# Trouble in paradise: the great procurement and finance disconnect
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-07-12
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: How to Improve Supplier Relationships Through Strategic
Meta Description: Discover how organisations can enhance supplier relationships by aligning procurement and finance teams to strategically utilise payments for cost savings and increased collaboration.
URL: https://financedigest.com/trouble-in-paradise-the-great-procurement-and-finance-disconnecthtml

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![Stephen Carter, Director of Payments Strategy at Ivalua](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/stephen-carter-450x448-1736815588429-compressed.jpg)

_By_ **_Stephen Carter,_** _Director of Payments Strategy_ _at Ivalua_

Supply chains have faced crisis after crisis over the past two years, further highlighting the need for organisations to foster strong supplier relationships as they look to navigate increased disruption. Payments is one area where organisations can [build much stronger relationships](https://www.financedigest.com/building-a-relationship-led-bank-requires-a-more-human-touch.html "Building a relationship led bank requires a more human touch") with suppliers, allowing them to work strategically to address disruption. However, for [organisations there is a disconnect between internal procurement and finance](https://www.financedigest.com/cyber-threats-for-finance-organisations-to-watch-in-2023.html "Cyber threats for finance organisations to watch in 2023") teams that is preventing them from using payments to do so.

The lack of collaboration between these two critical departments can create damaging business outcomes, from weakened supplier-buyer relationships and [higher costs](https://www.financedigest.com/uk-pub-operator-wetherspoons-loss-narrows-despite-higher-costs.html "UK pub operator Wetherspoon’s loss narrows despite higher costs") to poor visibility and increased supplier risk. But how can organisations ensure these two departments are on the same page?

**Living separate lives under the same roof**

[Payments were once viewed as merely a transactional process](https://www.financedigest.com/emvco-streamlines-approval-process-for-mobile-payment-devices.html "EMVCo Streamlines Approval Process for Mobile Payment Devices"). However, they have [since shifted](https://www.financedigest.com/dollar-set-for-biggest-two-day-fall-since-2009-as-rate-outlook-shifts.html "Dollar set for biggest two-day fall since 2009 as rate outlook shifts") to become far more strategic. Payments can be used more prudently to lower costs, drive innovation, navigate [supply disruption](https://www.financedigest.com/oil-prices-rise-on-supply-disruption-jitters-as-geopolitical-tensions-grow.html "Oil prices rise on supply disruption jitters as geopolitical tensions grow"), and make intelligent decisions about paying suppliers.

However, firms are struggling to unlock the strategic [value of payments](https://www.financedigest.com/2021-predictions-realising-the-value-of-payments-transformation.html "2021 Predictions: Realising the Value of Payments Transformation"), which stems from a lack of collaboration between the procurement and finance teams.

This comes down to a number of issues. Firstly, a reliance on ageing legacy payment systems that make it extremely difficult to integrate [finance](https://www.financedigest.com/from-fragmented-systems-to-unified-cpm-unicredit-prepares-for-todays-finance-challenges.html "FROM FRAGMENTED SYSTEMS TO UNIFIED CPM – UNICREDIT PREPARES FOR TODAY’S FINANCE CHALLENGES") with procurement systems. In many firms, [the](https://www.financedigest.com/new-space-observatory-helps-solve-mystery-involving-enormous-black-holes.html "New space observatory helps solve mystery involving enormous black holes") current supplier payments function exists in an ERP “black hole” that is disconnected from upstream processes like procurement. As processes, priorities, and efforts are not unified across departments, activities such as payments inquiries are often duplicated as the procurement and [finance teams](https://www.financedigest.com/what-skills-and-areas-of-knowledge-should-finance-teams-develop-during-2023.html "What Skills and Areas of Knowledge Should Finance Teams Develop During 2023? ") are approached separately – wasting valuable time on inefficient activity.

Secondly, procurement teams often have very little visibility into when their suppliers receive payments. It’s critical that the procurement department is aware when payments are late, as [delayed payments can severely damage supplier relationships](https://www.financedigest.com/why-it-pays-to-pay-on-time-the-impact-of-delayed-payments-on-supplier-relationships.html "Why it pays to pay on time: The impact of delayed payments on supplier relationships"). It can damage ties with key suppliers, as they are more likely to prioritise organisations that pay promptly and strive to maintain a collaborative partnership, even in times of difficulty. Delayed payments can also put smaller suppliers at risk of collapse – in fact, research shows that almost [two-thirds (65%)](https://info.ivalua.com/supplier_relationship/cost_versus_collaboration_report) of suppliers feel late payments are putting their company at financial risk.

It’s also [equally important](https://www.financedigest.com/boosting-gender-equality-in-tech-the-importance-of-mentorship-to-enhance-diversity.html "Boosting gender equality in tech: the importance of mentorship to enhance diversity") that procurement teams have visibility into payments in the event that the supplier has not met its targets. For instance, it does not help the organisation’s negotiating position with suppliers if they have already been paid, despite delivering a poor service.

[Improving the visibility](https://www.financedigest.com/improving-online-visibility-for-insurers.html "IMPROVING ONLINE VISIBILITY FOR INSURERS") and timeliness of payments is the single most impactful way to help organisations become a partner of choice. But without [opening avenues for conversation between procurement and finance](https://www.financedigest.com/the-future-of-open-finance.html "The Future of Open Finance"), organisations are unable to use payments strategically – meaning that they are missing out on chances to collaborate, forecast cash needs, manage suppliers effectively, and find cost savings.

**Offering an olive branch**

[Improving communication between procurement and finance](https://www.financedigest.com/5-ways-to-improve-your-business-finances.html "5 Ways to Improve Your Business Finances") starts with having the processes and technology in place to ensure both departments are on the same page to achieve the best outcomes. By modernising supplier payments, organisations can connect finance, procurement, and [account payable](https://www.financedigest.com/5-common-mistakes-around-accounts-payable-automation.html "5 Common Mistakes Around Accounts Payable Automation") systems, helping to unlock real-time payment visibility, reduce the duplication of activity, and open up access to greater automation. This helps to ensure [payments become a key strategic value](https://www.financedigest.com/5-ways-to-maximise-the-value-of-instant-payments.html "5 ways to maximise the value of instant payments") add.

For instance, restaurant operations leader AmRest addressed the visibility gap between its procurement and finance departments by joining systems across multiple countries, creating one view of the process for local procurement and finance teams. Bridging this gap helped AmRest to create a single, consolidated view of data, enabling it to generate accurate data models to streamline purchasing decisions and [support its strategic](https://www.financedigest.com/strategic-budgeting-ensures-success-of-community-support-programs.html "Strategic Budgeting Ensures Success of Community Support Programs") decision-making process.

Equipped with real-time payment visibility and execution, organisations can ensure timely payments and high-quality delivery, [every time](https://www.financedigest.com/how-to-nail-your-banking-audition-every-time.html "How to nail your banking audition every time"). This brings a real competitive advantage, as on-time payments can help to gain favour with suppliers, secure goods in a time where products may be in short supply, and ultimately build [supply chain](https://www.financedigest.com/5-steps-to-successful-supply-chain-finance.html "5 Steps to successful supply chain finance") resilience.

A smarter, digitised payment and procurement process also brings tangible cost benefits by automating processes and reducing [inefficiencies for the Accounts Payable department](https://www.financedigest.com/baswares-e-invoicing-to-eliminate-inefficiencies-in-health-department.html "Basware’s e-invoicing to eliminate inefficiencies in Health Department"). [Embedding supplier payments](https://www.financedigest.com/improving-customer-experience-and-profits-with-embedded-payments.html "Improving customer experience and profits with embedded payments") within spend management allows organisations to automate inefficient manual processes that waste both departments’ time. Boosting efficiency through automation helps to eliminate any unwanted or duplicated payment inquiries, freeing up the [team’s time to spend on higher-value activities](https://www.financedigest.com/why-finance-teams-need-to-go-beyond-numbers-to-an-active-relationship-with-data.html "Why finance teams need to go beyond numbers to an active relationship with data ") instead of laborious manual tasks.

**Building bridges**

As organisations slowly navigate their way out of crisis mode, payments have become much more strategic and are seen as a core part of procurement’s [digital transformation](https://www.financedigest.com/5-key-takeaways-from-the-finance-sectors-digital-transformation-revolution.html "5 Key Takeaways From the Finance Sector’s Digital Transformation Revolution"). However, [unlocking the true strategic value of payments starts with creating one business](https://www.financedigest.com/three-ways-data-unlocks-business-value-for-financial-organisations.html "Three Ways Data Unlocks Business Value for Financial Organisations ") with one mission to achieve their long-term goals.

Organisations must have a unified vision to [create a successful strategic payments process](https://www.financedigest.com/growth-of-mineral-processing-and-mining-industrie-is-creating-demand-for-rotary-trommel-market.html "Growth Of Mineral Processing And Mining Industrie Is Creating Demand For Rotary Trommel Market"). By [integrating payments](https://www.financedigest.com/building-a-business-case-for-integrated-payments.html "Building a Business Case for Integrated Payments") and invoicing – and connecting this data with procurement – organisations will be able to take control of payments schedules and ensure strong lines of communication between both departments. It’s only through collaboration that organisations can get through this rough patch, and [timely payments](https://www.financedigest.com/adapting-payments-to-reassure-consumers-and-safeguard-profitability-during-times-of-uncertainty.html "Adapting payments to reassure consumers and safeguard profitability during times of uncertainty") will go a long way to ensure you have great relationships with suppliers.


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