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Conflict between those spending the money (budget holders) and finance teams is an age-old problem and despite best efforts there is often a disconnect in the company’s purchasing and approvals process. Whilst many shrug their shoulders and say, “that’s just how it is”, when you look at the bottom line figures, it’s clear something needs to change.
When we talk about a disconnect, we aren’t just talking about the stereotypes of how these teams clash, we are referring to the fundamentals of how they function. These departments often function independently and isolated from one another, whereas the accompanying roles of making purchases and approvals should go together, to guarantee efficiency and ensure no mistakes are made which could hamper the financial health of the business. Why is this not the case?
There are many factors to play in making it difficult for finance professionals and budget holders to work together for purchasing and approvals, but the key barrier is the different needs of these two departments. Budget holders want to record their spend in their spreadsheets against their budget, whereas finance teams aren’t concerned with how much the budget holder is spending but are more focused on ensuring the budget holder can approve the invoice quickly when it comes to paying for the goods or services. That is where the difficulties lie because chasing budget holders for approvals can be time consuming, arduous, and frustrating for all parties involved, especially when accounts payable personnel have so many priorities and deadlines to meet.
What can be done to improve the relationship between these departments to streamline purchasing and accounts payable processes to ensure optimal efficiency and an overall healthy bottom line?
We’re in a digitised future and almost everything which was previously paper such as bank statements and books are now digital – however, finance departments still seem to have a firm hold on paper, despite the costs, environmental impact and tangible downsides such as security and storage. Suppliers are still sending paper invoices and finance teams rely on manual, paper-based approaches to process them, but paper-based approvals can sit on desks for weeks and risk getting lost which can considerably slow down the approvals process, not to mention how error prone manual paper-based processes can be.
Ditching paper to go digital is inevitable for many business functions and it’s easy to see how this simple change can help connect and unify departments. Utilising digital files can be easy to send, receive and file, making it quick for procurement officers to view it a later date and eliminates situations such as forgetting when you sent an invoice for approval, for example.
You will undoubtedly have heard the term “automation” – we proudly talk about it a lot here at Pegasus! Automation may strike fear into some as something to replace human efforts and thereby, eliminating jobs, and removing culture from businesses but this couldn’t be further from the truth.
Many departments across multiple sectors have turned to automation to streamline workflows and drive efficiency by replacing previously manual, tedious and error prone tasks with automation. This is no different for finance; consider your most time-consuming tasks in your invoice, purchasing and approvals processes such as the areas where budget holders and finance teams tend to reach loggerheads. Finance teams want budget holders to approve invoices with little or no chasing, and budget holders want to know their suppliers are being paid on time to ensure no hold ups with good or services. By automating workflows you can put an end to this conflict and join-up these teams seamlessly as invoices can be approved at the click of a button, finance are kept in control of spend at all times offering complete visibility.
As we have mentioned, budget holders and finance teams often have different needs, and different end goals. For finance teams, their main job is to get an invoice paid quickly and then they no longer need the invoice so it can be stashed away for audit purposes, often never to be seen again. Of course, they can access this data easily if they need to, especially if an ERP solution is used that gives full visibility into retrospective spending, but it is not always necessary to access it. What businesses don’t realise is that this is one of the key factors in causing a siloed relationship with budget holders - just because they no longer get any value from viewing historical data and invoices, doesn’t mean that budget holders do not. It’s pivotal that budget holders can continuously access historical data to ensure they are working diligently to spend wisely and guarantee the best deals.
When you consider this further, it means that finance departments often have scores of data, which would be valuable for budget holders, filed away. By using a platform that shares this data between departments seamlessly, finance don’t need to be harassed by budget holders continuously asking for this information, and budget holders have all the data at their fingertips to make smart, budgeting decisions.
It goes without saying that having visibility over spend after it has occurred is fundamental for finance departments, but for budget holders, it is just as fundamental to have this visibility over forecasted and actual spend so they know where their budgets lay. A common way to do this is with spreadsheets but this requires manual input from both departments and there is a high risk of errors occurring, particularly if there is a misalignment between what finance claim has been spent, and what budget holders believe has been spent. By the time an agreement has been reached it is often too late to do anything about this money anyway, and factoring in that a spreadsheet report was most likely already at least two weeks out of date when it was circulated around the business means there is very little that can be done, affecting the overall bottom line.
What both teams need is a real-time view of spend exactly when it happens by hosting your purchasing and accounts payable on one platform with real-time dashboard so everyone can see everything they need to. It means no long delays to pick up an issue and limited overspending. Budget holders can record all their forecasted and actual spend in the same place and finance can then diligently forecast cash flow for the rest of the business meaning a win-win for all departments.
Whilst conflict between budget holders and finance teams is not a new issue, there are certainly new and improved ways of overcoming them. Appreciating that each department has its own end goals is important, but both sides ultimately want invoices approved and paid quickly, but sadly, disconnected processes makes this an all-to-common challenge. There are some simple ways to unify these departments such as ditching paper and moving to digital processes, and by harnessing data sharing across all departments in real-time. In the longer-term, a move to automation by automating workflows can offer unbeatable benefits. There are solutions that can transform the way your budget holders and finance teams interact such as our AP Automation and Online Buying platform, available with Opera 3 SE. For more information and to discuss how this could work for your business, please contact us today.
Posted On: February 22, 2024
