization and supply chain volatility
In this era of globalization, organizations can’t survive without complex and interconnected supply chains. Therefore, the CFO today needs to be very much aware of geopolitical uncertainties and supply chain volatility and should try to develop strategies that help minimize its impact effectively.
This also involves using advanced analytics and predictive modeling to anticipate potential disruptions, hence implementing contingency plans for a resilient and agile supply chain.
Regulatory compliance and risk management
Dealing with the regulatory landscape complexities, financial compliance, and risks is also crucial for a CFO to maintain healthy financial reporting at the end of the year. However, the heightened scrutiny and increased regulations don’t make financial compliance an easy affair. CFOs must create a culture of regulatory and financial compliance within the organization. Anti-bribery and anti-corruption regulations, data privacy requirements, and environmental standards should be at the top of the list.
Talent and skills gaps in procurement and finance
Another main challenge of a strategic P2P perspective to the CFO is the procurement and finance-centric talent and skills gaps. A practical P2P management approach will necessitate a multidisciplinary look at the issue where good financial acumen dovetails with solid supply chain knowledge. To reach this target, CFOs must actively narrow these gaps by investing in training and development programs, promoting cross-functional collaboration, and attracting the best talent.
Technology adoption and integration
Technology adoption and integration in procurement operations presents both a challenge and an opportunity at the same time. Adopting and integrating technologies like cloud computing, robotic process automation, and data analytics enhance efficiency, accuracy, and visibility in different P2P operations and financial reporting.
Therefore, CFOs should be at the forefront of any evaluation and selection of technologies and any deployment that can drive strategic objectives forward, managing by the same token all the cybersecurity and data integrity hazards.
Essential Strategies for CFOs to Navigate procure-to-pay Complexities
“Reimagining procure-to-pay isn’t difficult, but it does require a strategic approach.“
~Sriram Velicheti, Director in Technology Consulting, Protiviti
For CFOs to navigate the complexities of P2P, they must employ strategies that hold water in today’s business landscape. Identifying and acknowledging that issues need to be addressed can be a good starting point. The rest of the strategies align with bringing transformation and making the process of change as smooth and as far-sighted as it can get.
Developing a holistic procure-to-pay transformation roadmap
An essential strategy that CFOs must develop is creating a holistic transformation roadmap encompassing the entire P2P process. The roadmap should outline the desired future state for the firm, taking into account the specific goals and challenges.
CFOs must identify areas for improvement, such as streamlining procurement procedures, optimizing payment processes, and financial reporting, as well as enhancing data visibility and analytics.
Fostering cross-functional collaboration and alignment
Oftentimes, the procure to pay processes work in collaboration with finance, procurement, operations, and IT departments. It requires cross-functional collaboration and alignment; only then can CFOs streamline the P2P operations effectively. Therefore, CFOs need to break the silos, facilitate collaboration, and enhance overall organizational performance by establishing regular communication channels.
Investing in digital technologies and automation
Investment-led transformation is also an excellent strategy. Modern P2P solutions, enabled with end-to-end automation in e-sourcing, e-procurement, and e-invoicing, will provide CFOs with visibility of processes and optimization in cash flow management and cost savings in both the short and long term.
Enhancing supplier relationship management and risk mitigation
CFOs should enhance their supplier relationship-building approach while mitigating the risk related to the procurement process. In that direction, initiating vendor performance metrics, periodic supplier evaluations, and negotiation of terms of contracts to the company’s advantage would be a good starting point.
On the same note, CFOs can also establish a sound mechanism of risk mitigation: the investigation of potential suppliers, monitoring of market dynamics, and instituting appropriate internal controls. In so doing, they ensure not only a reliable supply chain but also minimize its disruption and optimize cost savings.
Best Practices in Measuring and Optimizing Procure-to-Pay Performance
CFOs should adapt their approach to a strategic point of view in optimizing the complexities of procure-to-pay processes. CFOs must adopt practices that not only facilitate measurement and optimization but are strategic in nature, from supplier collaboration through strategic sourcing and negotiation, spending optimization, dynamic workflow, and faster processing to optimization.
The following are some of the strategic steps toward measuring and optimizing P2P processes:
- Automating manual requisition, invoice processing, approvals, workflows, and payment processing.
- Data-informed decision-making and eliminating maverick spending by using advanced analytics based on AI/ML, consolidating purchases, and negotiating better pricing with high-spend suppliers.
- eProcurement solutions for better visibility on spend, policy compliance, supplier collaboration, requisitioning, and approval workflow. 4. Supplier collaboration for cost savings, improving quality, and operational efficiency with visibility into forecasts for the demand and status of orders.
Future trends shaping the procure-to-pay landscape for CFOs
Given the increasing complexities and challenges in the business landscape, procure-to-pay operations now rely on increased digital transformation. From streamlined requisition and resourcing to digital transformation, advanced analytics, regulation and compliance management, risk management, cloud-based solutions, integration of AI and ML, transparency, and future trends in P2P processes now define the new age finance function.
The role of CFOs (and CPOs) has also become multi-dimensional, expanding beyond traditional financial management responsibilities. It requires them to focus on cost-cutting measures and financial reporting, manage supply chain disruptions, liaise with the right vendors, manage procurement, ensure finance compliance, and work on technology integration in business operations to forecast and minimize risks.
OPEN Money offers an effortless way for businesses and business leaders to streamline their Procure-to-Pay processes with minimum friction while enjoying the benefits of integrated banking and collaborative dashboards. It inherently makes the task of CFOs and CPOs quite effortless with advanced reconciliation methods, insightful finance reporting, and compliance.
