Profit squeeze puts payables in the limelight: How to help clients rein in costs
Australian accounting firm, Next Dimension Accounting, explains how they’re guiding clients out of payables pain with new processes and ApprovalMax.
Accountants and bookkeepers are feeling it as much as their clients. The impact of inflation is putting a squeeze on expenses and revenue.
ApprovalMax Ambassador and Australian accounting firm, Next Dimension Accounting, serves small businesses and Not-For-Profits (NFP) across Australia, and has seen an increasing number of clients scrutinising costs.
Next Dimension Accounting and its clients seek better ways to rein in spending in this challenging economic climate. Brendan Lucas, CA, Founder and Managing Director, explains how he’s guiding change and shares his observations.
1. Industries such as NFP and Construction are being hit harder and insist on reducing costs
“We’ve seen NFPs hit hard because government funding is not keeping up with inflation, and donations are harder to come by,” says Brendan.
“Construction confidence has eased off, with multiple collapses. Significant increases in the cost of materials throughout the entire sector erode profit margins”
“I think there is a general issue of cash flow and payments. There are challenges when it comes to collecting money, and then there’s a game of who to pay first, and who to negotiate payment extensions with. “We’re working hard to highlight and raise awareness of the problem and communicate how important it is to fix the process of approving, spending, and using tech to make this easier.”
2. Working together to create accountability over cost codes and budgets is critical
“It starts with good processes around accounts payable. It’s not just the top of the food chain that should be approving expenditure,” says Brendan. “If each business manager takes responsibility for their spending, it creates a sense of ownership over the profit and loss, and checks and balances applied. “For myself, I don’t get a lot of bills coming to me for approval. That helps me keep an eye on the detail, but gives someone else the responsibility.
“We use ApprovalMax to help enforce that sense of responsibility and protection. It’s important to make it easier for business managers to look back at their spending, interrogate the benefits of that spending, and forecast future spending.”
“At the end of the day, money should not be leaving business accounts without approval from an authorised decision maker.”
3. Digging deeper into spending can be easy with the right tech
“By starting with a forecast, at the end of the month, it’s helpful to report against the forecast, to understand why things might have changed,” continued Brendan.
“Sometimes the forecast is missing information, such as forgetting to include or anticipate something, but having that forecast helps investigate that. “Technology like ApprovalMax can help save time thanks to its budget-checking functionality to see how all budgets are impacted by the documents being approved,” says Brendan.
Need a solution to tighten the business belt? Consider using ApprovalMax to automate the process and add a layer of financial controls
Create clear rules around ordering with purchase order management.
Different division managers each need a good guide around budgets and choosing suppliers. Within those rules, you can make it easier for different managers to get their jobs done, with minimal administration.
The ability to manage purchase orders holistically in ApprovalMax makes short work of approving spending when the invoice comes in. Once it’s all in the set-up, it runs like clockwork.
Once a budget is created and the right suppliers are recognised to deliver the goods or services, the automation in ApprovalMax will notify the manager in charge of that cost centre with an approval request, whenever a purchase order is raised. Key benefits:
- Proactive approval processes by using purchase order approvals
- All authorisation-relevant information for approvers in one place.
- Timely notifications to approvers and comment-based communication with requesters.
Ensure your suppliers are legitimate before you pay them
ApprovalMax allows users to vet suppliers, ensure they are approved first, and then create approval workflows. This makes it easy for senior administrators to control what suppliers business managers can buy from and how much can be spent.
ApprovalMax integrates with the Xero and QuickBooks vendor lists too. Some extra features also help ensure accuracy, such as insisting on mandatory fields and descriptions to explain what items are being purchased.
Rules to help you scrutinise the value of suppliers
Every time an invoice is paid, it is an opportunity to investigate whether the quality of the service was up to what was agreed upon and whether to proceed with future work with the supplier. This offers a helpful way to determine whether you get what you’d hoped for.
The rules implemented in ApprovalMax encourage timely reviews of supplier services. By assigning accountability to department managers for their respective cost centres and suppliers, these rules actively encourage the management team to monitor these contracts and conduct regular reviews.
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