Altus Dynamics Blog

Challenges and Solutions to Controlling your Purchasing Budget

Posted by Stefanie Gause on Sep 2, 2016 1:48:10 PM

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Challenges

In my experience, most social services organizations are so busy focusing on service delivery and putting out fires that they have little time left to focus on things like determining the average cost of purchasing. Furthermore, preparing monthly budget status updates is typically a very time consuming process and access to real time information isn’t always available. Despite these upfront challenges, not readily knowing these financial metrics often leads to even more trouble down the road.

For instance, how often do you find yourself at the end of your fiscal year, scrambling to spend leftover money in your budget so you don’t have to return it to your funder? The problem is that if you don’t spend the money, you’re likely to get less funding next year. There are always great ways to use money on programs, but they typically require planning and are hard to rollout in a hurry. Wouldn’t it be great to have visibility into the status of the budget throughout the year to plan for that surplus ahead of time and allocate funds accordingly?

How many times have you been preparing a monthly board report, and in the process discovered some budget line items (expenditure) that require additional explanation, forcing you to sift through invoices etc. until you can track down the necessary information?

The final piece of this Purchasing Budget puzzle comes when asking yourself whether (or how much) you trust that the other individuals at your agency are making responsible purchasing decisions. You likely require approval over a certain threshold, so for larger purchases this may not be a concern.

However, what about the lower value purchases? Have you negotiated volume agreements with local suppliers, and are these being honored for one-off purchases?

You may think this is a trivial concern, but let’s compare costs for something small like toilet paper and see how it plays out over time. Consider ordering toilet paper every couple weeks for residential services, from a single supplier for all locations for $4 for a pack of 16, versus picking up toilet paper from grocery stores for $8 for a pack of 16. At double the cost, over a year the total ends up being $104 and $208, respectively. Now take that number and multiply it by the total number of locations, and the number adds up pretty quickly! Even if you only have about 20 locations, that is an annual savings of $2,000. Those savings are significant if your organization is looking for as many ways to cut costs as possible.

Solutions

The good news is that there are tools that can help you regain control of your budget through better financial planning and visibility into budget statuses and purchasing. We believe that giving budget managers role tailored, self-service access to their budget to actuals information can have a profound impact on the quality of purchasing decisions being made. It also means the Finance team no longer has to spend days preparing monthly budget reports for these folks since the necessary data is available to them 24/7. Implementing an automated purchase requisitioning process is another great way to increase your control, limit rogue spending, and gain greater visibility into your financial data. A major benefit of requisitioning is that, in the scenario when you are stuck looking for invoices and details to back up last month’s expenditures in time for a board meeting, you can simply refer back to the purchase requisition which includes full detail as to what was purchase by whom & why.

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This Post Was Written By Stefanie Gause
Stefanie has always had a passion for the non-profit and public sectors with several years of experience in the education, assisted living, and social services industries.
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