Purchasing and finance reinforce each other in one system

Government organizations are busy professionalizing and digitizing their procurement and finance departments. This trend has been going on for years, but the striking thing about the market is that more and more authorities are simultaneously choosing to link the two processes more closely.

With a total purchase of more than 85 billion euros in products and services, the Dutch government is one of the largest ‘buyers’ in our country (accounting for 15% of the total amount). For our government, the importance of an efficient and transparent procurement system has always been extremely important. In the current landscape, the role of procurement is only advancing further into the foreground.

Purchasing was at the forefront and under pressure, especially during the Covid-19 crisis. The government had to do everything possible to solve gigantic purchasing problems (think about buying face masks and vaccines).

It was not just about large sums, it also had to be put together in record time. For the buyers involved, who are usually used to structured and well-planned processes, it means a lot of work.

Add to this that buyers – both at national and municipal level – must take more and more things into account and therefore must buy smarter. For example, they need to pay more attention to the UN’s Sustainable Development Goals, use new ways of bidding and seek cooperation with others. Conclusion: public purchasers are under increasing pressure and are facing a huge task.

“In government organizations that still run traditional (legacy) IT systems, the streams of finance and procurement often still run separate from each other,” says Sander Hildebrand, government expert and chief economics consultant at iQibt. “And that division presents more integration challenges. At a time when the demand for speed, transparency and efficiency is paramount, many governments are realizing that they need to do something about it. “

“If you seamlessly integrate purchasing and financial processes, you have a much better picture of the entire chain,” Hildebrand continues. “You can report more easily, and you also report with the correct data, so the reports are less likely to fail.”

Purchasing and finances under one roof

A concrete example where this provides benefits is national government expenditure management. “Because all procurement and financial data across multiple departments are on one platform, expenditure can be reported at an integrated level. This information can then be used in areas where cost savings or better terms can be ensured, or for the strategic procurement and the budgeting process. ”

“There is one source and therefore one truth.”

For services, an integrated approach can make a big difference to the way customers – suppliers, buyers or other stakeholders – are served. “Because in such a situation you do not have fragmented files, you can provide customers with all the necessary information at the touch of a button,” says Hildebrand. “There is one source and therefore one truth.” This is a benefit that should not be underestimated, which has not yet been realized in many organizations.

The main advantages of an integrated chain

It also means good news for employees in the workplace. Colleagues in procurement and finance often spend a lot of time working in their various systems. Working from a single system can thus provide several benefits; from major functional improvements (no more synchronization issues and interfaces) to better overview and work more efficiently, but above all more user-friendly.

Take SAP, the largest ERP system provider to (larger) governments, as an example. Richard Legierse, founder of iQibt, points to a concrete benefit that the firm’s consultants all too often hear after implementing SAP’s Finance and Procurement modules at a government agency.

“A major advantage of an integrated system is that the stability of the process is increased. In ‘old’ purchasing environments, different interfaces have often been built for master data and for different transaction data (budget checks, responses to budget checks, commitment messages, invoices and payment requests). These interfaces can cause SAP failures. With the new system, the different interfaces are no longer needed to bring the two processes together. “

And Hildebrand and Legierse see even more benefits for customers: “Fewer errors in the ordering process due to better source data, a higher invoice flow (without human intervention), clearer authority management for, among other things, payments and 3-way matching, and a central place for data maintenance. . “

Is a municipality different from a ministry?

There is great diversity in the public space. Nevertheless, Hildebrand and Legierse state that it not only sounds “logical” to recommend an integrated ERP system to a ministry, but that it also applies to, for example, a province, G4 municipality or even a municipality with 30,000 inhabitants.

“A major advantage of an integrated system is that the stability of the process is increased.”

“Basically, everyone has the same information needs and the same need for functionality,” says Hildebrand. However, each organization will have to make its own assessment, and here it is advisable to examine the pros and cons of the two core processes – ‘source of contract’ and ‘buy to pay’.

“Small municipalities do not really need their own ‘source to contract’ system because it is not interesting in relation to ‘return on investment'”, says Hildebrand. “The costs are not commensurate with the benefits. And when it comes to buying to pay, smaller government institutions should mainly look at procurement volumes, the types of contracts in the portfolio, but also how procurement is contracted and legislation and rules. ”

For large parties, the latter, how procurement is entered into, is an important consideration factor. “Large government agencies such as the central government have specific laws and regulations for procurement. The integration between procurement and finance is therefore different and depends on the type of financial administration that is performed,” says Legierse.

“The processes and requirements that apply are different in both administrations,” he explains. “In addition, large (national) state agencies are obliged to join centrally organized initiatives. Think, for example, of initiatives regarding internal messaging and data exchange. ”

“The importance of a streamlined buying process and a solid financial household has come high on the agenda.”

But in practice, the decision to move to a new integrated system – despite all the business cases that are developed – is almost always synchronized with the life cycle of the systems. “This determines the systems’ ‘renewal calendar’. And from there, governments begin to look for their ideal demands. “

An acceleration in implementations

The experts at iQibt expect that the shift to a collaboration between finance and procurement will accelerate in the coming years. “The government is really investing a lot in IT innovation. And the importance of a streamlined buying process and a solid financial household has come high on the agenda. ”

For government institutions facing such a shift, it is important to learn from the experience of the private sector (it is, after all, at the forefront of the domain) and of the forerunners in the public market.

The Financial Services Center – a joint service center for the ministries SZW, Finance, BZK, OCW and VWS – is a good example of a government agency that has integrated procurement and finance.

Legierse: “One of the success factors is that FDC is not so much concerned with the organizational agreements between the departments, but only provides a service to the departments within finance and procurement.”

It is important that government institutions have carefully considered the scope in advance. What fits and works? And what not?

“And look not only at the system impact, but also at the organizational implementation,” Hildebrand and Legierse conclude. “Be sure to gather input from all ranks within the departments, and pay sufficient attention to the change side of the change.”

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