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Improve your purchasing order processing cycle

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22nd Dec 2014
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Improving purchase order processing can free up time, ensure budget holders have full visibility of their spend, and give FDs more time to spend across the business, says Invu CTO Stuart Evans.

A budget holder often believes their budget is there to be spent as they see fit. They may see the finance department as the support network to help them with their budget availability information. A problem with having this perspective is that very little attention is given to the actual spend and purchase order processing (POP).

This lack of attention to POP can result in an FD finding out about a corporate spend when a purchase invoice arrives and not before, putting them on the back foot and having to adjust budgets. This ineffective process is open to budget holders overspending without any knowledge or consideration of the corporate finances. The FD will then have to chase the budget holder to ask why they are approving purchase invoices for payment when, according to their monitoring, it is clear they do not have readily available budget to validate the invoice. This puts the organisation in a difficult position of having to honour the agreed invoice with extra corporate spend not previously allocated.

Automated systems and the right document management tools can make finance more visible across the company, provides the required structure and permissions for budget holders and often, lowers the finance department’s workload. With the right tools FDs can improve the purchasing order processing cycle within their organisation - from selecting suppliers down to generating the invoice and automating the approval process, while giving budget holders 100% visibility of workflows to assign invoices correctly and mitigate against overspending.

As the job of the FD broadens from one that’s beyond financial management to one of strategic planning, it becomes more time consuming, so it is imperative companies have the right tools in place to save them time.

Budget holders can be emotional when it comes to justifying why they’ve made a particular spend or preferring to deal with one supplier sales team over another because they are used to dealing with them.

But why stick to the same vendor if you can find the same order cheaper elsewhere? Prudent finance departments would always encourage budget holders to explore different suppliers to get the best value for money and by regularly using an automated purchase order processing system, budget holders can gain access to previous purchasing history allowing them to accurately compare prices and potentially save money through having the knowledge of what purchases have been agreed before.

In addition to providing budget holders with increased visibility, an electronic PO system enables the finance department with visibility of company accounts at all times, with the assurance that the information is correct.

 An automated POP system discourages departments operating in silos and provides them with a clear understanding of how their department is performing.

Ultimately, this will free up the FD’s time as they will not have to spend time chasing colleagues to justify their spend.

 

Stuart Evans is chief technology officer (CTO) at Invu.

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