How To Manage Your Spending During The COVID-19 Crisis
A strict spend management strategy is one of the easiest ways to deal with an economic downturn. As no one can predict the full extent of the financial crisis that will follow this COVID-19 outbreak, the next best thing you can do is control how you react and how you prepare yourself for it.
Below, we’ve outlined four steps you should consider if you want to learn how to manage your spending.
How to better manage your spending in four easy steps
Step 1: Eliminate rogue spending
Rogue spend (also known as maverick spend or tail spend) is usually caused by purchasing products and services outside pre-negotiated contracts.
Having control over your organization’s spend is critical anytime, not only during crises. Therefore, it’s vital that you track your spending to identify which payments are necessary and which are not.
To do so, you need a stricter purchase order approval process. If needed, you can even involve your CEO or CFO in the approval process to ensure that you only purchase what is absolutely necessary.
Another thing you can do is regularly assess your spending. You can hold weekly meetings to review procurement spend and find out if what you budgeted is what you actually spent. If not, adjust your budget accordingly (the key here is to adjust your budget frequently, not quarterly or yearly, as you might do under normal circumstances).
Procurement platforms are essential for building a transparent process to assess requests for purchases. Software can:
ensure submitted requests are well-founded;
ensure an individual cannot approve the same request they submitted;
keep all information in one place;
automate three-way matching to verify invoices before they’re paid.
Here are other procurement mistakes organizations make that ultimately lead to wasted cash.
Step 2: Frequent communication with stakeholders
Due to restrictions, most organizations operate remotely. This has a direct impact on communication. Thankfully, spend management platforms can also help improve communication between team members.
Because Prokuria is a browser-based application, it can be accessed from any device, from anywhere in the world. Moreover, it can send real-time notifications that keep stakeholders aware of approval requests and purchase order status. These notifications remove the need for long email threads, making the spend management process more efficient and organized for everyone involved.
Step 3: If possible, postpone any big spendings
With crises also comes uncertainty - you don’t know how your business will look like 2 weeks, 1 month, or 6 months from now. So you want to make sure you go step-by-step and solve issues as they arise.
However, you don’t want to miss opportunities either. Keep the big picture in mind and cut costs uniformly. Otherwise, cutting costs arbitrarily across the board might leave you vulnerable to competition and displacement.
A few spendings you can forego in the coming weeks are:
new projects or marketing campaigns.
Working from home also means you can make some savings. Expenditures you should consider are:
travel expenses for your employees;
research and development;
Last but not least, you should decide whether your full-time employees can work part-time and if there’s any chance you can delay payables’ payment timing. If necessary, you can also renegotiate contracts and change annual subscriptions to monthly or quarterly payment terms.
Step 4: Keep an audit trail
In its most basic form, an audit trail is a record of all the activities part of a specific operation, procedure, or event your organization has been involved in.
Tracking requests, approvals, and costs in real-time are key to ensuring costs do not get out of hand. Thus, an audit trail is vital to any process that involves your operation’s finances and assets. Thankfully, Prokuria can help you with that.
Making an audit trail part of your financial and procurement strategy will not only help you record essential information, but put it to use in building value, profitability, and productivity. Because Prokuria is a cloud-based platform, it can preserve what is intrinsic to any efficient procurement process, while removing the elements that make it difficult or costly time-wise to pinpoint specific stages in any past procurement operation.
Proactively managing your spending is the only way you can manage your organization’s health during crises.
Planning early can help you avoid unnecessary risks and get a firm grip over your business. Following the steps outlined above will benefit your organization during this crisis and beyond.