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How IT & Procurement Teams Should Evaluate Spend Management Products

Vlad Falin

March 30, 2023

5

In today's fast-paced business world, managing expenses can be a daunting task for IT and procurement teams.

To help you out, we compiled a list of features and functionalities that you should consider when picking your spend management platform.

Spoiler alert, Pluto has them all.

PCI DSS Level 1 Provider

One of the essential features that should be given high importance is the product's PCI DSS Level 1 compliance.

The Payment Card Industry Data Security Standard (PCI DSS) is a set of guidelines and security requirements designed to safeguard payment card data. 

The standard was developed by major credit card companies, including Visa, Mastercard, American Express, Discover, and JCB, to ensure that all companies that handle payment card data maintain a secure environment. PCI DSS compliance helps to prevent fraud and data breaches, protecting both the company and its customers.

PCI DSS Level 1 is the highest level of certification a company can achieve for PCI compliance. 

It requires companies to undergo a rigorous independent audit to ensure compliance with all 12 of the PCI DSS requirements, including network security, access control, and vulnerability management. 

Achieving PCI DSS Level 1 certification demonstrates that a company has a comprehensive and effective security program in place to protect payment card data.

When evaluating corporate spend management products, IT and procurement teams should look for products that have achieved PCI DSS Level 1 compliance to ensure that the product meets the highest security standards. 

This will help to ensure that the company's payment card data is adequately protected and that the company is meeting its compliance obligations. By prioritizing PCI DSS Level 1 compliance, IT and procurement teams can help to safeguard their company's reputation and financial well-being.

Being PCI DSS Level 1 compliant is essential for any organization that handles corporate card information, as it provides a high level of security and assurance that the organization is taking all necessary measures to protect its customers’ data.

Pluto Card is proud to be PCI DSS Level 1 compliant. This means that our customers can trust that we have taken all necessary measures to secure their data and protect it from unauthorized access. 

We also partner with vendors who are held to the highest security standards, such as PCI or SOC2 compliance.

Passwordless Login

Passwordless login is a secure and convenient way for users to access their accounts without the need for a password. It is an effective way to protect against unwanted access to your account, as passwords can be easily compromised or stolen. By tying your Pluto access with a company email account provided by your organization ensures that when your employees lose access to their company email address they also lose access to Pluto. 

At Pluto Card, we understand the importance of passwordless login, and we offer this feature to our customers. With our passwordless login feature, our customers can access their accounts quickly and securely, without the need for a password.

Activity Log And Audit Trails

Activity logs and audit trails are crucial for ensuring strict auditing everywhere. An activity log records all user activity within an application or system, while an audit trail provides a record of all changes made to data within the system.

Pluto Card offers a 7-year audit log, which means that our customers can track critical changes made to their data over a seven-year period.

Data Access

Employees that are using our platform have only as much access as they need, and we have infrastructure redundancy built into Pluto, which means that all compute and data is  run in multiple geographies. 

Business continuity is paramount at Pluto - to this end, we ensure data redundancy with redundant backups in multiple geographies as well.

In addition, at Pluto, your application data is always encrypted in transit, and at rest. 

Continuous Security Scans

Pluto also provides a continuous security scan, which tackles multiple dimensions, including code or dependency  vulnerabilities, infrastructure, and public endpoint scans. 

Our customers can be assured that we take security very seriously and are always on the lookout for any potential security threats. 

In the event of a security incident, we have an immediate incident response plan in place and will notify impacted customers without undue delay of any unauthorized disclosure of customer data.

24x7 Customer Support and Dedicated Account Manager

In addition to these security features, Pluto Card also provides 24x7 customer support.

We understand that our customers need support around the clock, and we are always available to help with any questions or issues that may arise.

Data Infrastructure, Redundancy and E2E Encryption

We also provide infrastructure and data redundancy, which means that our customers’ data is highly available and secure, even in the event of a system failure or outage. 

Data is always encrypted in transit, which means that it is always protected during transmission between servers or devices.

Finally, another crucial feature that IT and procurement teams should consider when evaluating corporate spend management products is data residency and retention policies. 

Pluto Card offers an audit trail for changes to customer data, so we can track who did what. 

Additionally, we have a data residency promise of 7 years, which means that we retain customer data for that period of time. 

This can be important for compliance with regulatory requirements, such as tax or financial reporting.

Conclusion

In conclusion, when evaluating corporate spend management products for your enterprise, it’s essential to consider the security features that the product offers. 

PCI DSS Level 1 Compliance, passwordless login, activity logs and audit trails, and data residency and retention policies are all critical features that can help ensure the security and integrity of your organization’s financial data. 

Pluto Card offers all of these features, along with 24x7 customer support and infrastructure and data redundancy, making it an excellent choice for organizations looking for a secure and reliable corporate spend management solution.

For more information  visit plutocard.io and book a demo.

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At Pluto Card, our mission is to assist businesses of all scales make well-informed choices. To uphold our standards, we follow editorial guidelines to guarantee that our content consistently aligns with our high-quality benchmarks.

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5
All
Procurement
November 23, 2023

Mohammed Ridwan

Top 9 Procure-to-Pay Software for Enterprises

You want a procure-to-pay (P2P) software that automates your procurement process and addresses issues like lack of visibility, double payments, and delayed approvals. However, since such a tool has multiple users at different hierarchies and a complex workflow, you often end up with a more complex process if you don’t choose the right software. 

With ad-hoc processes, many issues pop-up: employees wait weeks for approvals, procurement teams have no real-time visibility over purchase requests and don’t know how to prioritize, finance teams get minimal control over expenses, and the entire process is chaotic. Hence, choosing the right procure-to-pay solution requires a focus on ease of use and flexibility. 

In this post, we will share the best procure-to-pay software for businesses in the UAE. We will discuss how P2P software helps with procurement management and which tools are worth considering. 

What is Procure-to-Pay Software?

Procure-to-pay software is a tool to automate the complete procurement process, which combines accounts payable (AP) software and procurement software.

Instead of having your procurement processes and data scattered across emails, Jira, different task management tools, and custom ERPs, you bring it onto a single platform. 

Procure to Pay software

By moving from your legacy tools to an automated P2P software, you can:

  • automate approval workflows, making the purchase request (PR) process easier and faster. Flexible approval workflows enable all stakeholders to approve requests with a trigger-based flow. 
  • integrate with ERPs to maintain a preferred vendor list and manage order items. While most P2P software supports record-keeping only, some allow the conversion of PRs to purchase orders (PO) automatically after approval.
  • match the goods received note (GRN) to enable two-way or three-way matching and ensure proper inventory and timely vendor payments. 
  • process payments with multiple payment options to avoid delays and foster vendor relationships. It also helps avoid double payments, underpayment, or overpayment. 
  • reconcile data faster via integrations with accounting software, enabling more visibility and control. Accounting teams get the right documents, and finance teams get visibility over expenses.

Since legacy ERPs aren’t enough to manage your entire procurement process, adding P2P software makes purchasing and payments easier. 

Top 9 Procure-to-Pay Software

Here is a procure-to-pay software list for companies in the UAE: 

1. Pluto

Procure-to-Pay software by Pluto

Pluto is an all-in-one procure-to-pay solution to transform your procurement and AP processes. It sits on top of your ERP as a layer to manage the multiple stages of the procurement process. From automating PRs to setting multi-layer approval workflows and managing vendors, it is the ultimate solution to transform a chaotic procurement process into a faster and more efficient one. 

Key Features:

  • Features fully customizable workflows for raising PR and POs, requiring no technical expertise
  • Offers a flexible approval engine capable of managing intricate hierarchies
  • Enables multi-layer invoice approvals with policies to align with your company's structure
  • Ability to upload invoices easily via WhatsApp images, eliminating the need to search for invoice details. Also facilitates invoice capture via emails directly to speed up the receipt capture process
  • A centralized dashboard to gather bills in one place and track the status to avoid double payments
  • Vendor-specific corporate cards to control budgets and detect irrelevant expenses
  • Supports local and international wire transfers to make payments 
  • OCR technology minimizes manual data entry by creating and populating bills from invoices
  • Supports ERP integration to synchronize your vendors, POs, and bills and integrates with accounting software, such as Oracle, NetSuite, Zoho, Quickbooks, Wafeq, Xero, etc.
  • Integrates with payment gateways and accounting software for seamless payments and reconciliation (a feature not available in other solutions)
  • Raises alerts for upcoming payments and enables scheduling payments in advance and automate invoices 
  • Provides a complete audit trail of the process to ensure visibility at each step
  • Shows real-time analytics to facilitate deep insights for supporting budget control

Pricing: 

Request the sales team for a custom quote

Pros:

  • More financial control with vendor-specific corporate cards 
  • Better Forex rates than most local banks 
  • Multiple integration options including Netsuite, Dynamics and more

Cons:

  • Slightly longer on-boarding due to unlimited corporate purchasing card offering 
  • Directly integrates with all other major ERPs except Tally

2. Order.co

Procure to pay solution by Order

Order.co is a procure-to-pay platform that provides you access to over 15,000+ vendors in addition to your preferred vendors. It acts as an online marketplace like Amazon or eBay to help you procure items for your business. You add items to the cart, and it enables a rule-based approval system for POs with complete control and visibility. 

Key Features:

  • Provides a custom, pre-approved Order.co catalog, including your current vendors and a vast network of 15,000+ vendors
  • Supports purchases from multiple vendors regardless of their ordering methods (API, website, email)
  • Sources the best prices for your needs to automatically generate POs and set up recurring orders to save time and reduce manual errors
  • Offers real-time budgeting and reporting insights by the user, location, cost center, or vendor
  • Simplifies payment processing by consolidating all orders from multiple vendors into one monthly invoice

Pricing:

Dependent upon locations and usage; contact hello@order.co for pricing information

Pros:

  • Customizable product lists for ordering 
  • Easy-to-create customizable workflows
  • Ability to categorize purchases and run reports

Cons:

  • Set up is confusing and requires customer support help
  • Can not order from multiple vendors at the same time

3. Yooz

Procure to pay platform by Yooz

Yooz optimizes the procurement process by focusing on invoice management.  It is suitable for mid-size companies of all sectors wanting to automate procurement with a cloud-based procure-to-pay solution. It uses artificial intelligence (AI) and machine learning (ML) technologies to enhance security and control in their account payable automation software.

Key Features:

  • Enables online, real-time management of supplier relationships, improving communication and collaboration
  • Provides mobile access for invoice approval and communication
  • Maintains regulation-compliant traceability, ensuring adherence to relevant laws and standards
  • Automates real-time general ledger (GL) coding and PO matching
  • Captures all types of documents through various channels, such as email, drag and drop, mobile, scan, and secure file transfer protocol (SFTP)
  • Integrates with accounting software and ERPs
  • Allows users to approve and pay invoices in batches, offering multiple payment options, such as virtual credit card, ACH, e-check, and paper check
  • Offers a range of services, including consulting, configuration, training, and user support

Pricing: 

Free trial for up to 15 days followed by a "pay-as-you-use" model. Also offers “gold edition” subscription pricing (based on the volume of documents) for an unlimited number of users and 4 hours of complimentary service

Pros:

  • Integrates with Sage Intacct
  • Ability to tag people in the comments and email them directly from the invoice
  • Numerous criteria available for setting up the approval workflows

Cons: 

  • Doesn’t offer payment services in the UAE, so you need to carry out payments on a different platform
  • Doesn't have integrations with major vendors as a form of punchout
  • Time-consuming to download and export files
  • Hard for vendors to send the invoices through Yooz

4. Kissflow

Procure to pay solution by Kissflow

Kissflow simplifies and enhances procurement processes while ensuring transparency and compliance. It helps users automate the entire process without requiring technical expertise or coding experience. It comes with 50+ ready-to-use applications, enabling unlimited automation applications.  

Key Features:

  • Offers fluid forms to enable easy capturing, approval, and tracking of PRs
  • Allows users to register and maintain vendors with access to multilingual catalogs
  • Integration with accounting systems, ERPs, and finance systems like Quickbooks, SAP, and Microsoft Dynamics 
  • Accelerates the invoice approval process with timely alerts and automated checks. Connect invoices to contracts, POs, and service entry sheets in a single dashboard
  • Customizable reports to visualize data using charts, filters, and heatmaps
  • Ability to define and manage budget restrictions with dynamic rules throughout the entire procure-to-pay lifecycle
  • Customized approval workflows to ensure transparency with rule-based approval processes
  • Smart alerts that provide real-time updates on the status of POs and invoices to keep stakeholders informed 

Pricing: 

Starts at $2499/month (billed annually). Pricing varies based on transaction volume and number of users

Pros: 

  • Intuitive interface with a relatively short learning curve

Cons:

  • Does not support payment flows in the UAE
  • Cost of its license is high (particularly for SMBs)
  • Can not handle intricate processes that require a high degree of customization or involve multiple conditional branches
  • Customization options are limited, including specific integrations, advanced business rules, or more sophisticated automation capabilities

5. Coupa

Procure-to-pay software by coupa

Coupa is a cloud-based automation platform to manage procurement processes. It facilitates supply chain optimization by providing visibility and control. It brings consumer shopping ease to the procurement process. With a focus on user adoption, it provides an intuitive shopping experience for employees, making it easier to adhere to pre-approved spending guidelines.

Key Features:

  • Simplifies procurement by allowing organizations to track pre-approved spending and get real-time visibility into POs and order lifecycle
  • Maximizes pre-approved spend to offer complete visibility over the purchase-to-pay processes
  • Promotes user adoption at all levels with an easy-to-use interface, creating value for both employees and vendors
  • Provides a centralized platform within Coupa Procure, allowing easy comparison of items across multiple vendors
  • Offers real-time budget management with budget meters, allowing organizations to assess budget sufficiency before committing to spending
  • Employs AI and machine learning to detect errors and fraud across business spend
  • Enables quick notifications of disruptions and allows vendors to confirm availability, minimizing unplanned downtime
  • Provides real-time visibility into inventory availability, helping organizations reduce redundant and wasteful spending

Pricing: 

Request the sales team for a custom quote

Pros:

  • Several categories and filters in the analytics section to streamline data
  • Chat option enables approver and claimant to discuss issues with receipts
  • Enables setting up of customized approval chains and including additional new approvers  

Cons:

  • Lots of unnecessary notifications, making it difficult to select the ones that need action or comment
  • Low receipt searchability, making retrieval time-consuming
  • Inconsistent syncing of remit-to address from NetSuite
  • Complex to implement and not intuitive, forcing admins to spend more time resolving employees' queries
  • Slow customer service 

6. Esker

Procure to pay platform by Esker

Esker is a cloud-based automation procurement software. It helps you optimize procurement processes and collaborate strategically with your vendors. With the ability to integrate across various company departments, it simplifies user adoption while facilitating visibility and control.

Key Features:

  • Facilitates approval mechanism and GRN matching for each PR and invoice 
  • Offers real-time analytics, enabling you to maintain tighter budget controls
  • Gives access to products from preferred vendors, aligning purchases with company procurement policies
  • Provides a self-service portal, facilitating supplier onboarding, catalog management, and invoice status access
  • Customizable dashboards to manage daily tasks, monitor productivity, and identify issues and opportunities as they arise
  • Enables you to customize the interface with your company's corporate identity, enhancing the supplier's ability to identify and engage with your organization seamlessly

Pricing: 

Contact sales for pricing

Pros:

  • Contains filtered views to allow for focused priorities 
  • Auto-sends payment reminders

Cons:

  • Gets expensive with each customization implemented
  • Doesn’t allow unused/old customer accounts to be deleted
  • Integration with accounting software isn't seamless 
  • Approval workflow requires a manual trigger to start

7. PayEm

Procure to pay software by PayEm

PayEm offers a procure-to-pay solution, covering everything in one place to replace your traditional procurement process. With a core focus on processing PR, it simplifies the creation of POs with custom forms and approval workflows. It facilitates collaboration between procurement and finance teams to enhance visibility and control. 

Key Features:

  • Offers custom request forms equipped with conditional logic to ensure a user-friendly experience
  • Provides fully customizable automated approval workflows based on factors like amounts, subsidiaries, and stakeholders
  • Integrates with communication platforms like Slack and email, allowing request tracking and approvals
  • Consolidates all the requests and approvals, simplifying discussions, document sharing, and creating an audit log
  • Enables real-time updates and clear overviews of request statuses, minimizing the need for follow-up inquiries
  • Offers OCR technology for invoice processing
  • Syncs with your ERP and enables exporting reconciled transactions and uploading them to your ERP 
  • Automates vendor management with payment scheduling, funds transferring, and limits setting for each vendor

Pricing: 

Request a custom quote

Pros:

  • Multiple virtual credit cards for different vendors
  • Supports global transactions 

Cons:

  • Some vendors don't accept PayEm cards
  • High transaction clearing time 
  • Limits the user to either a virtual or physical card at one time 

8. Pipefy

Pipefy Procure to pay platform

Pipefy is an automation procure-to-pay tool to manage end-to-end procurement processes, from PR to paying vendors, to create a frictionless experience. It aims to break silos between teams to simplify purchase and AP. 

Key Features:

  • Allows you to create and customize workflows, from purchase requisition to supplier management
  • Provides secure portals where records and documents can be organized, ensuring that all information is easily accessible, especially during audits
  • Ensures compliance with custom forms that include required fields to accelerate POs
  • Enables access to real-time insights to help you forecast ideal quantities and vendors for requisitions
  • Evaluates your processes, delivering reliable data to enable strategic and data-driven decisions
  • Integrates with your existing ERPs and accounting systems, such as NetSuite, Oracle E-business Suite, QuickBooks, Sage Intacct, etc.  
  • Enables deadline alerts, approval flows, and information exchange to prevent late fees and cashing in on early payment discounts
  • Offers a customizable dashboard to streamline vendor registration, updates, onboarding, and contract management

Pricing:

Offers three packages starting with a free option for smaller teams, and a subsequent model that costs $20 per month per user and $34 per month per user. Also, offers an enterprise plan with custom pricing

Pros: 

  • Offers templates for organizing processes

Cons:

  • Complex sign-up process
  • Workflows aren’t flexible with difficulty with respect to adding new users and making changes 
  • Difficult to import data and search in the database for information

9. Procurify

Procure to pay software solution by Procurify

Procurify speeds up the procurement process, enhances internal communication, and reduces financial risks. It is an easy-to-implement tool that saves time for finance and operations teams. From catalog management to custom user controls, it helps to track the procurement process in real time. 

Key Features:

  • Tailors POs to match your internal processes and vendor expectations
  • Creates, tracks, and maintains an audit trail of all procurement transactions for transparency and compliance
  • Enhances financial controls by enabling PO-based purchasing
  • Ensures that requested items are approved against budgets before procurement
  • Syncs PO with your accounting system or ERP, whether via API, CSV, flat file, or direct integration
  • Integrates with trusted vendors through punchout catalogs to streamline the ordering process
  • Enables blanket PO, which involve making multiple purchases against a single PO, even when details of future purchases may be unknown
  • Provides PO workflows to save on shipping costs, unlock vendor discounts, and reduce paperwork 

Pricing: 

Starts at $2000/month with a custom pricing tier

Pros:

  • Easy-to-make amendments in the original PO
  • Enables ordering from multiple websites for resources, including Amazon
  • Makes it easy to upload documents to support expense and order reports

Cons:

  • Doesn’t offer payment services in UAE, so you will need to carry out payments on a different platform
  • Doesn’t cater to the UAE market, and does not support UAE-specific workflows such as VAT management
  • Cannot edit orders once they are approved
  • Cannot see the order history for a catalog item without running a report
  • Physical inventory has to be tracked outside Procurify

Which Procure-to-Pay Software Should You Pick?

Don’t choose a platform that offers the maximum functionality. Instead, choose the one that is user-friendly and flexible. 

Procurement is already a complex process that requires visibility by different stakeholders. Choosing a tool that offers visibility and accommodates complex business needs will help you transform your chaotic procure-to-pay process

If you want to get started, book a demo, and our team will help you identify the bottlenecks and make the entire process simpler and manageable.

Disclaimer: The comparisons and rankings of procure to pay software competitors in this article are based primarily on reviews found online. While we strive to provide accurate and up-to-date information, these reviews are subjective and reflect the opinions of the users who posted them. The information presented is intended for general informational purposes and should not be considered as a definitive guide for choosing a software provider. We encourage readers to conduct their own research and consider their specific needs before making a decision.

5
All
Guides
January 29, 2024

Mohammed Ridwan

How to Improve the Accounts Payable Management Process for Healthy Working Capital

Accounts payable (AP) is the money you owe vendors and creditors, i.e., short-term liabilities. These are the payments for goods and services you received that are yet to be cleared.  

Companies struggle to manage accounts payable because the process involves multiple stakeholders, and the workflow isn't clearly laid out. The teams have to handle hundreds of documents, including purchase requests, purchase orders, goods received notes (GRN), invoices, etc. and ensure there isn't any discrepancy with the order received.

So, decentralized approvals and verifications make the process chaotic before the team can clear the final payment. If you find yourself in a similar situation, where accounts payable is hectic, and the working capital is messed up, read this post to discover the top strategies for effective accounts payable management.

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What is the Account Payable Process?

Account payable process

The AP process starts upon receiving goods and an accompanying invoice for payment processing. The next step involves verifying the accuracy of the invoice details. This verification process ensures that the goods received match the information provided in the invoice, including quantities, prices, and other relevant terms.

Following the confirmation, the invoice undergoes an approval workflow. It involves obtaining the necessary authorizations from various departments or individuals within the organization and ensuring compliance with internal policies and procedures before proceeding with the payment.

After completing the payment, the accounts payable team records the transaction in the financial system, updating the company's records. This step ensures accurate financial reporting and maintains an up-to-date overview of the company's financial position.

Challenges of the Decentralized Accounts Payable Process

Companies strive to maintain a seamless flow of goods and services while meeting financial responsibilities through timely and accurate AP management. However, relying on a manual process for these tasks introduces these bottlenecks: 

  • Managing documents manually raises concerns, particularly with paper-based documents that are susceptible to misplacement or damage. It not only hampers day-to-day operational efficiency but also poses a threat to data integrity.

  • Similarly, a manual verification process increases susceptibility to mistakes. Achieving precise alignment between received goods and invoice information requires meticulous attention, heightening the possibility of overlooking crucial details such as terms and conditions.

  • The manual handling in the approval workflow introduces risks of delays and potential oversights. Obtaining authorizations from different departments becomes time-consuming, and ensuring compliance with internal policies is prone to human errors.

  • After completing the payment, the critical step of recording the transaction in the financial system becomes vulnerable to manual data entry errors, impacting the precision of financial reporting and the clarity of the company's financial standing.

  • The manual process increases the likelihood of inadvertently paying the same invoice multiple times. Inaccurate data entry and a lack of robust authentication processes expose the organization to fraud, including the manipulation of invoices.

In summary, the manual accounts payable process detrimentally affects operational efficiency and financial stability. The lack of synchronization across different teams results in communication gaps and discrepancies. Failing to maintain a cohesive and streamlined process leads to errors in financial reporting, impedes effective decision-making, and strains interdepartmental collaboration.

Strategies for Efficient Accounts Payable Management

Effective management of the accounts payable process is possible when you optimize the human and technological aspects of the same. 

On the human side, optimizing requires streamlining workflows, enhancing communication, and fostering a collaborative environment. Simultaneously, the technological part involves shifting to an accounts payable automation solution that provides a centralized platform for complete visibility and control. 

Here are the strategies for efficient accounts payable management:

Strengthen Internal Control Over Financial Reporting

Internal control over financial reporting (ICFR) ensures the accuracy, reliability, and integrity of financial information within an organization. ICFR helps safeguard financial processes and mitigate risks as the intricate nature of accounts payable necessitates a robust control framework.

Strengthening ICFR for enhancing accounts payable management involves the following elements:

1. Segregation of Duties

With the segregation of duties, you ensure that no single individual controls all the stages of the accounts payable process. You divide the responsibilities among different staff members, which reduces the risk of errors, fraud, and mismanagement.

For instance, by assigning one team member to handle invoice approval and another to process payments, the segregation of duties minimizes the risk of errors or fraudulent activities and promotes accountability.

2. Audit Trail

Establishing a comprehensive audit trail involves recording and documenting every transaction in a chronological sequence of activities. It facilitates transparency and serves as a valuable tool for tracking and investigating discrepancies that arise during the accounts payable process.

For instance, in the case of an invoice mismatch, a comprehensive audit trail makes it easy to trace the exact steps in the transaction history, revealing where the error occurred. It speeds up the resolution process and enhances accuracy in financial reporting by promptly addressing issues.

3. Approval Policies

Clearly defined approval policies outline the hierarchy of authorizations required for various transaction amounts, ensuring that financial transactions undergo proper scrutiny before processing.

For instance, a clearly defined approval policy mandates that transactions under $1,000 require approval from a department head, while amounts exceeding $10,000 necessitate approval from top-level management.

4. Document Policies and Procedures

Clear documentation outlines specific steps for the accounts payable process. When a team member adheres to these guidelines, all required approvals are obtained, documentation is consistently retained, and errors are minimized.

In practical terms, this means that during an audit, the organization quickly and accurately traces the entire lifecycle of an invoice, showcasing compliance, reducing audit time, and enhancing financial transparency.

By strengthening ICFR, organizations systematically address challenges such as fraud, errors, and inefficiencies.

Employing Technology 

AP automation optimizes the accounts payable management process beyond mere operational enhancements, enabling accuracy, efficiency, and informed decision-making. Automating AP management is a strategic approach with the following key elements:

1. Centralized Collaboration

centralized collaboration

Automation involves centralizing AP management and creating a unified document storage and collaboration platform. Not only does it extract all the critical information, but it also stores them on a centralized dashboard for easy access and processing. This fosters seamless communication among team members, ensuring everyone can access real-time information and collaborate effectively.

2. Safeguards for Duplicate Payments

detect duplicate payments

Automation includes built-in safeguards to prevent duplicate payments. Automated systems employ checks and validation processes to flag duplicate receipts and eliminate the risk of paying the same invoice multiple times, reducing the likelihood of financial errors. Moreover, since the centralized platform acts as a single source truth, the possibility of double payments automatically reduces.

3. Streamline Workflow

streamline accounts payable workflow

Automated workflows simplify and streamline the entire AP process. With simple if-then rules, you can create workflows for trigger-based approvals. By eliminating manual intervention at various stages, tasks such as invoice approval, payment processing, and data entry become more efficient, reducing processing times and enhancing overall workflow. 

4. Integrate

Integrate with ERPs

The accounts payable software integrates with other financial systems. This integration ensures a cohesive flow of information across departments, reducing data silos and enhancing accuracy in financial reporting.

5. Insights

Gain accounts payable insights

Automated AP systems provide valuable insights through analytics and reporting tools. These insights enable businesses to track key performance indicators, identify trends, and make data-driven decisions. This analytical capability contributes to strategic financial management and planning.

Improve Vendor Relationships

Vendor relationships are not just about successful transactions. Healthy partnerships bring many benefits, such as streamlined processes, minimized disruptions, and a collaborative atmosphere that enhances the overall effectiveness of the accounts payable function within the organization.

Improving accounts payable management involves the following components:

1. Negotiate With Vendors

Initiating negotiations with vendors involves engaging in open discussions about terms, pricing, and contractual agreements till both parties arrive at mutually beneficial arrangements. Compelling negotiation ensures favorable terms for the company and establishes a foundation of trust and collaboration.

For instance, when negotiating with a key supplier for raw materials, the company secures favorable terms such as bulk purchase discounts and extended payment periods. This not only reduces costs but also builds a positive, long-term relationship.

2. Timely Payments

Adhering to agreed-upon payment schedules fosters goodwill and reliability, positioning the company as a trusted and preferred partner. Timely payments strengthen vendor relationships and contribute to smoother transactions and potential benefits such as early payment discounts.

3. Transparent Communication

Keeping vendors informed about payment timelines, potential delays, or any changes in the process contributes to a positive working dynamic. Open lines of communication facilitate problem-solving, creating an environment where both parties feel comfortable addressing concerns and finding resolutions.

4. Streamline Onboarding Process

Simplifying the onboarding procedure by providing clear guidelines, efficient documentation processes, and transparent communication ensures that vendors can seamlessly integrate into the accounts payable system. It saves time and lays the groundwork for a cooperative and efficient long-term partnership.

By implementing these strategies, businesses cultivate vendor relationships that go beyond transactional interactions, fostering a collaborative environment.

End Result: Optimized Accounts Payable Management Process

accounts payable automation in Pluto

For storing and retrieving documents, you get optical character recognition (OCR) technology that extracts invoice information accurately. All the information goes on a centralized digital platform, reducing the chance of misplacement and improving accessibility. 

For verification, you get all the necessary information on a unified dashboard. This centralized database enables accurate cross-referencing of received goods with invoice details, minimizing errors and making the process more efficient.

You get a no-code trigger-based approval workflow builder for approvals, where you can create workflows with simple if-then rules. These preset rules and automated notifications make authorization seamless across departments, reducing delays, ensuring policy compliance, and lowering the risk of human errors.

For recording transactions, you get integration facilities, where your accounts payable software syncs data across your accounting systems for consistent records, minimizes errors, ensures precise financial reporting, and offers a real-time, accurate view of the company's finances.

Next Steps for Efficient Accounts Payable Management

After establishing transparent processes and policies and adopting the right automation tools, plan an AP audit.

An AP audit involves reviewing and assessing the existing procedures to pinpoint areas that can be improved. By doing so, you identify inefficiencies or bottlenecks in the accounts payable management system. It provides insights into how well the established processes align with the intended goals and whether adjustments are needed.

This proactive approach helps enhance the overall efficiency and effectiveness of accounts payable management, ensuring that the system operates smoothly and aligns with the company's objectives. 

Read more about AP audits in our post to understand how they help and how you can prepare for them in advance.

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Spend Management
February 23, 2023

Mohammed Ridwan

What is Operating Budget: How to Create & Manage One

Businesses have all sort of budgets, such as cash budgets, labor budgets, investments budgets, project budgets, and each has their own particular function. Among those, few are as important as the operating budget.

Your operating budget consists of all your fixed and variable costs, as well as your expenses and it is what your business will use to determine what revenue will look like for a given period of time. But an operating budget isn’t simply about knowing how much you are spending and can make; it can also help you find ways to improve your bottom line. 

In this article, you’ll learn about the importance of having an operating budget, the components that form one, and how you can improve the management of your budget.

What is an operating budget?

An operating budget is a yearly financial plan showing a company's expected income and spending. It's created at the end of each year to plan for the next one. This budget helps companies predict their money flow, manage costs, and make smart financial choices. It's key for businesses to stay on track and grow. Understanding an operating budget is important for anyone running a business or managing finances.

Why do we need an operating budget?

A company's annual operating budget outlines how it intends to spend its money over a specified period. In order to create one, fixed and variable costs, as well as revenue, need to be taken into account.

The purpose of an operating budget is to determine where and when funds should be allocated, make sure all expenditures are covered, and keep things running smoothly for all types of businesses. Without one, your business cannot function efficiently. 

Unlike a capital budget, an operating budget helps businesses plan their daily operations and recurring expenses, whereas a capital budget helps them plan long-term investments.

Its purpose is to prevent cash outflows from exceeding cash inflows. It is necessary for companies to evaluate their incoming revenue and expenditures in order to accomplish this.   

The process of creating an operating budget involves:

  • Examining your costs (fixed costs, variable costs, administrative expenses, etc.)
  • Tallying your list of sources of income.
  • Estimating one-time spends
  • Working out your supplier costs
  • Estimating your revenue
  • Building cash flow projections
  • Monitoring petty-cash and other expense sections
  • Setting spending goals

While a tight operating budget with limited resources can lead to a lot of profit, it can also create inefficiencies for your business. Ideally, you should be looking for this balance when calculating your operating expenses in the current fiscal year, as well as when planning your operating budgets. 

Benefits of having operating budgets for businesses

  • Finance the expansion of your company: If you plan to obtain a business loan or raise funds from investors, you must present a detailed operating budget outlining your income and expenses.
  • Make your business budget clearer so you can plan for the future: Your business budget serves as a financial road map in a number of ways. The financial health of your company can be determined using this report, as well as what needs to be done to achieve future financial goals.
  • Help your company run more efficiently and effectively if you make a budget: Keeping a company budget can also help you stay out of debt by ensuring that the right money is spent in the right places at the right time.
  • Analyze your revenue and costs to determine where you can save money: Budgeting your business can help you identify areas where you can cut costs or increase revenue, increasing profits.
  • Avoiding debt by predicting slow months.
  • Helping you maintain control over your business.
  • Recognizing reinvestment opportunities.
  • Calculate your expected earnings.
  • Analyze the gap between your expectations and reality

What are the components of an operating budget?

Operational budgets become more valuable and relevant the more detailed they are. A budget for operating expenses may include a high-level summary as well as several supporting sub-budgets. When you are developing a budget, you'll typically include the following operating budget components:

1. Revenue

A company's revenue is generated by selling goods and services. The forecast of revenue can be based on a simple year-over-year comparison, but breaking down revenue based on its underlying components can provide more useful information.

It is not a good idea to use projected revenue at this stage. This is not advisable since emotions can lead you to misperceive the company's capabilities. Identify your actual revenue from your financial statements, and don't worry if your expenses are higher than sales revenue. It is common for businesses to lose a certain amount of money each month until they reach profitability.

2. Variable costs

As sales volume increases or decreases, these costs rise or fall accordingly. Costs associated with variable items include direct raw materials and labor, commissions , production supplies, and monthly fees on credit cards. To calculate percentages on variable costs later, you'll need to list the actual costs when you create your operating budget. It is crucial to understand how variable costs will change as you do revenue projections. 

3. Fixed costs

A fixed cost is an expense that remains relatively constant regardless of whether sales rise or fall. Among these fixed expenses are cost factors such as monthly rent, utilities, leases of equipment, and insurance. In order for a company to be profitable, it must have a small, fixed cost and variable cost as a percentage of its revenue. To do that, it's important to understand what those fixed costs are.   

4. Non-cash expenses

Stock-based compensation, deferred income taxes, and depreciation are among the most common non-cash expenses.

5. Non-operating expenses

An organization's main activity is not directly impacted by these costs. Non-operating expenses include interest payments, losses from asset dispositions, and currency exchange costs.

Operational budgets may include other items in some industries or organizations. Typically, capital expenses aren't included in operating budgets since they are long-term costs, while operating budgets are short-term.

How to manage and improve operating budgets?

Creating an operating budget and managing it effectively takes several skills. The goal of budgeting is to improve control and accuracy over time, making your budgets even better. In order to do so, you can take the following approach:

1. Prepare multiple budget types

Spending is guided by budgets, which predict revenue over a certain period of time. Short-term budgets are intended to cover one year or a year and a half, while mid-term budgets are intended for two to three years, and long-term budgets are intended to forecast your business's finances for four to five years. Businesses often create multiple budgets. As part of business operations, they may rely heavily on a short-term budget, while for high-level planning, they may rely more heavily on a long-term budget. There are also overhead budgets, direct materials budgets, production budgets, administrative expenses budgets, direct labor budgets, and many more.

2. Delegation

A senior manager should designate who shall be responsible for updating and maintaining localized budgets. In order for all budget updates to fit together, you'll also need a plan for your delegates to help maintain financial accountability.

3. Monitoring and collaboration

Maintaining a healthy budget requires regular monitoring and collaboration. Overspending or underspending is noted here, adjustments are made, and future predictions are made. Collaboration with your staff is what allows you to find discrepancies between your expectations and the day-to-day business reality. This is ultimately the best way to monitor variable costs, follow cash flow, and catch mistakes.

4. Forecasting

It is important to understand where your business stands today and where it wishes to go in the future before you plan your business strategy. It helps you to understand where you met, exceeded or encountered unexpected difficulties for the entire year based on accurate, up-to-date data from routine budget monitoring. Using your data, you can create a budget that is more tailored to needs at the end of the year.

7 tips to efficiently managing operating budgets

1. Ensure that budget details are set appropriately

A budget can take many forms. Understanding how detailed this particular budget needs to be is the first step toward creating a successful budget. Budgets should be broken down at least by department. In most cases, though, it isn't particularly helpful to get too deep into line items. Often, managers or specific employees are better equipped to keep track of granular details about frequent purchases. In addition, managers should be able to adjust budgets based on their performance. Managing social media campaigns may require flexibility from a marketing manager, for example.

2. Delegate effectively

As a business opens, most spending may be cleared personally by the owners. Businesses grow to a point where they are unable to handle the volume of decisions alone as they grow.

It may be challenging to give someone else control over the company's finances, but as a result of delegation, all purchase decisions won't have to be passed through the owner's desk. A department can respond more nimbly to its needs. In order to continue to improve their skills in budget management, managers should have access to budget management training tools.

3. Engage in collaboration

It is necessary for departments to have a certain amount of control over their own budgets. The importance of encouraging communication between related departments cannot be overstated. Having overlapping objectives between the marketing and sales teams can help each team perform better, for instance:

  • Your finance team can cooperate with IT to find ways to keep systems updated without overspending.
  • Your Human Resources department can consult with the travel management team to lower the cost of recruiting (when it involves traveling.

4. Establish a standard for budget reporting

The budget now spreads across multiple departments if you follow the steps in order. It takes some time for each department to manage its budget independently and some time for them to collaborate with other teams. 

Keeping a centralized "home" for budget management helps executives get a cohesive, high-level view when they need it. It is possible to accomplish this by implementing a central budget system that can be accessed by all budget users. Each department should record expenses according to the same procedure, even if they handle the budget monitoring on their own. It will be easier for you to combine all records into one master budget record this way.

5. Compile accurate, complete data

It is vital to monitor actual business expenses in order to keep your budget on track. A budget without this step is merely a theoretical document that does not have any real power to influence business decisions. Make sure to pay attention to the performance of your budget during each upcoming period by collecting thorough, accurate updates.

Setting clear spend categories and making the expense submission process as convenient as possible are two ways to accomplish this.

It is important to keep context in mind when categorizing. It is possible to classify the same restaurant meal differently depending on the purpose of the trip. Interviewing a potential employee is an expense in human resources. A meal with a client is a sales opportunity. Your travel budget covers the cost of a business traveler's meal. Create an accurate view of your expenses by categorizing them appropriately in your system.

When you submit an expense report in a few minutes, you're more likely to receive complete information. The process can be streamlined by choosing a budget management tool with features such as receipt photo capture and automatic categorization.

6. Schedule appointments for budget updates

We've all experienced situations where it seems like all projects are due at once. An intense workload can lead to a temptation to drop any unimportant task during a crunch period.

Nevertheless, budget management is an essential task if you want to keep your business' finances in order. When you put off a budget review until next week, "when things calm down," the greater the chances of soon having to put out a new fire.

Establish a schedule for closing books and updating department heads on any course corrections that need to be made. The early detection of overspending can be achieved by checking on it quarterly or monthly.

7. Keep the future in mind

By comparing actual and planned spending on one budget, you can inform your next budget preparation. By keeping notes from your financial budget reviews, you can create your next budget more easily.

It is possible to discover patterns in your notes that you might not notice on a daily basis. Were you able to make a surplus in some areas but overextended in others? How can you anticipate future spending patterns? The data from your own budget is a great resource for building future plans.

How can Pluto help businesses create and manage an operating budget?

Tracking expenses

Pluto can track all the expenses made by the organization and categorize them according to their purpose. This way, the organization can see where their money is going and identify areas where they can cut costs.

Budget setting

With Pluto, an organization can set a budget for each expense category (under a corporate card or group of cards). This ensures that the organization does not overspend and can stay within its financial limits.

Real-time monitoring

Pluto can provide real-time updates on the organization's spending, allowing them to see how much they have spent, how much they have left, and where they are overspending. This helps the organization make informed decisions about its spending and adjust its budget accordingly.

Detailed reporting

Pluto can generate ad-hoc reports, providing the organization with detailed information on their spending. This can help the organization identify trends and make informed decisions about future spending.

Overall, Pluto can help an organization create and manage an operating budget by providing real-time tracking, automated reporting, and budget-setting features. This allows the organization to stay on top of its spending, make informed decisions, and achieve its financial goals.

Key takeaways

An operating budget isn’t just important, it’s absolutely necessary. While there can be challenges when it comes to building one, such as poor visibility of your expenditure and a lack of expense tracking, these can be overcome with the aid of Pluto.

Properly building and updating your operating budget will help you find opportunities for improvement when it comes to cost-cutting and revenue, as well as generally increase the efficiency of your business.