What a Shifting CFO’s Focus Means for Procurement

For CFOs in procurement, the pressure is on. They are tasked with all the historical expectations of managing financial reporting, statutory compliance, and bookkeeping, but are now increasingly expected to also be a business partner with strategic and operational focus.

What does this mean? CFOs and their teams are expected to do more with less. The Hackett Group’s 2024 Key Issues Study found that financial teams’ workloads are expected to increase 5% this year while headcount and budget slightly decrease, leaving a productivity gap of 6% for CFOs to find a way to make up. While that might not sound like much, with so many concurrent tasks to handle, the gap can feel insurmountable.

One thing is clear: as CFOs transform into strategic partners for the business, they need to find solutions alongside their CPO and procurement counterparts to go further with fewer resources.

This blog breaks down The Hackett Group’s findings for CFO 2024 priorities and how procurement can go hand-in-hand to help finance meet its goals to subsequently transform both organizations into strategic business partners with top company leadership.

Keeping Costs Low Amid Market Volatility

The top priority for finance executives was cost management and optimization, according to The Hackett Group’s findings. Given that disruption and economic uncertainty haven’t slowed down and don’t show any signs of stopping, managing the risk and working to optimize working capital has been key. Finance must continue to strengthen supplier payment terms as well as inventory management, two areas with a clear crossover into procurement.

With procurement occupying historically cost-volatile areas impacted by geopolitical tensions, supply chain issues, and manufacturing, energy, and raw material costs, CFOs have also taken a particular interest in procurement to identify areas of cost risk — as well as savings opportunities. For example, optimizing procurement processes, logistics, distribution, warehousing, and more can effectively lower manufacturing and supply chain costs.

However, as procurement teams know, optimizing these processes is multifaceted and complex, especially at scale. The Hackett Group’s findings indicated that the best companies are proactive when it comes to cost optimization — finding ways to thrive and capitalize on growth opportunities regardless of challenges that come their way. A closer relationship between CFOs and CPOs and their teams can help uncover areas of opportunity. Another strategy is digital transformation and the adoption of technology.

Embracing Digital Transformation to Do More With Less

Consider these two findings: While “digital transformation, process improvements, and technology modernization” fell in financial leadership’s top five priorities in The Hackett Group’s research, only 54% of finance executives reported having high confidence in their ability to meet that objective. However, despite the primary focus on cost savings, executives also projected their technology spending would increase this year.

Together, this indicates that while CFOs clearly see the potential value of technology to help their organization meet overarching objectives, they lack the confidence in their teams to adopt and implement technology to align with that potential. The mismatch is pressing — to reduce costs and maximize efficiency among their teams, they must continue to adopt technologies such as cloud, analytics, machine learning, and scalable solutions. But without the right partners or training ecosystem in place to adopt those technology investments, confidence in successful implementation is low.

Another top-ten priority from the survey intersecting with this work is upskilling existing talent. A mere 28% of respondents said they had a major initiative in place this year to support upskilling, despite it being a crucial priority to capture the full value of digital investments.

At Arkestro’s recent Advisory Council about maximizing margins and achieving procurement excellence, we explored how crucial technology investments and strategies can transform areas like procurement into a profit-generating powerhouse — with minimal training required. For example, by optimizing procurement through Arkestro’s Predictive Procurement Orchestration (PPO), CFOs and procurement leaders can drive profitability and organizational growth together by:

• Shortening cycle times to run more competitive events
• Analyzing spend data to extend reach without more headcount
• Making every decision informed based on past data and results
• Improving supplier negotiations and relationships through easier processes

Adopting the right technologies and partnering with key business areas, such as procurement, can help CFOs make a bigger impact than they could alone.

Aligning Finance and Procurement

Another of The Hackett Group’s top 10 priorities from financial leadership this year was the growing emphasis on cross-functional business partnering, including better alignment with other functions in the organization.

Last year, 21% of surveyed executives said they didn’t have a plan for improving business partnering. This year, however, the number dropped to 3% — a marked decrease and evidence finance leaders are seeing the opportunities uncovered by partnering with other areas inside the business to help them make informed, timely, and strategic decisions that maximize enterprise value.

One of these key potential partnerships is the procurement function. Just as finance’s goal is to elevate its position by providing actionable business insights, procurement also has an invested stake in elevating its status in the organization at large. More and more, the two organizations are partnering to collaborate more effectively and tackle shared challenges head-on together.

The partnership makes sense — in areas such as supply chain continuity and resiliency, spend, and cost savings, CFOs and CPOs have shared interests in keeping costs low, efficiency high, and reducing risk. Both serve as stewards of company resources, and both functions touch essentially all aspects of operations. Despite procurement being historically perceived as a tactical function over a strategic one, it’s becoming more and more clear that elevating and focusing on procurement helps CFOs achieve their priority areas of focus.

The Hackett Group’s study identified several benefits for CFOs by focusing on procurement:

• Cost savings: A partnership between the two means finance is integrated at every stage of procurement, ensuring cost-saving opportunities are identified and effectively utilized.
• Mitigate risks: With closer involvement, CFOs can help procurement identify risks before they escalate.
• Align financial objectives with overarching business goals: By informing procurement decisions, CFOs can ensure strategic alignment to maximize value in the long term.

Ultimately, in today’s environment, both procurement and finance must operate as strategic partners to the business at large. Coordination between the two can help finance executives meet their key priorities for 2024, as well as elevate procurement into a profit-generating pillar. Arkestro’s platform helps procurement make better decisions, faster, and at scale. Get in touch to learn more.