How to Avoid Busting End-of-Year Procurement Budgets
As the year comes to an end, it's important to not let a more relaxed work environment around the holidays turn into a recipe for disregarding strong business practices. In particular, you don't want all the hard work you've done throughout the year to manage budgets go out the window through undisciplined spending and a lack of oversight.
Instead, finance teams should look to leverage automation where possible to adhere to procurement budgets. Doing so helps account for fewer resources available toward the end of the year, such as when finance and procurement departments become shorthanded due to employees taking time off around the holidays. Automation and digital tools also help account for more remote work during this time of year, such as when employees work from home or while traveling during the holidays and make purchases while on the go.
Specifically, finance and procurement teams can stay on target by:
Tracking Spending in Real Time
Utilizing a platform that automatically tracks spend data as purchases occur can be key to enabling finance and procurement teams to efficiently monitor how spending aligns with their budgets. For example, companies with e-procurement or spend management software can see exactly what purchases are being made and for how much, which helps prevent unexpected surprises that bust budgets. If employees are making purchases that risk putting you over budget for the year, tracking it in real time may leave you with enough wiggle room to either return purchases, delay orders until the new year or implement spending freezes as you get close to hitting budget thresholds.
Informing Employees About Year-End Goals
If you don't have an e-procurement or spend management platform yet, you may not be able to track spending in real time, but you can still closely monitor transactions on corporate cards and ask employees to file expenses as soon as possible so you can know somewhat how spending aligns with your budget. While this type of manual effort isn't foolproof, it's important to inform employees about how their spending affects budgets so that they don’t mistakenly deter your company from reaching those goals.
Moreover, if they're aware of how their spending aligns with budgets, they may avoid making certain purchases. You could even implement rewards for employees to stay on track with budgets, such as by providing an extra day off in January if the company meets its year-end goal.
Establishing Automatic Approval Thresholds
To account for fewer resources around the holidays and to help avoid large purchases from busting budgets, you could implement certain automatic approval thresholds that help you stay on budget. For example, for purchases made within an e-procurement platform, you could set an automatic approval for purchases less than, say, $20, to avoid slowing down staff on small purchases, while larger ones would require closer attention. At the same time, you don’t want to get nickeled and dimed into going over budget, so you may want to also set up automatic alerts for when you reach a certain level close to your budget and then adjust approvals accordingly. Tracking spending in real time can help in this regard. If you don’t have an e-procurement platform yet, you could still set up a system where employees only have to file detailed reports for purchases above a certain amount and then catch up on other expense reports after the holidays. You’ll still want to try to track all purchases as best you can to avoid going over budget in total, but perhaps you can make do having less insights into smaller purchases temporarily.
Utilizing Digital Wallets
Lastly, you can make it easier to track purchases while employees are on the go by adding corporate cards to digital wallets. That way, if employees make purchases when they're on their own devices while traveling or working remotely, that data can still filter to your spend management platform or other tracking system. Otherwise, these purchases may go unnoticed until it’s too late and you’ve already exceeded your budget.
Overall, technology and employee education can play important roles in helping you stick to your procurement budgets. And if you haven’t already added an e-procurement or spend management platform, you can begin planning how to implement one so that you can start next year off on a strong note.
To learn more about how your business can gain full visibility into spend and maintain frictionless purchasing protocols, schedule a demo with GoProcure today. You can also read more about how our platform improves the full procurement lifecycle.