Control expenditure and prevent fraud with robust Purchase Order Automation for Xero

In this interview, you’ll find out how a boutique accounting practice specialising on virtual finance team services for SMEs and not-for-profits has put their clients’ organisational expenditures under control and helps them prevent fraud by implementing purchase order automation with ApprovalMax, the Xero pre-integrated financial control system.

The interview was held with Rhys Roberts, Founder and CEO at Viridity

ApprovalMax: Please tell us a few words about your practice – Viridity: 

Viridity: Viridity is a boutique accounting practice for SMEs and not-for-profit organisations. We work hand in hand with our clients and provide virtual finance team services. This includes CFO services, management and board reporting, bookkeeping and payroll services as well as help with BAS preparation and other compliance requirements. In short, we take care of all the finance matters while a business is not yet ready to have its own in-house finance team. Many of our clients are NFPs or small ASX listed organisations, so being aware of new apps on the market and recommending suitable ones is part of our role. 

One of our core strengths lies in identifying operational roadblocks and inefficiencies, which we then resolve by implementing capable systems and add-ons to streamline business processes. ApprovalMax is one of the most powerful tools at our disposal for this.

ApprovalMax: In which business cases and for what kind of client do you employ ApprovalMax?

Viridity: For us, the real power of ApprovalMax lies in the robust purchase order approval matrix. Most not-for-profits have strict expense tracking guidelines and “delegated levels of authority” – i.e. strict limits regarding who can spend money, and how much. This is also the case for many businesses where purchasing decisions are not being made solely by the business owner. The functionality offered by Xero is great for SMEs, but its weakness is the lacking capability for setting up more formal and more controllable purchase order processes.  

That’s why we needed an add-on to enhance the control of expenditure – before any money is committed, not after the invoice has arrived! After reviewing the apps available we selected ApprovalMax because its approval matrix ensures that purchases are approved by the right people with the right level of authority. Plus, it provides clear and transparent audit trails (our clients’ auditors love it!).

Now we can pinpoint who approved any given purchase; and if a transaction was altered at a later stage, we know who did that too. All clients we recommended ApprovalMax to have implemented it, and all of them are still using it.

ApprovalMax: How did the purchase order approval process use to work before ApprovalMax? 

Viridity: In the past, some of our clients used the purchase order feature in Xero, others had either a manual purchase order process in place or a purchase order system which didn’t integrate with Xero. 

When one of our clients had a (non-integrated) purchase order solution installed, they raised their purchase orders in that app. To get them approved required a manual matching process to link purchase orders and invoices, which then had to be rekeyed manually. A huge waste of time. By implementing Xero + ApprovalMax + Receipt Bank for this client, we achieved a significant time saving plus improved functionality.

ApprovalMax: What does the purchase order process look like now, with ApprovalMax?

Viridity: Now, our clients create purchase orders in ApprovalMax where they get approved according to a predefined approval matrix. We helped them set up a custom approval matrix for their requirements, which really streamlined their approval workflow. 

Incoming supplier bills are forwarded to Receipt Bank, from where they enter Xero. The client then uses the ”Bill approval” workflow in ApprovalMax to authorise bills for payment. Nearly all bill payments are made in bulk by uploading batch files, again maximising both efficiency and control.

ApprovalMax: What are the key benefits achieved – for you as a practice and for your clients?

Viridity: Implementing ApprovalMax improves processes and reporting in a number of ways. For our clients it means that unnecessary spending has been limited, the approval process is now on the surface and transparent, efficiency has improved throughout the company, fraudulent activities have been minimised and the detailed audit trails establish confidence. 

From our perspective, once the integration is complete we can rest assured that all data is precise and a reliable base for generating management reports. This allows both my team and the client to move away from worrying about the accuracy of data to focusing on the actual information contained – because meaningful real-time information is critical for making good decisions. Last but not least, this process is for all concerned far more enjoyable!

ApprovalMax really comes into its own in organisations that want to delegate the control of expenditure, yet retain oversight and approval authority. In NFPs and ASX listed organisations this will be a formal delegation of authority from the board to senior managers, potentially throughout the whole organisation. This also applies to any business that has grown to the point where individual employees within the company need authority to make purchasing decisions.

ApprovalMax: Regarding fraud prevention, how does ApprovalMax contribute to addressing this issue?

Viridity: ApprovalMax helps control expenditure within board-approved budget levels, which makes it a great tool for minimising the risk of fraud – unfortunately a very realistic scenario in SMEs / NFPs, according to statistical data. Having robust systems with the appropriate separation of responsibilities (such as offered by ApprovalMax and Xero) does help reduce this risk considerably.