In our guide “Control in a crisis” we covered four spend management strategies that companies can implement to proactively revise spend control to minimize a downturn’s negative impact on the business.
As a supplement to our guide, we’ve created a 16 step checklist that organizations can follow immediately to start using these strategies today.
Re-define purchase materiality. Lower limits of purchase order approval authority. Consider decreasing limits by up to 50% on all requisitions.
Increase purchase accountability. Increase the number of approvals and signing authorities on all purchases. Designate the CFO or Controller for all material expenditures, and consider designating the CEO as the final approver on all requests.
Consider assigning approval authority to the Board of Directors on certain types of costs.
Develop new financial processes to analyze budget-to-actual variances based on users, accounts, and business units.
Keep an audit trail. Ensure you can track the path behind every purchase and know who is spending what, and on what.
Create revised budgets for each business unit or department. Give them the autonomy to be accountable for their numbers. Schedule regular meetings with teams, departments, and managers to review budget-to-actual reports and analyze variances. Depending on the size of your organization, we recommend a monthly cadence.
Revise forecasts and budgets in all areas. Switch to quarterly-updated forecasts or rolling 12-month forecasts as a replacement budget tool. Prepare forecasts under “worst-case” and “best-case” scenarios and update break-even analyses to prepare for all outcomes.
Schedule a strategic business planning session with senior leadership, key stakeholders, and/or the Board of Directors. Dedicate time to discuss customers’ changing needs before and after an economic downturn, the company’s burn rate, runway, and business models. Assess how to best position your company when the market starts to recover.
Review workplace policies and make adjustments wherever possible. Consider the following:
Analyze changes in supplier pricing. Renegotiate vendor contracts, arrange new terms for payments, or seek alternative suppliers.
Review large budgeted business expenses and move them to the next quarter or fiscal year. Examine big projects planned under:
Analyze discretionary spending. Identify and review the essential and non-essential expenses by asking:
Change credit card policies. If your company relies heavily on reimbursable expenses or corporate credit cards for a portion of its discretionary spend, implement temporary amendments to spend policies to rein in non-urgent expenses.
Keep team members engaged by being transparent. Operationalize new spend control protocols into the company culture. Identify your Spend Culture and communicate revised controls to the organization.
Invest in video conferencing platforms to uphold connection and community. Adopt online conferencing systems such as Zoom, Whereby, Skype, or UberConference. Keep employee morale high and ensure the right support services are available for people who may have a hard time adapting to change.
Review tools that are used for procurement and cost management. In times of downturn, an expense management system should be optimized for geographically distributed teams and those who are working remotely. Consider switching to a cloud-based purchasing software if you aren’t already using one.
An optimal spend management system should include these features:
To learn more about efficiently controlling spend through a cloud-based procurement solution, contact us to book a demo on Procurify.
Stay tuned for additional information in this series where we’ll share cloud accounting software options, productivity solutions for remote accounting teams, and business continuity planning steps.
Visit our COVID-19 Resource Center for more guides and resources to help your teams navigate the challenges ahead.