Ever wonder why is Finance always at the back of the queue for investment?
The one common characteristic of every finance team is that it is always crazy busy. This is exacerbated each month-end in the scramble to get everything processed to produce the month-end accounts, management information pack, and quarterly VAT returns as well as the annual pain of year-end and the subsequent audit.
Most finance departments are becoming increasingly frustrated by their inability to evolve and adopt better methodologies simply because there are always “more important” projects for the corporate cash and available resources. Unfortunately, it is equally common that finance teams often don’t communicate fully the benefits and value of proposed investments.
Let’s take two examples:
- Invoice approval automation: The removal of all the paper
It is becoming standard practice for businesses of every size to remove all the paper from the invoice capture and approvals process. The technology is 100% proven. It saves at least 50% of the current time needed to process invoices and creates capacity for more important and useful tasks. It also speeds up approvals, enables more prompt payment of suppliers and simplifies month-end accruals.
All valid benefits for the finance department, but usually not enough to get the buy-in from the board. That’s because most boards are made up of more than just finance. They are made up of various departmental budget holders, approvers and directors.
That’s why I recommend a different approach.
Why not show budget holders, directors and approvers their benefits of purchase invoice automation? For example:
- They save time! They will never need to sign or chase paper invoices again. Everything is online and accessible from any connected device. They can see all the details of the invoice, see an image of the actual invoice and approve it on the spot at any time, 24 x7.
- They improve their relationships with suppliers! With purchase invoice software, suppliers are paid promptly and every query is managed quickly and efficiently. This means approvers and directors are no longer chased down by suppliers for unpaid invoices.
- They get full visibility on spend for quicker and more efficient decision-making! They can see how much they are spending with every supplier, the status of every current and historic transaction (including the invoice), what they purchased, how much they spent and even if the invoice has been paid.
- They know how much budget is left! If you have budgets, they can also see budget availability based on every invoice received.
If finance teams take the time to explain the benefits that directly relate to the directors and approvers, they are FAR more likely to get their buy-in.
Let’s be clear, nothing ever arrives without some form of “order” being placed, however informal that process may be. As important, most people nowadays purchase online. The simple discipline of raising a formal electronic purchase order for everything the company buys delivers huge benefits to everyone involved. It takes a few moments, but the implications are transformational.
Finance get a formal approval process, budget availability validation, full commitment accounting (foresight to all costs incurred and the cash flow implications) and fully automated order, receipt, and invoice matching out-of-the-box.
But what is in it for the budget holder, directors, and approvers?
- They get full visibility on spend before it happens! They can review every purchase before it happens, see the relevant budget availability (whether based on the corporate budget or a project-related budget) and approve or deny in a couple of clicks or taps from any device. Likewise, they can check historic pricing, see how much they have spent with that supplier (and much more) before they make a fully informed decision.
- They enhance communications with suppliers! Every supplier receives a formal purchase order with both the anticipated costs and the relevant terms of supply. Additionally, they can see all the information on every supplier, on demand 24×7
- They see straight away if invoices are over or under planned spend! With purchase order automation, when the invoice arrives, it is automatically reconciled to the order or receipt so that:
- 2-way match (invoice vs order) confirms if the invoice is the correct value allowing “one click” approvals.
- 3-way match (invoice order, GRN) confirms everything is as it should be and these transactions are auto-approved without touch by anyone in the business.
- Exceptions are denied with instructions to quickly resolve any queries.
- On final approval, the accounting / ERP application is updated to enable prompt payment.
- They can maximise their budget allowance and spend! They can see their budget availability based on everything they are planning to spend, everything in process and every completed transaction
The simple discipline of capturing the request to purchase transforms the ability for budget holders, approvers and directors to proactively manage their budgets, projects and suppliers. It ceases to be a monthly review of the management accounts and transforms into a real-time view of the world as it is today, updated automatically moment by moment.
If finance teams want to move away from always being at the back of the investment queue, I recommend they start talking about the value and benefits of purchase invoice and order automation to their colleagues who make up the clear majority of the users of purchase and budget software.
Without a doubt, budget holders, approvers and directors will be keen to move away from dealing with paper invoices and dependency on management reports that are between 5 to 15 days out-of-date when they arrive.
Bottom line – finance teams need to move away from trying to manage and oversee spend based on historical reports in the management information pack and embrace the next generation financial management, which is basing all decisions on exactly where the business is today and where it is planning to be in the future.
We call this Budget Holder Management. Looking at it this way, how could a board of directors not want to take this step as the ROI is utterly compelling?