Expense reconciliation: tips to improve your process

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HelpfulTips.jpgIs the financial year-end getting the better of you? Are suppliers unco-operative? Are you late with their payments? Are you over budget and struggling to balance the books?

If any of the above scenarios apply to you, take heart in knowing that you’re not alone.

Balancing inconsistent supply chain management practices with increasing costs and pressures to reduce those costs, as well as heightened compliance around invoicing are just some of the headaches procurement managers face daily, Pascalle Albrecht, National Travel and Procurement Manager at Nedbank, tells SmartProcurement.

In April 2016 researchers at Deltabid surveyed more than 500 procurement professionals and asked them about the challenges they face daily. The top challenge of those surveyed related to the selection and quality control of suppliers.

One of the popular solutions offered in the market today is an outsourced procurement function. This enables the business to focus on its core functions by outsourcing to a third party the sourcing and managing of suppliers. Selecting vendors can be an arduous exercise – the amount of work that goes into due diligence, compiling the related evaluative reports and submitting them to the chief procurement office or procurement manager is often underestimated.

Key benefits of an outsourced procurement function include:

• Enabling businesses to benefit immediately from the expertise of procurement professionals without having to structure an internal team from scratch.
• Having experienced procurement specialists who understand how to fast-track solutions.
• Benefiting from efficiencies in stock and vendor selection.
• Using outsourced service providers who can be incentivised against a percentage of the savings attained.

But is outsourcing the only way to achieve efficiencies? Certainly not.

The use of technology in procurement today can greatly benefit a procurement manager through the faster capturing and managing of supplier data. Software metrics designed to measure the tracking of payments and to notify the procurement manager of pending deliveries, looming deadlines or the urgent reconciliation of expenses, will allow the procurement staff to focus on adopting a more strategic approach to reconciliations and vendor selection.

Other potential benefits include software packages that introduce a best-practiceaccount reconciliation process that includes real-time dashboards and automated notifications to users.

Centralise and prioritise

A centralised procurement function enables a more structured, holistic approach to procurement. Efficiencies and economies of scale from a centralised structure can mitigate risks and avoid human error. The likelihood of misspending and the duplication of purchases would be greatly reduced. Also, a more streamlined, centralised procurement function could assist with strategic supplier relationship management.

But what is the correct approach?

Confused? Should you bolster your internal procurement team? Should you provide them with the best software to streamline the procurement process? Is there a way to better manage your supplier relationships?

One crucial tip that you should take from this article is the importance of creating and sticking to predetermined budgets; it is critical and will save you many grey hairs. In addition, the value of a strong reconciliations department cannot be understated – regular reconciliation can mitigate balance sheet errors, which could cause financial losses, and prevent fraud.

Furthermore, take an analogy from your personal life: account reconciliation in terms of credit card accounts, cheque books and statements is critical. Retaining and evaluating receipts against the statements in a business is just as important. For a procurement manager, who deals with high (and probably costly) stock volumes, this process should be an absolute priority. Where mistakes are identified by the reconciliation adjustments, corrective steps should be undertaken for the account balances to match the printed receipts.

This is why it is advantageous to employ the best accounting software to ensure the reliability of your data. The danger of unreliable data is that it may lead to taking incorrect decisions – both practically and strategically – based on incorrect data.

The point is: accurate reconciliations and good, clean data are possibly just as relevant as supplier/vendor selection and management.

 

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