CFOs and CPOs need to follow 5 basic steps that will enable them to work together to maximize profitability and revenue.
CFOs and CPOs share a similar goal: to increase cash, cut costs, and enforce compliance to reduce risk. However, their different approaches to managing and monitoring cash flow can often muddle the lines of communication between the two roles.
No CFO can be successful in managing company spend and cash flow without close collaboration with the procurement arm of an organization. So, why are some financial departments still struggling to consolidate these processes?
5 ways to bridge the gap
Communication gaps are the most common roadblocks for CFOs and CPOs looking to sync up an organization’s procurement functions with larger financial agendas. In fact, many of the discrepancies between these two business functions can be solved by executives working together to consolidate and unify both goals and processes. Here are five ways to bridge the divide between your CFO and CPO in order to maximize revenue and profitability:
- Speak the same language: Having direction, precision, and an understanding of the financial goals of the organization in preparation for meetings between CFOs and CPOs will improve overall efficiency and profitability. A unified and methodical approach to interdepartmental communication will eliminate discrepancies in communication and will ultimately prevent misunderstandings and oversight that can quietly bleed a company’s bottom line.
- Collaborate: CPOs should work collaboratively with CFOs. Through cloud-based tools that promote real-time visibility and automation, the two roles can be more in sync with each other’s priorities and progress. This will align both departments to ensure goals are being met, as well as highlight any discrepancies that may arise.
- Set protocol: More often than not, executives across all departments are not kept fully informed about an organizations’ procurement or finance best practices. To prevent extraneous or potentially dangerous company purchasing, CPOs must work together with their CFO to develop and communicate company-wide policies. A formal protocol will ensure that all purchases made on behalf of the company are purposeful and ethical and align with the company’s financial goals.
- Unify metrics: Speaking in dollars and cents is only helpful when the dollars and cents represent the same thing. This major pain point in the CFO/CPO relationship stems from both parties’ inability to agree on performance measurements or metrics. Much of this is due to the fact that there is no direct link between purchasing performance and financial performance. Executives must develop and agree upon common savings and spending measurements to ensure consistency.
- Review: Reporting alone is not sufficient to create a closer and more efficient relationship between CFOs and CPOs. Dedicated and regular interaction around common objectives and metrics should be a top priority throughout the year to ensure the agreed-upon goals and metrics are being met.
Ultimately, a business’s profitability depends on its CPO and CFO working collaboratively to achieve its financial goals. When working in concert with one another, procurement and finance can cut expenses effectively and efficiently, streamline transaction costs, and mitigate potential liabilities for an organization at large.
It’s not just CFOs and CPOs that need to follow these steps. Here’s how to keep organizational silos from stopping your e-procurement success.