How to maximize the relationship between finance and procurement

After leading the opening talk at the Forge Technology Sourcing Summit in Boston, Massachusetts in May, we sat down with Jesse Russell, our Head of Purchasing for North America and APAC, to get his thoughts on what was discussed, and about the conference itself.

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Hi Jesse! Firstly, what did you talk about at FORGE Tech Sourcing Summit?

Jesse Russell (JR): Hey! It was a really interactive discussion with the audience and the panel about the benefits around maximizing the relationship between finance and procurement teams.

I chatted with Mousa Hamad, Vice President of Corporate IT and Procurement at Pushpay and Chris Gonzalez, Head of Finance at A.team. They live in the day-to-day relationship between finance, technology, and procurement, and have tons of experience in it as well.

They made it clear that their businesses operate the most effectively when all three teams are working well together. Personally, I’ve sat both in finance and technology organizations and, once you have that alignment, is a force multiplier in operational efficiency, you can operate as a more strategic planning function, and can ultimately enable innovation across the business.

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So how does an aligned finance and procurement function streamline processes for better results?

JR: It really depends on the context. A good process needs to be made to measure and we really strive to meet our customers where they are to really optimize the procurement process.

Some companies, like A. team, are focused on growth. Their focus is to raise capital and enable their teams to drive growth quickly. They’re willing to sacrifice governance within the process to facilitate this speed.

But that creates a lot of different tools without oversight of costs, overall business suitability and individual contracts. So working with a team like Vertice helps build an intentional strategy that looks at their SaaS stack with an eye on the longer-term.

However, many of our customers are at a different stage of their business. They are well established but their stack is bloated with a lot of legacy tools that are heavily embedded with multiple tools, or would result in a high cost of migration.

The finance team isn’t always clued in on the impact of potential changes to the stack and the technical team doesn’t always have a clear line of sight to the financial impacts of a bloated stack.

How do finance and procurement teams work effectively together towards this goal?

JR: Mousa from PushPay gave some great insight here. He noted the first thing to implement is regular touch points - monthly meetings with stakeholders from both teams to look at costs, budgets, and contracts that are coming up for renewal to ensure they are ahead of the game to have the necessary conversations with the vendor and internal technology teams to align on their next move.

It’s a great starting point, and helps companies to work proactively which is really important. It gives you time to plan, outline key objectives and react to any surprises. . They can bridge the gap between what costs are needed and, crucially for teams like finance, why they’re needed, which is so important for visibility and cost clarity.

You mentioned visibility, how important is that?

JR: Incredibly so. Plainly stated, you can’t manage what you can’t see.  If you can see contractual information, costs, and key renewal dates, combining this with open lines of communication enables teams to move quickly and effectively to deal with any new contracts or costs. You don’t want to surprise your CFO with a last minute approval request on a high dollar contract.

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So how early should different teams get involved?

JR: As soon as possible! The relevant stakeholders should know what is going on from the outset, and be involved in conversations. If your SaaS tools are spread across different cost centers, you need to have everyone’s input early to get ahead and be aware of all situations, not just that which directly concerns a particular team.

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Isn’t collaborating difficult if you work in a decentralized work environment?

JR: Sure, it’s difficult at first, but it can be done. The key is to turn on the lights and show the data. Highlight the real issues of decentralized contract management, increased costs, lack of usage oversight, unknown contractual risks.

Despite everything, teams might not want to centralize the ownership of their own tools though, so giving them the ability to get the information, processes and triggers they need to manage them effectively is key.

But work with them to make sure that the tools they have ownership of are their tools only - and not for multiple teams. This might require some right-sizing or removal of duplicate tools from their stack. The spend data will help them to realize the need to do so.

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We’ve talked a lot about cost savings - how do you balance these with company growth?

JR: We’ll never get away from Savings being a key KPI, however, the days of it being the be all and end all of procurement teams should be over. The most effective procurement functions understand that they should be driving value more than cost savings.

The goal should be getting the best price with the contract terms that mitigates the most risks but not at the cost of feature functionality. Otherwise you can learn the hard way that chasing a good deal could result in spending more in the long run. If you’re looking it through a value lens, procurement becomes a strategic function and innovation enabler.

For example, you might need overlapping tools initially to deal with rapid growth or to service key customers, but you also need a strategic longer-term plan that recognizes cost efficiency will be a much larger requirement as you mature. You’re going to have to depreciate duplicative tools eventually, but knowing when and why is crucial.

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A key takeaway from the talk was a proactive procurement process, how are companies enabling this?

JR: If the processes are already in place, it’s about having a tool that automates a trigger. I’ve lived the life of managing this via spreadsheet but this type of automation enables teams to get processes started early and give themselves the best negotiating standpoint.

Of course, just having a trigger won’t guarantee results. You need to align that with having all the information readily available, a robust procurement process, and an expert negotiating team. Data hygiene, contract visibility, and establishing meaningful relationships with the teams will build  trust that these conversations will start well in advance of a renewal date.

That’s exactly why Vertice is here. Our standard process is to kick this off at the 90 day mark (or whatever trigger date a customer wants.) We also provide a single source of truth to help finance, technology or procurement teams need to effectively manage their stack.  information, approval workflow processes, and support from practitioners who have negotiation experience and pricing data from thousands of suppliers.

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Would you attend next year’s Forge Technology Sourcing?

JR: Absolutely! We could have talked for another 45 minutes, the audience asked some great questions and Mousa and Chris are always a blast!

And people wanted to hear about how Vertice could help them! If you missed out on this, feel free to get in touch and find out how Vertice can transform your procurement functions.