Kobe and Shaq won 3 championships together. They had a chance to be the best duo of all-time, but couldn't make it work, and Shaq went to Miami. Like Shaq and Kobe, FP&A and Procurement are superstar business functions that need to be in complete harmony to be truly great.
Unfortunately, most Procurement and FP&A teams struggle to integrate their data and processes to help each other. Not working well together is terrible for Finance, but budget-owners and purchasers often carry the burden with redundant requests, siloed workflows, and no visibility. To build harmony between Procurement and FP&A, they have to unify their data and workflows. The results will make your teams more productive, accurate, and valuable. Let’s explore how.
For Procurement and FP&A, collaboration is a two-way street.
We know FP&A professionals are masters of models. The beauty of financial planning tools is their flexibility to model anything, but that also makes them notoriously tricky to integrate. As a result, budgets are disconnected from our purchase workflows. Employees work through the budget process then have separate workflows to make purchases. FP&A then has to manually approve purchases and keep track of budget performance. Or worse, your business partner is doing the manual tracking.
For Procurement and FP&A, collaboration is a two-way street. FP&A models are radically more accurate if they use real-time purchase data. It’s the best source of what’s to come. Unfortunately, after interviewing over 100 businesses ranging from 100-15,000 employees, only one of them uses purchase-level data in their financial forecasts. Hint: this business is a $20B+ data and analytics company with data analysts on the Finance team. A forecast without price drivers, contract terms, and billing details will always introduce a margin of error that we shouldn't have. It's tough enough to forecast top-line, we can't afford variability in our opex forecasts.
Meanwhile, while procurement has excellent visibility into price drivers, contract terms, and billing details, they often need up-to-date information about hiring plans or other business drivers that influence variable expenses. By working closely with FP&A and collaborating on the latest business plans, Procurement can improve their renewal estimates and prioritize their time for negotiations and competitive sourcing. All the data is there –– we need better ways to collaborate.
When we bring together budgets and purchasing, we streamline work by eliminating duplication and manual reconciliation. We work as a team, and our collaboration improves forecast accuracy and renewal projections. Most importantly, we make things simple for our budget-owners and employees – increasing compliance and improving decision-making.
At Trace, we strive to build harmony within Finance. Our purchase operations and spend analytics platform helps FP&A, Procurement, and Accounting automate workflows, get end-to-end visibility, and do deeper, faster financial planning and analysis.
We can always kind of be average and do what’s normal. I’m not in this to do what’s normal. – Kobe Bryant