Why Budget Reviews Go Wrong — And 3 Steps to Fix Them | Procuredesk

Imagine you are in a budget review meeting with your department owners and you're kind of telling them they went over budget and they kind of look confused because they have no visibility into what's really going on till the time you tell them if that's your reality. Whether you're a controller or a CFO of a company, this video is for you. Because in this video I'm going to give you three simple steps that you can follow to review your spend more often and that can avoid these awkward conversations at the end of the month. Right. If you're joining me for the first time, welcome. My name is Sachin. I am the founder of procuredesk, where we help growing companies control spending and automate procurement and AP processes. So let's dig in. Number one is look at your budget versus actual report. So a very common scenario, right? Let's say you have a quarterly budget assigned to a department and they are spending the budget and then at the end of the month you update your spreadsheet. That's when you come to know, oh really? Okay, this is how much they have really spent. And imagine they have spent 80% of their spend right in the just first month. Now, you know, alarm bells are going on that they are going to go over budget and so on. Compared to this, let's say you have a system where you can see every week, like every Monday, pull up a report which shows budget versus actual and you can see if there is a department that is spiking. And you could have a more proactive conversation and say, hey, I saw these spikes coming in. I just want to make sure that you're still aligned with the budget and so on. Right? So, so just by having that simple budget versus actual every, you know, I don't know, Monday kind of helps a lot to make sure that if somebody is going to go over budget, you can look at it. Number two is look at your top spending categories. A very common scenario in growing companies, especially at the quarter end, when they're looking at their spend and maybe their expenses are higher, they start looking at certain categories and say, oh geez, we spend so much on office supplies as an example. And that is true because you don't have a way to kind of look at the information in a more, I would say often or more frequent way so you can analyze these patterns. A simple fix for this is of course have a system which allows you to do that, whether it is spreadsheets, whether you're pulling data from your accounting system, or whether you're using A purchasing system doesn't matter, but you should be able to go in and let's say every week pull and say what are my top spending categories? Where, where are we spending more money? And this is also important where if you have more variable cost, which is kind of tied to your, let's say, revenues, if revenue is going up and your variable cost is going up, these are the things you can look at pretty quickly and see are you trending in the right direction and avoid any last minute surprises right at quarter end. Number three is look at any outliers or unusual expenses. This is very common in growing companies is like people have credit cards, they they're spending left and right and for right reason. You've kind of given them the authority to go spend the money so that operation doesn't stop. But at the same time you need to control the spending as well. Like are there certain actors that are misusing those credit card authority that you have given to them? So of course there are other measures you can put in in terms of spend control and all, but at least you could start looking at every week and say all right, are there some expenses which are like outliers, maybe we shouldn't have spent money on that. Or, or let's say you're a construction company and you realize your material cost has gone up, maybe you can use this opportunity to have your procurement team reach out to the vendor and renegotiate the cost rather than the field keep on buying the same material at the increased price and then you realize at the end of the quarter then said geez, we overspent because the price went up. So wherever you feel like their pricing could be variable, this strategy works very well. So just to do a quick recap, the These are the 5 minutes spend reviews you can do every Monday to avoid any last surprises or any, I would say surprise expenses. Number one is budget versus actual by department. Number two is top spending categories and number three is any outlier or unusual expenses. If you'd like to see how a procurement system can help you do all that, click on the link below and talk to one of our product specialists to see what strategy will work for you. Thanks for joining me today and I'll see you the next video.