Getting New Year Budgets off to a Strong Start
The turning of the calendar brings new potential for a successful year, and businesses can use this time of year to clarify goals and establish new strategies to stay on track. One area in particular to focus on is getting budgets off to a strong start, which can require a mix of technology and implementing stronger processes that help build a foundation of tracking spend data and adhering to spending controls.
Specifically, companies should follow these steps to get 2020 budgets off to a strong start:
Discuss Budget Goals With Employees
While technology can help build and manage budgets, employees still largely drive spending decisions. If everyone isn’t on the same page about budget goals, employees may incur expenses that bust budgets. For example, an employee that is unclear about travel budgets and purchasing methods may book costly accommodations on their own and then expect to be reimbursed for these expenses that go over budget.
Finance and procurement teams, along with other department managers with their own budgets, should take the time to explain budget goals to employees and discuss how they can work together efficiently to meet those goals. Budgets can sometimes seem arbitrary or unfair to employees, so taking the time to explain budget goals can also help improve employee experience.
For example, rather than employees feeling restricted about the products and services they can purchase for their teams, they may feel empowered to stay within budget if they understand how doing so can help their team earn a high enough profit margin to pay out bonuses to all employees. Conversely, having budget discussions with employees may cause finance teams and other leaders to realize that their budget goals are somewhat arbitrary, and the company may be better served by spending a bit more in areas that ultimately lead to higher revenue.
Track Spend Data
Once everyone is clear about budget goals, implementing a consistent way to track spend data allows you to clearly see how your spending aligns with budgets. Ideally, you can automatically track this data in real time, such as through an e-procurement or spend management platform. These platforms may also have analytic capabilities to make it easier to forecast spending so you can make adjustments before you end up going over budget.
If you don’t have an e-procurement or spend management platform yet, you should still aim to track spend data however you can, whether that’s based on credit card statements or employee expense reports. While these may be slower to process and less accurate, it’s better to have some system in place for measuring how you’re tracking against budgets rather than just hoping for the best.
Establish Cost Controls
Lastly, companies can implement cost controls that make it easier to stay on budget. These controls can include setting maximum dollar amounts that employees can incur without further approval, such as establishing a limit on what a hotel or meal can cost in order to qualify as an approved expense. Companies can also establish controls by directing employees to purchase from approved vendors that have negotiated better rates than competitors, or by setting up contracts in advance for recurring purchases so that you know precisely what your spend will be in that area.
Tracking spend data can help you determine what controls to implement, such as if you identify that certain business units spend unnecessarily more than others and need to be reined in or if certain types of expenses like travel need additional controls. You can also automate controls through e-procurement or spend management platforms, such as by setting up approval workflows for purchases that pass a threshold you define.
By following these steps, companies can establish a strong foundation for reaching budget goals in 2020. If you have yet to add an e-procurement or spend management platform, doing so toward the beginning of the year can help you achieve the insights and automation that enable companies to more easily stay on track with budgets.
To learn more about how your business can gain full visibility into spend and establish better budget-related processes, schedule a demo with GoProcure today. You can also read more about how our platform improves the full procurement lifecycle.