1. What are the main benefits of aligning treasury with procurement?
Aligning treasury and procurement improves working capital by linking supplier contracts and payment terms with liquidity planning. It also reduces financial risk and strengthens cash forecasting accuracy since procurement commitments feed directly into treasury’s financial outlook.
2. What specific risks are mitigated by this alignment?
When treasury and procurement collaborate, companies are better protected against cash flow shortages, supplier credit risks, and unexpected financing costs. Treasury can anticipate exposures such as interest rate or currency fluctuations that often originate from procurement activities.
3. What trade-offs or tensions should companies expect when aligning these functions?
There can be tension between procurement’s goal of negotiating longer payment terms and suppliers’ need for faster payments. Treasury’s focus on minimizing capital costs may also conflict with procurement priorities such as supplier resilience or sustainability. Misaligned KPIs can further complicate collaboration.
4. What practices help to effectively align treasury and procurement?
Effective alignment requires shared KPIs across both teams, such as cash conversion cycles or days payable outstanding. Integrated data systems give real-time visibility into purchase orders and supplier payment schedules. Cross-functional governance ensures procurement decisions are reviewed for their financial impact.
5. What outcomes have been documented when companies successfully align them?
Companies that align treasury and procurement report stronger liquidity, cost savings from improved payment terms, and fewer surprises in working capital needs. This collaboration also enhances resilience against market shifts, including interest rate volatility and supply chain disruptions.
For more insights from Anders Lillevik, CEO of Focal Point, please read the full article on Treasury & Risk: The Strategic Benefits of Aligning Corporate Treasury with Procurement.
