In most organizations, budget holders are responsible for the purchasing for their department and making the best use of the available budget, whilst finance teams are both responsible and accountable for capturing and accounting activities for that spend.
Finance use ERP and accounting software to manage the process of capturing the relevant invoices, getting them approved, posting them to the ledgers, and getting the supplier paid. Once a month they provide the management reports to the budget holder to update them on where they are against the budget.
So what are the tools and information available to the budget holder that would be sufficient to make them accountable for their spending? The answer is almost none because the information they would need is locked up in the finance ERP /accounting software.
The diligent budget holder addresses this problem with multiple spreadsheets that they maintain to track their spending against the available budget. This is a time-consuming activity and always needs reconciliation with the management accounts when they arrive.
The diligent budget holder will also be continually asking information from finance about their suppliers such as: how much they are spending, the status of transactions and payments, and even for historic information on the price paid for something historically for reference. At least they will still be asking if finance is capable of responding in a timely manner. If not, they will probably have given up some time ago.
If senior finance management wants to make budget holders accountable for their spending management two changes are required.
- The first is to provide the automation software that delivers the budget holders real time information on every supplier, every transaction (current and historic) including current and projected budget availability. It is unreasonable to hold someone accountable for spending, then keep them in the dark on just about every aspect of that responsibility.
- The second is to recognize that the current manual purchasing processes may address finance’s requirements, but almost all ERP/ Accounting applications are unfit for the purpose to address the budget holder’s requirements.
The benefits of purchasing automation can extend far beyond productivity gains. It represents an opportunity to deliver a single seamless paperless process that puts the organization on the same digital page for every aspect of purchasing.
It should replace the budget holders' spreadsheets to help them plan spend more efficiently and provide finance with oversight of that plan spend afar into the future as the plans exist.
Perhaps most important of all, it should enable finance and budget holders to work much more closely together and develop the organization’s skills in the effective management of budgets and spend.
The result – purchasing automation ensures that everyone is now both responsible and accountable for their purchasing because the business has provided the tools to make that possible.