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Budget management, Purchase invoice automation, Accounts payable | 3 Min Read

Stretching budgets further: how schools can reduce the cost of what they buy

Written by:
Neil Robertson on August 4, 2020

    

Every school is careful how they spend their available school budget as there are so many competing priorities to choose from and nowhere near enough funds to address them all. 

Whilst each school is subtly different in terms of the purchasing processes they have put in place, almost all have introduced “best practice” bureaucracies to ensure conformity to both the governance of spend and their ability to meet their legal spend reporting requirements. 

Unfortunately, for most schools, this has resulted in consuming a great deal of time for teachers, heads of departments, procurement staff, the finance department, senior management and governors, when everyone was already extremely busy. 

If you'd like to find out how automating your school’s accounts payable process  can help achieve long-term, sustainable savings, download our free eBook here.

These problems are exacerbated as people spend time shopping around for the best prices on low-value items, and often end up making purchases from yet another supplier who happens to have an offer for the cheapest price this week.

This all happens without any consideration of the additional administrative cost that is incurred to account for that purchase. 

However, there is now a much better way of working that will 1) save everyone involved in the purchasing process a great deal of time, 2) enable the school to achieve considerably lower costs than they are currently paying and 3) enable the school’s budgets to be stretched further while supporting school spending. 

The first cost every school should reduce is that of administrating the purchasing and accounts payable processes. A recent comprehensive survey of the process -- which looked at:  

  • time required to raise a request to buy,  
  • undertake the correct approval process (with associated budget availability checks), 
  • place the order,  
  • capture the receipt and invoice,  
  • match them,  
  • approve the invoice,  
  • deal with internal and supplier queries,  
  • post the transaction to the ledgers,  
  • and finally, file the invoices and finally administer the subsequent payment process, 

found that the average school spends over £60 in labour for every order processed. Unsurprisingly, this “hidden” cost often exceeded the price of the items purchased! 

 

School budgeting – cutting costs further  

The second cost every school should consider reducing is the price they are paying on the vast majority of what they purchase. It is both common and commendable that many schools trade with local suppliers to support their community and this is increasingly relevant as we enter a “new normal” where small businesses need all of our support. But at the same time, this should be balanced against the premium price they are prepared to pay to support their local suppliers, as it equally reduces the schools ability to address their priorities and the educational experiences that they can deliver to their students. 

The problem with most school spending in the past is that there was no easy way to quantify the real costs of administrating a diligent purchasing and accounts payable process or ensuring they achieve best value pricing across the thousands of different purchases they make. That is, until now. 

 

Extend the functionality of your existing accounting/ERP software and stretch your school’s budgets further  

To reduce administrative costs and prices being paid, every school should take a fresh look at purchasing and accounts payable applications (purchase to pay) that extend the functionality of their existing accounting/ERP software — specifically those that include integrated online buying from organisations like YPO, Amazon Business, Lyreco and other major suppliers (as this will help school spending go further). 

These modern applications provide everyone outside the finance department with a fast, convenient and productive purchasing experience, for both online purchases and raising requests to buy for other items — all of which can be done from any connected device. 

Once a request to buy is raised, it can be automatically checked against budget and the appropriate approval process applied. Once again, approvals can be undertaken from any device and once approved, the order is sent directly to the supplier. 

From there, the supplier invoices are automatically captured (as are receipts), automatically matched to highlight exceptions and, on final invoice approval, the invoice is posted automatically to your accounting/ERP software. 

Compared to a manual process, you can save up to 90% of the administration time and reduce the cost of doing so.  As a result, you have more time available to spend on reducing the costs of what you buy and maximising your school budgets. 

The bi-product of automation is the digital capture of every supplier invoice, including not just the header information, but every line item (item code, description, unit of measure, quantity and price). As every procurement professional will tell you, this data is the foundation of every tender to reduce costs and is always extremely hard and time-consuming to capture manually. 

By using advanced digital procurement applications and technologies, it becomes very easy to immediately identify how much your school could save by paying less, simply by comparing the prices you pay against the £10bn plus of spend analytics we have already processed and evaluated. 

For larger schools and MATs, these savings will run into many £100,000’s year-on-year, simply by using suppliers like YPO, Amazon Business, Lyreco for common items and other major suppliers for areas such as F&B. 

If a school does not have their procurement resources, the entire spend review, savings identification, tendering, supplier selection and subsequent automation is provided as a service. 

As for how much all of this might cost, the answer is far less than you think. By combining all of the usual costs of Procure to Pay into a single monthly payment, spread over a 1 to 3-year term, every school will achieve a cash ROI in as little as 3 months, as well as improve their ability to address other investment priorities directly from the savings they are making thereafter. This enables school budgets to be stretched quickly and easily.  

If this all sounds too good to be true, we promise you it’s not. Digital procurement has changed everything – and every school budget will benefit. 

If you’re interested in finding out more about how you can improve your school’s budgeting and spending with software, just download our eBook on purchase automation, budget management and digital procurement for schools by clicking the button below. 

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