Managing the invoices and expenses side of any business can be a significant burden on its finance team, but with some professional advice, modern technology can be used to help streamline this area of a business.
Following his presentation at the Digital Accountancy Show on the topic, SB Digital Director Ryan Pearcy looks at the many recent developments in payables for hospitality businesses and how a tech-focused leader can optimise their operations by selecting the right software to use.
Expense management can be a horribly manual and time-consuming task. Throw in the hustle and bustle behind the scenes of any business and the whole process can feel chaotic. Multi-site operations make the process even more difficult, with goods being received in different locations to where the order is held and paper documents, collected by non-finance individuals, have to make their way to the central finance team before verification and processing can commence. Add multiple entities of a group into the mix and documents will inevitably get misplaced or put on the wrong system.
Invoices and expenses can be paper (via post or hand delivery), email (which tends to now be the most common) or via a portal that you must access and download yourself. These will generally be received by multiple different people in the business, based on their role and department. This tends to be by design so that the individuals that know what the expenses are for have the chance to check them and manually mark them as approved. If you have a well organised system these may come into a centralised email address or physical tray but for many businesses the finance team are responsible for collecting this information, which is traditionally labour intensive. Once collected they then need to re-type this data into the finance system, which can be a laborious process with the danger of incorrect keying. The process is often exacerbated by invoices with large numbers of lines that need separating to different nominals or cost centres for reporting purposes. The repetitive and manual nature of this work can lead to errors and so a robust review process is also required to check the data inputted.
Multi-site and multi-entity
Many businesses have multiple sites per organisation, or a number of separate entities or buildings on one site within in a group structure. Both of these setups usually have a central finance team and their separate structures create unique challenges for the accounts payable process, but it is the central finance structure that creates the initial challenge. A centralised, and usually remote, finance team means that operational individuals generally receive delivery notes and invoices. To make use of a digital system they will need to engage in a new data capture process, but they will not see any tangible benefit to themselves as the efficiencies are felt most by the finance team. This tends to cause push back by those on the shop floor and it is up to the business owners and managers to stand firm to ensure the new processes are observed.
In a multi-site operation, reporting is done by location and so purchases need to be split by location. This is not always straightforward as the simpler data-capture tools do not extract invoice address and so cannot automate the allocation to the location. This can then become a manual process which removes a major time saver for the team.
A multi-entity organisation has a different challenge. When invoices come into central finance they need to enter into a data capture tool but as each entity will need a separate nominal ledger you will need a separate expense capture system to link to it. With suppliers that operate across multiple locations, and therefore multiple entities, invoices end up in the wrong system and moving them across can be painful.
Orders and Deliveries
To maintain control and save money when ordering in bulk, Purchase Orders can be used to authorise a purchase before it is made and to hold a supplier to account on price. In a fast-moving business operation, many growing businesses tend to avoid these as getting the paperwork to site or approved is time-consuming and can affect operational efficiency. When operated effectively, Purchase Orders ensure best prices and delivery dates are agreed upfront and suppliers are held to these before payment is made. When used manually the admin burden of purchase orders can often outweigh the benefits.
Delivery notes are always delivered to site, but without an available purchase order to match it, there is no way to validate if what was ordered is correct. Generally, volume can be estimated by an experienced team but in some sectors (such as hospitality) over-ordering is rife, and often price is harder to check with the supplier trusted to have got it right. This can quickly lead to errors and incorrect pricing which then hits the margin of the business.
Payment processes can be simple by idea but complex by operation. The focus here is in relation to payment in arrears, normally based on the due dates of invoices. Payments are run based on due dates of invoices, generally from the finance system. Information is manually re-keyed into the bank’s batch payment system from selected invoices or statements. A good system will have suppliers pre-stored with bank details restricted and authorisation only possible by designated individuals. A bad system will put full reliance on the finance team, with most somewhere between the two. Either way, the re-keying of information creates additional risks of fraud or error and adds time to the process.
Is there a solution?
Modern cloud-based expense management systems create the greatest efficiency savings whilst also improving data accuracy, speed of input and reducing risk of fraud. The best setups enable costs to appear in the system in less than 5 minutes from when they were dispatched by the supplier, including an approval process, which has a significant impact on the ability to report “live” on the finances. The costs of these systems are far outweighed by the time savings they generate and can also enable a significant reduction in paperwork.
How do they work?
The most effective expense management systems are either one software or a combination of different software systems that work together effectively. They include data capture tools, custom built approval flows, automation engines and integrations that enable documents to be located, processed, allocated, approved and pushed for payment from anywhere. Individuals are given appropriate access to the software depending on their roles, which can be accessed from anywhere with an internet enabled device, and the software creates reminders via notifications where helpful.
Starting with Purchase Orders, these can be created centrally via an app (potentially on a phone) using item lists pulled from the finance software. These are then sent via pre-built approval flows digitally and instantly to the relevant internal individuals, which once approved can be sent digitally to the supplier. When goods are received these can be matched against orders, both for volume and price, and allocated to a location. When an invoice is created this can be captured via a designated email address, photographed via a phone, or scanned or extracted from an invoice portal. At this point the invoice is scanned with all relevant information extracted automatically and pushed through for approval via the designated approval process. This can be a combination of automatic and manual approvals based on the nature and value of the expense, as well as the department. They can be digitally matched to Purchase Orders and Delivery Notes to verify their accuracy, all the while being visible inside the same system and automatically pushed into the finance system ready for payment. Modern payment systems can extract invoice and bank information directly from the finance system (segregated by user level), enable easy selection for payment and approval and sync with traditional banks to enable payment directly, without the need to re-type anything.
This sounds complex and costly
Selecting a digital expense management system that works for the size and intricacies of the business can quickly deliver a significant reduction in the administrative burden on your team. Selecting the right system is key, with various ones designed to work with operations of different size and structures.
There are great, relatively cheap tools, such as Dext and ApprovalMax that combine well for Purchase Orders through to Invoices. Libeo is a tool that has been designed by those in the hospitality industry for this sector and focuses on making the capture and payment of supplier invoices simple. Lightyear is a more advanced tool, working across the entire process, covering multi location and entities, but is more expensive. Picking the right tool for now and where the business aims to be is important for achieving the biggest return on investment.
How do we make this work?
With any system conversion comes the challenge of change management and the impact on the team. Processes will need to be adapted, training tailored, and support secured. Getting this right can transform how you and your team work for the better.