Collaboration results in significant cost savings benefits!
Procurement and finance are two crucial departments within any organization that have a significant impact on its success. While procurement is responsible for sourcing goods and services from suppliers, finance oversees the financial health of the organization. When these two departments work together, they can significantly improve the vendor management efforts of an organization resulting in cost savings, better vendor relations, and healthier supply chains. In this blog, we’ll discuss the benefits of procurement and finance working together to improve vendor management activities and processes.
Cost Savings: Procurement and finance working together can lead to significant cost savings for the organization. Procurement can negotiate better deals with vendors, while finance can ensure that payments are made on time, avoiding any late payment penalties and taking advantage of discounts. The finance department can also provide procurement with data on company spending history, which can help procurement identify cost-saving opportunities and negotiate better contracts with vendors. Additionally, more efficient payment processes can open up opportunities for dynamic discounting and supply chain finance programs that deliver substantial savings and cash management benefits.
Improved Supplier Relationships: Effective vendor management requires strong supplier relationships. When procurement and finance work together, they can improve supplier relationships by ensuring that vendors are paid on time and that any disputes or issues are resolved quickly. This can lead to better communication, increased trust, and more favorable terms for the organization. Implementing an efficient AP Automation solution with workflow and real-time dispute management capabilities can go a long way toward achieving these goals while also reducing costs through efficiency gains.
Enhanced Compliance: Procurement and finance working together can ensure that all vendors comply with the organization’s policies and regulations. Finance can monitor payments and ensure that vendors are paid only for goods or services that have been received and meet the organization’s standards. Procurement can also work with finance to ensure that vendors comply with any applicable regulatory requirements and that all necessary documentation is in place. Enhanced compliance reduces your organizations exposure to litigation, fines or other costly regulatory actions. Using a vendor portal based vendor onboarding and maintenance solution can ensure that all vendor, both new and existing, are meeting all of your compliance goals and all necessary compliance documents are provided with their expirations being tracked and communicated.
Improved Risk Management: Vendor management also involves managing risks associated with the procurement process. When procurement and finance work together, they can identify potential risks associated with vendors, such as financial instability or non-compliance with regulations. By working together, they can develop strategies to mitigate these risks and ensure that the company is protected. A supplier portal can be a good tool to use to enable real time communication with your suppliers as well as track supplier performance to mitigate potential risk.
Increased Efficiency: Finally, procurement and finance working together can increase the efficiency of the vendor management process. By sharing information and working collaboratively, the team can streamline processes and reduce duplication of effort. This can lead to faster procurement cycles, faster payment processing, and better overall vendor management. In addition to the finance tools of AP automation and dynamic discounting, procurement can automate the PO dispatch and update process via a vendor portal or supplier portal to help generate additional efficiencies.
Procurement and finance are two critical departments that can significantly impact an organization’s success. When these departments collaborate to increase vendor management efforts, the organization can benefit from cost savings, improved supplier relationships, enhanced compliance, improved risk management, and increased efficiency. As such, it is essential for organizations to encourage collaboration between these departments and ensure that they have the necessary tools, solutions and resources to work effectively together. Three words that can drive this partnership to better results with your vendors… Communicate, Collaborate, Transact.
Contact ICG to start a discussion on how your organization can better collaborate for success or to schedule a demo of one of ICG’s comprehensive vendor management solutions. Watch a short video on ICG’s vendor management solutions.