As the reality of economic slowdown sets in different parts of the world, it’s essential that you tighten your budget. This may mean reassessing crucial areas such as your company’s purchasing habits, repaying your company’s debt and tracking expenses.
In theory, this sounds easy but in practice, it’s a different ball game. This is because managing your budget requires an efficient tool that puts you in control. One that helps you curb bad spending.
If you’re struggling with budgeting, there might be several contributing factors. For instance, the irresponsibility of budget holders, unclear purchasing policies or outdated purchase order systems.
To help you understand this better, I’m going to use two examples that will show the difference between using paper-based and automated purchase orders. I’ll name the companies Company A and B. Company A uses a paper-based purchase order while Company B doesn’t. Let’s see what the outcome is for each company.
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This is a property management company. Its employees deal with rental agreements, property management forms, lease applications, invoices and purchase orders – all in paper-based format!
Let’s look at Company A’s budget.
|Expenses:||Estimated Dollar Amount:|
|Available to spend||000|
As you can see from the above example, during the month of June, Company A experienced a deficit of $61,500. Its purchases and salaries seem to spiral out of control while the projects don’t generate enough income.
One of the reasons Company A has a zero budget is that it’s using…
All paper-based budgets have the following disadvantages: They are unfit for agile business practice, they are prone to errors, and they are often locked away in filing cabinets by the finance department. Plus, Aberdeen Group’s (a research company) benchmark study discovered that manual processes hamper accounts payable operations and the overall company’s budget.
Managing the company’s budget
As you can see, paper-based systems make managing budgets extremely difficult for Company A. Furthermore, this outdated practice does not allow budget holders to track spending in real-time. In some cases, purchases happen without being monitored which increases opportunities for fraud or theft.
Also, there’s a likelihood that Company A is grappling with duplication of invoices or purchase orders. Rectifying this issue takes time as the paper-based system used by the company doesn’t allow it to be resolved quickly. This company is also likely to pay suppliers twice or even reorder building materials that have not run out.
Company A can avoid this problem by adopting an automated purchase order software that monitors purchasing transactions.
This is a construction company that has different construction projects scattered all over the country. Each site has a Project Manager responsible for setting up the estimates, budgets and construction timetable. He/she employs subcontractors and provides necessary explanations for the builders, engineers and other specialists.
The CFO of Company B monitors each project’s budget and advises accordingly. All this is possible because Company B uses a purchase order software that puts the CFO and the Project Managers on the same page.
|Expenses:||Estimated Dollar Amount:|
|Available to spend||300,000|
As you can see from the above budget, using an efficient purchase order software has immensely contributed to the success of three projects in ways paper-based systems cannot.
Here is why:
Automated purchase order software helps company B control costs through quotations and purchase order approvals. An efficient tracking tool like Procurementexpress.com does this best. Find out more about Procurementexpress.com from this blog.
The team’s buy-in
According to Invu (document management solution provider), half of finance workers responding to the survey said they were unhappy with purchasing processes.
The survey also reveals that nearly three-quarters of finance workers reporting unhappiness are not using a dedicated software as part of their purchase order process. Instead, their companies opted for a manual process like Excel spreadsheets, journals, etc.
Company B stands a good chance of winning its staff’s buy-in because it uses a user-friendly software that doesn’t require prolonged training. With a purchase order software like Procurementexpress.com, your finance team will be happy to process purchase orders!
You can also set a spending limit for all purchases in accordance with each budget. This way, your team will be accountable in ways that paper-based systems do not allow.
How Procurementexpress.com helps companies budget
In principle, a budget is a tool that helps companies spend effectively, however, this cannot be the case if the company’s budgets are not shared across teams. Again, a cloud-based software like Procurementexpress.com helps companies create different budgets that can be easily shared across teams. Moreover, it allows your team to load purchase orders with invoices using devices such as tablets, smartphones, and desktops.
No matter what the size of your company’s budget is, Procurementexpress.com will allow you to cut costs and increase profitability. What are you waiting for? Sign up for a free trial today!