Aligning procurement with treasury

Category Management & Business AlignmentData & TechnologyInformation SystemsInternal CollaborationOrganisational AlignmentStakeholder IntegrationStrategic Cost Management+-

Register for a free-to-access webinar on optimising procurement’s relationship with finance and treasury, presented in partnership with Taulia.


Procurement staff are really good at spending the company’s money: that’s their job, they’re professionals and they do their jobs well. It’s about tough pricing, rigorous contract management, and – these days, especially – a somewhat more collaborative approach to see if there are any innovations the business could draw from its suppliers.


No question, procurement is really good at spending the company’s money. But is it always so good at spending the company’s cash? There’s a difference. Doing a £100,000 deal and writing the cheque for it now is a very different thing from doing a deal and writing the cheque for it in 30 days, or 60, or 90. Just ask your treasurer.


Even in an incredibly low-interest-rate environment, treasurers are concerned with cash – not only how much of it is spent, but how quickly. There may be corporate objectives that seem quite remote from the daily grind of procurement, such as the need to repay a pile of debt that was issued to finance a major acquisition, for example.


Why any of this concerns the procurement function is because of the growing trend for more focus to be placed on suppliers and when they get paid. Allied with that is the emergence over the last several years of a Swiss army knife of supply chain finance tools that financial institutions and technology companies want to sell to corporates so they can better manage their supplier payments – tools such as reverse factoring, dynamic discounting and procurement cards.


When vendors knock, they do so on the treasurer’s door. If the treasurer likes the sound of the idea, they will speak to procurement. “With these new treasury solution products being typically sold to treasury, the treasurer has to get involved a lot more heavily in working with procurement,” says Jennifer Pinney, a director at the working capital consultancy REL. “From our side, we see treasurers approaching us to help examine the business case for those solutions and then we typically pull in procurement.”


Separate entities

Historically, procurement and treasury often didn’t have much to do with each other. The exception might have been when goods were being bought from overseas, creating foreign exchange (forex) risk. Even then, says Pinney, when procurement spotted an opportunity to buy more cheaply from a supplier in the eurozone rather than in the UK, for example, “often, they smacked their forehead and said they forgot to bring in treasury”.


The problem is procurement likes to buy cheaply; treasurers like to have certainty so they know when their cash is coming in and going out. Treasurers need to hedge the forex exposure to reduce volatility – but they cannot do so if procurement professionals fail to tell them about the great new euro contract they’ve just negotiated. Larger companies with a global footprint are much better at managing these issues, however.


Increasingly, procurement functions are being given working capital targets to help align their goals more closely with those of treasury and the company as a whole. “Most CPOs have been engaged in one way or another with working capital optimisation,” says Pinney.


“It’s the new normal for a CPO to stretch payment terms as far as possible. They actually welcome these new solutions, but what they need is some guidance.”


Evaluating, sourcing and rolling out supply chain finance products is a project that works best when treasury and procurement work closely together. Treasury understands how the products work. Procurement knows the suppliers and can help identify those that should be prioritised for rollout and that may be less suitable candidates – if one of your suppliers is Microsoft, they won’t be interested in your supply chain finance solution, thanks all the same.


“Typically, treasury are very enthusiastically engaging with their procurement teams on this,” says Bas Marteijn, head of trade finance and asset-based finance for the Benelux region at Deutsche Bank. “Those corporates that have seamless cooperation between treasury and procurement are the ones that are able to extract the most value from supply chain finance initiatives.”


Procurement Leaders will be hosting a webinar partnered by Taulia: Become best friends with finance and treasury by sharing your goals. This webinar will provide:

  • Tips on how to create a mutually beneficial relationship between treasury and procurement departments.
  • Guidance on educating procurement teams on the value of optimising working capital.
  • Advice on aligning with the finance function’s goals and metrics.

Register for the free-to-access webinar

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