In most businesses, it's difficult to decipher the differences between finance teams and budget holders. The budget holder and the finance team typically work together to purchase goods and services for their department. A good working relationship between these two departments is essential for the business. So the question remains, finance teams v budget holders: What are the differences?
In organizations, budget holders are responsible for the purchasing for their department and making the best use of the available budget, while finance teams are both responsible and accountable for capturing and accounting activities for that spend.
Finance teams have several budget approval processes that are used mainly through ERP and accounting software. An ERP manages the process of capturing the relevant invoices, getting them approved, posting them to the general ledger, 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 and their spending.
So what tools and information would be useful to a budget holder if they were trying to stay on top of their spending? Unfortunately, most don’t have the necessary data sources or tools to use for monitoring spend. The problem lies within the financial ERP/accounting software used by many businesses. It is often locked up from the user’s view, making it nearly impossible to acquire the kinds of data needed to stay on top of spending and understand financial performance, unlike what we offer at Compleat Software.
However, through the implementation of accounts payable automation, this doesn’t have to be the case. Bridge the gap between finance departments and budget holders with our guide.
Facing budget limits, 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. Before you know it, you will probably have given up if they can’t respond to the requests in a reasonable amount of time. Maybe they have given up on you?
If senior finance management wants to make budget holders accountable for their spending management two changes are required.
- The first is to provide an accounting 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. This would be unacceptable in all procurement organizations looking to retain talent capable of budget planning.
- The second is to recognize that the current manual procurement processes focus on the needs of finance, but most accounting software is not suited for the needs of a budget holder. They need a proper accounts payable system.
When organizations buy automation, they get more than productivity gains — they get a seamless paperless process that puts the organization on the same digital landscape for every aspect of purchases. This allows for the benefits of purchasing automation, digital invoice processing, and artificial intelligence, among others to extend far beyond productivity gains. It represents an opportunity to deliver a single paperless process from a toxic paper-enforced procurement mess.
It should replace spreadsheets for budget holders and help plan spending more efficiently. Finance can review the plan and ensure its implementation is within budget and as planned. In this way, plans can be reviewed and updated at a distance into the future.
Most importantly, finance and budget holders should work together to develop the organization’s skills in effective budget management. Finance and budget holders can now 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.