You may think to yourself: finance handles finances, operations handles operations—and there is little to no overlay. Their responsibilities don’t overlap, so there’s no need for more interaction than a quarterly Zoom meeting or a monthly email amongst the teams.
Sadly, this is a total misconception.
It’s true; at first glance, the two teams seem to handle entirely dissimilar tasks. Finance is tied with responsibilities like budgeting, forecasting, and expense management. They share the responsibility of tracking the numbers and improving the profitability of the business. The operations team, on the other hand, ensures the business runs without hiccups. It also manages resources and works to lower disruptions in the way of offering goods or services.
From this angle, we can all agree, the duties of the finance and operations teams seem pretty different.
However, again, this couldn’t be further from the truth.
The two teams are very similar and depend on each other to work productively. Many of their processes also intertwine to allow every company to meet their goals. When it comes down to it, you can’t aim for efficiency in one department by excluding the other.
Let’s explore more on what we mean and how your finance and operations may be more similar than you think.
The Finance Team’s Responsibility
A finance team’s biggest responsibility is facilitating procurement.
Now, what is procurement?
It is the process of obtaining goods and services for business purposes. For example, purchasing raw materials to produce goods is a procurement process.
Frankly, without procurement, you would find it very difficult to run your business operations.
Many modern organizations use the term “procure-to-pay” to refer to their procurement process. It starts with identifying the right vendors and ends with paying for your orders.
What is the role of finance in procurement?
- Set spending limits for procurements
- Optimize the process for more value using spend management
- Budgeting and forecasting
How Procurement and Finance Teams Impact Productivity
Procurement is an integral part of every business. It affects the quality of your goods and services, and ultimately, your reputation. Thus, time acquisition of resources is also critical to serving your customers. You cannot even think of operating a business in the absence of an efficient procurement process. Why? Because you wouldn’t even have a business.
Additionally, the effectiveness of your procurement process directly decides the quality of your offerings. If you buy low-quality resources, you can end up selling inferior products or services.
Low quality products = bad for business.
On the flip side, an effective procurement process can turn into a competitive advantage when optimized. Finance teams play a huge role in this process. Maintaining the delicate balance between low-cost and high quality is a constant focus for those on finance teams. Optimization of costs is the goal of a finance team, and achieving that through procurement is a struggle for many of them.
A fully optimized procurement process can drive down company costs. This is a critical piece, as businesses spend 2/3rd of their revenues on procurement. What does this mean? It means that even a small percentage of cost-cutting can go a long way to boost profitability.
Cutting costs + boosting profitability = a finance team’s dream.
So, what are a few more byproducts of an optimized procurement process?
Companies can build mutually-beneficial supplier and vendor relationships through their procurement process. Therefore, it can allow you to foster innovations and boost your brand. In addition, businesses can expand their operations relying on procurement processes. They can target the international market and grow their revenues.
In short, companies wage their existence on the effectiveness and optimization of their procurement process—and finance teams are leading that charge.
The Operations Team’s Responsibility
The operations team is the grease on every company’s wheels—they keep the company moving.
Another of the vital tasks of an operations team is to manage and optimize the supply chain. Now, we all think of “supply chain” and think “products”. But what do we really mean by supply chain?
In simplest terms, a supply chain consists of all the activities necessary for a business to provide products or services. It is the network between the vendors and businesses that allows a business to serve the consumer. This network is complex, and without the proper organization and coordination of processes, it can become a mess. A company’s supply chain can go from a potential growth-driver to an operation’s team worst nightmare.
In addition, the supply chain includes several components like suppliers, producers, distributors, and transporters.
So, how exactly does the operations team optimize the supply chain? Operations teams:
- Manage product sourcing and suppliers
- Control inventory
- Ensure the optimum use of resources
- Facilitate timely delivery of goods or services
- Lower costs and operational risks
- Identify opportunities to improve efficiency and grow the bottom line
How Supply Chain and Operations Teams Impact Productivity
The supply chain acts as a roadmap for an organization. It lays out all the stages of your operations— all the way from sourcing goods to delivering products to your customers. That being said, your operations team (and company as a whole) cannot meet your customers’ needs without an efficient supply chain.
So, what truly makes a resilient, efficient supply chain management indispensable?
It Delivers the Right Products
Not only do you have the ability to deliver products more efficiently to your customers, but a resilient supply chain ensures that you always have the products you need to keep your operations running smoothly. Let’s face it, after 2020 and 2021, no company can afford to not have a resilient supply chain.
It Improves Customer Service
An optimized supply chain is vital to satisfy your customers. If your company isn’t running efficiently and if you don’t have the products you need, you can’t offer your customers any value. Without customers, companies can’t keep the lights on. Efficient operations and supply chains directly affect the bottom line of every business.
It Reduces Costs
Proper supply chain management allows businesses to lower purchasing and production costs. A huge role of operations teams is strategic sourcing, and being able to find the lowest price for the highest quality product. The way we see it, there’s no sense in paying more money for the same exact product if you can find it elsewhere. Operations teams are tasked to make their supply chain is as cost-effective as possible.
Why Finance and Operations Teams Depend on One Another
As you can see, procurement and supply chain are two parts of the same equation. You cannot imagine wooing your customers if the two processes don’t work in sync. That being said, you cannot imagine wooing your customers and growing your business if your finance and operations teams aren’t in sync.
Are we starting to sound like a broken record?
Well, it’s true. Finance and operations teams depend on one another to get them through everything from everyday business hurdles, to worldwide pandemics.
How exactly do finance and operations teams rely on each other, you ask? Let’s dig into it.
Meet Disruptions in Operations
A business can experience disruptions in its operations. For example, COVID-19 forced 28% of businesses to look for alternate sourcing options. Finance and operations needed to work together to overcome the situation. Your finance can create a new procurement budget, while operations search for alternatives. In this, resilience in your supply chain and business operations follows.
Create and Stick to Budgets
Procurement professionals have to stay within the budget developed by the finance team. However, it can only work to the company’s benefit when both teams work together. Your operations can provide insights, based on which operations can create a fitting budget. The process can work wonders to improve the value and ensure the optimum use of resources.
Reduce Operations Costs
Every facet of the supply chain offers opportunities to cut costs. However, the finance team alone can’t achieve the task. It needs active cooperation from the operations team to attain its goal. How can we cut costs?, What are we spending too much money on?, Where are our bottlenecks? are just a few of the questions that can be answered when finance and operations teams come together. Both teams need to share feedback to improve profitability.
Building Strong Supplier Relations
The operations team is in charge of developing lucrative relationships with suppliers. However, it is only one part of the process. The other part is the responsibility of the finance team by making timely payments to vendors. Together, with frequent purchases and on-time payments, client-vendor relationships flourish. As a rule of thumb, when vendor relationships are flourishing, it makes it much easier for companies to operate better and, ultimately, grow faster.
Getting Finance and Operations in Sync
By now, you probably have a good idea of what it looks like when your finance and operations teams are in sync; you’ve also probably realized the importance of the two teams working together.
Now let’s give you the tools to actually get your finance and operations team on the same page. We just need to give you a few tips:
Ensure Optimum Communication
Communication is the foremost requirement for your finance and operations to work together. Make sure all the members know each other and can collaborate with ease. The purchasing process is such a huge part of each team’s responsibilities; a centralized purchasing process that gives the finance and operations teams a single source of company-wide purchasing information they can use to stay on the same page.
Encourage the Free Flow of Data
A data-driven approach for every business. Therefore, your operations and finance teams should be able to exchange data without restrictions. However, this process can become challenging if the two teams use different tools to manage processes. Maintaining separate spreadsheets is also not suitable to harness productivity.
If anything, it’s the antithesis of productivity—a waste of time as we like to call it.
If data is king, then visibility is the crown. Wonders can happen when finance and operations have the proper visibility into their expenses. Let’s take the example of CorePower Yoga to illustrate what we mean. The company was suffering from low visibility and high company-wide spend every month. However, after aligning their finance and operations teams, they began to see incredible savings and were able to grow not only faster, and more efficiently.
How? Let’s dig into it.
First, Negotiatus established a single source of truth for CorePower’s finance and operations teams—a centralized P2P platform—and facilitated the free flow of data. In short, CorePower is now able to stay on top of company-wide purchases and payments using a single platform.
With Negotiatus, CorePower improved its visibility into its supply chain and purchasing processes. For the cherry on top, they were able to save $11,000 monthly by making strategic spending decisions, and the company reduced their monthly rogue spend from $50,000 to $0 by having more visibility into purchases and approvals.
The finance and operations teams appear to handle disparate responsibilities. One team manages matters related to money, while the other looks after the smooth functioning of the business.
The truth is, not only do both teams rely on each other to perform daily tasks and business functions, but the company’s success and ability to grow relies on that functionality as well. One team cannot operate without the help of the other if you want to improve productivity of the company as a whole.
Make sure your finance and operations teams are working at the highest efficiency level as possible. Book a demo today to see how Negotiatus can unify your finance and operations teams and become your company’s strategic partner for growth.