Procurement and Finance Collaboration: Your Complete Guide to Breaking Down Silos and Driving Business Value

In today's fast-moving business environment, procurement and finance teams can no longer afford to work in isolation. While these departments have traditionally operated separately—with finance focusing on financial health and reporting, and procurement concentrating on supplier relationships and cost reduction—their processes are deeply interconnected.

When these teams collaborate effectively, organizations unlock significant benefits: improved spend visibility, faster decision-making, stronger supplier relationships, and measurable cost savings. Yet many organizations struggle to achieve this collaboration. According to industry research, over half of finance and procurement teams rate their cross-functional collaboration as only "medium" at best. Communication barriers, misaligned metrics, and separate technology systems continue to keep these critical functions apart.

This guide explores why procurement and finance collaboration matters, the common challenges that prevent it, and practical strategies your organization can implement to build a more integrated, efficient approach to spend management.

The business case for procurement and finance collaboration

Organizations that successfully integrate procurement and finance operations realize measurable benefits. Research shows that companies with strong collaboration between these functions achieve:

Financial impact

• 20–40% increase in realized savings: When finance and procurement work together to track and validate savings, organizations capture significantly more value from negotiated contracts and avoid "savings leakage."

• 10–30% improvement in operational efficiency: Streamlined processes, reduced manual handoffs, and automated workflows free up staff time for higher-value activities.

• Reduced cash conversion cycle: Optimized payment terms and improved invoice processing speed mean organizations can better manage working capital and maintain healthier cash positions.

• Lower processing costs: Automated, integrated P2P processes typically reduce the cost per invoice processed by 40–60%.

Strategic benefits

• Enhanced spend visibility: A single, integrated view of organizational spending enables better decision-making across both functions. Organizations gain insight into tail-end spend that often represents 20% of total spend but 80% of suppliers—spend that typically goes unmanaged when teams work in silos.

• Improved supplier relationships: Consistent communication between procurement and finance prevents mixed messages to suppliers. When suppliers receive timely, accurate payments and have a single point of contact for issues, relationship quality improves, often resulting in better pricing and priority treatment.

• Faster decision-making: When both teams have access to the same real-time data and established communication channels, decisions that once took days or weeks can be made in hours.

• Stronger compliance and risk management: Integrated procurement and finance operations create better controls, reducing maverick spending, ensuring contract compliance, and providing early warning signals of supplier financial distress.

Competitive advantage

In today's volatile business environment, organizations need agility. Procurement and finance collaboration enables faster response to market changes, whether that's securing critical supplies during disruptions, taking advantage of favorable pricing windows, or quickly reallocating budget to strategic priorities.

The organizations that master this collaboration don't just save money—they build resilient, agile operations that become a source of competitive advantage.

Why procurement and finance collaboration is essential

The roles of finance and procurement are evolving rapidly. Finance is no longer just a back-office function focused on treasury and compliance—it has become a strategic partner that guides business decisions through data-driven insights. Similarly, procurement has moved beyond its traditional role of simply buying goods and services to become a value creator that influences cost savings, supplier innovation, and risk management.

Strategic alignment creates competitive advantage

When procurement and finance work together effectively, they create powerful synergies:

• Enhanced spend visibility: Finance gains real-time visibility into spending patterns, while procurement accesses the financial data needed to identify savings opportunities and optimize supplier relationships.

• Improved cash flow management: Collaborative teams can align payment terms with procurement strategies, ensuring optimal use of working capital while maintaining strong supplier relationships.

• Better risk management: By sharing supplier performance data and financial insights, both teams can identify potential supply chain disruptions and financial risks before they impact the business.

• Stronger business case development: Procurement brings market intelligence and supplier insights to financial evaluations, resulting in more comprehensive business cases that account for total cost of ownership, not just purchase price.

• Accelerated digital transformation: Unified procurement and finance operations can more effectively implement and leverage automation technologies, creating touchless processes that reduce manual work and errors.

The cost of disconnection

Organizations that fail to integrate procurement and finance face tangible consequences:

• Reduced spend control and limited visibility into total organizational spending

• Inefficient management of tail-end spend (which can represent 20% of spend but 80% of suppliers)

• Inconsistent supplier communications leading to damaged relationships

• Poor compliance with purchasing policies, reducing negotiating power

• Missed opportunities for early payment discounts and favorable payment terms

Common barriers to effective collaboration

While the benefits of procurement and finance collaboration are clear, several obstacles frequently prevent organizations from achieving seamless integration:

Cultural and organizational barriers

• Resistance to change: Many organizations maintain a "we've always done it this way" mentality. Finance teams may feel protective of their traditional role as sole financial gatekeepers, while procurement teams may resist what they perceive as finance's interference in supplier relationships.

• Trust deficits: Finance may question procurement's ability to deliver promised savings, while procurement may view finance's budget constraints as unrealistic or inflexible. These mutual doubts create friction that hinders collaboration.

• Separate goals and incentives: When finance is measured on budget adherence and procurement on cost savings, the teams may find themselves working at cross-purposes rather than toward shared objectives.

Communication and process gaps

• Insufficient dialogue: When departments operate in silos without regular communication, they cannot effectively coordinate activities or align on strategic priorities.

• Misaligned terminology: The two functions often use the same terms differently. For example, "cost savings" means price reduction to procurement but year-over-year expense reduction to finance, leading to misunderstandings in reporting and goal-setting.

• Competing priorities: Finance may prioritize extending payment terms to preserve cash flow, while procurement knows these terms can damage supplier relationships and increase costs. Without open discussion, such conflicts remain unresolved.

Technology and data challenges

• Disconnected systems: Many organizations run separate procurement and accounts payable systems with disparate workflows and master data, making it difficult to maintain a single source of truth.

• Limited data visibility: Finance may lack access to supplier contract details and market intelligence, while procurement may not have real-time visibility into cash flow implications and budget status.

• Manual processes: When invoice processing, purchase order management, and approval workflows remain manual or semi-automated, both teams waste time on administrative tasks rather than strategic collaboration.

How to build successful procurement and finance collaboration

Achieving effective collaboration between procurement and finance requires a structured approach that addresses people, processes, and technology. Here are proven strategies for success:

1. Establish shared goals and aligned KPIs

Both departments need to work toward common objectives that support overall business strategy. This means:

• Define success together: Hold joint leadership meetings between the CFO and chief procurement officer (CPO) to establish shared goals around spend management, supplier performance, and working capital optimization.

• Create common metrics: Align on how you'll measure success. This includes agreeing on definitions for cost savings, establishing shared dashboards, and creating joint accountability for P2P process performance.

• Link individual incentives to collaborative outcomes: Ensure that performance reviews and compensation structures reward cross-functional collaboration, not just departmental achievements.

Example shared KPIs:

• Days payable outstanding (DPO) optimization

• Purchase order (PO) compliance rate

• Invoice processing cycle time

• Realized savings vs. contracted savings

• Supplier payment accuracy and timeliness

• Cash conversion cycle efficiency

2. Clarify roles, responsibilities, and decision rights

Eliminate confusion by clearly documenting who owns what:

• Map the P2P process end-to-end: Document every step from requisition to payment, identifying which team is responsible for each activity.

• Define decision-making authority: Clarify who makes final decisions on payment terms, supplier selection criteria, budget allocation, and contract approvals.

• Create clear escalation paths: Establish procedures for resolving disagreements between finance and procurement, ensuring issues don't languish unresolved.

• Document communication protocols: Specify when, how, and what information should be shared between teams on a regular basis.

3. Foster regular, structured communication

Don't leave collaboration to chance—build it into your operating rhythm:

• Weekly tactical meetings: Brief check-ins to address immediate issues, review urgent supplier situations, and coordinate on time-sensitive matters.

• Monthly strategic reviews: Deeper sessions to review spend trends, discuss upcoming procurement initiatives, assess supplier performance, and align on budget forecasts.

• Quarterly business reviews: Executive-level meetings to evaluate overall P2P performance, review strategic alignment, and set priorities for the coming quarter.

• Annual planning sessions: Joint budget development and strategic planning to ensure procurement's category strategies align with financial objectives.

4. Align on critical operational issues

Address specific areas where finance and procurement perspectives often conflict:

Payment terms

• The challenge: Finance may want 90-day payment terms to optimize cash flow, but these extended terms can strain supplier relationships and limit procurement's negotiating power.

• The Solution: Procurement and finance should jointly discuss payment term strategies, considering factors like supplier preferences, early payment discount opportunities, supplier financial health, and the strategic importance of each supplier relationship.

Cost savings definitions

• The challenge: Procurement views cost avoidance (preventing price increases) as a legitimate saving, while finance may only recognize year-over-year spending reductions.

• The solution: Agree on a savings taxonomy that includes hard savings (reduced spending), soft savings (cost avoidance), and value-added services. Create clear reporting standards that both teams accept.

Inventory and working capital

• The challenge: Finance may view slow-moving inventory as wasted capital, while procurement understands the strategic need for safety stock and buffer inventory.

• The solution: Develop shared understanding of inventory strategy, including safety stock rationale, lead time considerations, and supplier reliability factors. Use data to jointly optimize inventory levels.

Budget development

• The challenge: Finance sets budgets based on historical spending, potentially missing procurement's insights into market trends, price fluctuations, and upcoming category management initiatives.

• The solution: Involve procurement early in the budgeting process. Procurement should provide market intelligence on commodity prices, supplier market conditions, and planned sourcing initiatives that will impact spending.

 5. Invest in integrated technology

Technology is a critical enabler of collaboration, but only when implemented thoughtfully:

• Unified P2P platform: Consider solutions that integrate procurement and accounts payable functions, creating a single source of truth for spending data, supplier information, and process status.

• Automated workflows: Implement automated three-way matching (PO, receipt, invoice), automated approval routing, and exception-based processing to reduce manual handoffs between teams.

• Shared analytics and reporting: Deploy spend analytics tools that both teams can access, providing real-time visibility into spending patterns, supplier performance, and process metrics.

• Master data governance: Establish joint ownership of supplier master data, ensuring both teams work from consistent, accurate information.

• Mobile accessibility: Enable both teams to access critical information and complete approvals from anywhere, supporting faster decision-making.

Technology selection criteria:

1. Flexible integration capabilities with existing ERPs and financial systems

2. Automated invoice-to-PO matching functionality

3. Real-time reporting and analytics accessible to both teams

4. Supplier portal capabilities for improved communication

5. Support for dynamic discounting and early payment programs

6. Build a culture of collaboration

Technology and processes will fail without the right organizational culture:

• Cross-functional training: Have finance team members spend time in procurement and vice versa to build mutual understanding and empathy.

• Joint problem-solving teams: Create cross-functional task forces to address specific challenges, giving both teams ownership of solutions.

• Celebrate shared wins: Publicly recognize successes that result from collaboration, reinforcing the behavior you want to see.

• Executive sponsorship: Ensure C-suite leaders visibly champion collaboration and model collaborative behavior themselves.

How the right technology platform enables collaboration

Unified data through an open commerce network

Effective collaboration requires both teams to work from the same information. The Basware e-Invoicing Network creates this single source of truth by:

• Connecting 1.2 million organizations: Our open commerce network is the world's largest, meaning your suppliers can easily connect regardless of their size or technological sophistication.

• Offering 220+ interoperability partnerships: Your suppliers don't need to be directly connected to Basware—they can connect through our partner networks, making onboarding fast and frictionless.

• Providing free supplier access: Unlike closed networks that charge suppliers transaction fees, Basware's network is free for all suppliers, removing a major barrier to adoption and enabling procurement to get 100% of their supply base connected.

• Supporting any-to-any connections: Whether your suppliers send paper invoices, EDI, XML, or e-invoices, the network handles all formats, giving both procurement and finance complete visibility into supplier transactions.

Seamless integration across your technology ecosystem

Collaboration breaks down when teams work in disconnected systems. Basware provides:

• 250+ ERP integrations: Pre-built connectors for all major ERPs (SAP, Oracle, Microsoft, Workday, and more) plus hundreds of niche systems, ensuring procurement and finance data flows seamlessly between applications.

• Flexible integration architecture: Whether you prefer API connections, file-based integration, or middleware solutions, Basware adapts to your infrastructure.

• Unified master data management: Supplier, contract, and spending data stays synchronized across procurement and finance systems, eliminating discrepancies that cause friction between teams.

Automated processes that free teams for strategic work

Manual invoice processing and PO matching consume time both teams could spend on collaboration and value creation. Basware automates:

• Three-way matching: Automated comparison of purchase orders, receipts, and invoices eliminates time-consuming manual reconciliation and reduces payment errors.

• Intelligent invoice processing: AI-powered invoice capture and coding reduces manual data entry by up to 90%, accelerating invoice processing while improving accuracy.

• Dynamic discounting: Automated programs that allow finance to capture early payment discounts when cash flow permits, while giving procurement data on discount capture rates to use in supplier negotiations.

• Exception management: Automated routing of discrepancies to the right person for resolution, with complete audit trails visible to both teams.

Real-time visibility and shared analytics

Both procurement and finance need access to the same data to make informed decisions. Basware provides:

• Unified dashboards: Shared views of spending, supplier performance, invoice status, and process metrics that both teams can access and trust.

• Advanced analytics: Spend analysis tools that help procurement identify savings opportunities while giving finance the forecasting data they need for accurate budgeting.

• Supplier performance tracking: Joint visibility into supplier delivery performance, quality metrics, and payment behavior, enabling both teams to manage supplier relationships strategically.

By implementing a unified P2P platform like Basware, organizations eliminate the technology barriers that have traditionally kept procurement and finance apart, creating the foundation for true collaboration.

You might also like…

• Read how automation, digitization, and the changing dynamics of global trade are influencing Finance and Procurement in the free EIU report here.

• Learn what changes are expected to impact Finance and Procurement in the next years in this blog.

Ready to learn more?

When it comes to APIA strength, Basware was ranked as a Leader. According to the Gartner Critical Capabilities for Procure to Pay Suites Report 2019, Basware came in 1^st amongst 13 competing vendors for AP automation.

Questions? Contact us here.

Continue your learning: essential resources on procurement and finance collaboration

From the Basware blog

1. Procurement Collaboration, Resilience, Technology, and Sustainability - Insights from Nordic procurement and finance leaders on collaboration, automation, and strategic value creation.

2. Finance and Procurement: A Fine Romance or The Best of Enemies? - Explore why cross-functional collaboration remains challenging and what organizations can do to improve.

3. No More Excuses: Why Doing Nothing Is Not an Option When It Comes to Digital Transformation - Understand the three Ps of digital transformation (Platforms, Processes, People) and how they enable collaboration.

Basware solutions that enable collaboration:

1. Procure-to-Pay solutions - Explore integrated P2P platforms that unite procurement and finance operations.

2. AP automation - Learn how accounts payable automation frees finance teams to collaborate strategically with procurement.

3. e-procurement - Discover procurement tools that integrate seamlessly with financial systems.

4. Basware e-invoicing network - See how the world's largest open commerce network creates visibility for both teams.

5. Invoice matching - Understand automated three-way matching that eliminates manual reconciliation between teams.

Additional reading:

1. Achieve 100% Visibility White Paper - Research on how organizations can gain complete spending visibility through collaboration.

2. Finance and Procurement: Leverage Automation to Build Collaboration eBook - Survey findings on how alignment between functions is changing.