Every company wants to stick to a budget; every company needs to stick to a budget. But, not all companies actually stick to them—let alone create a budget in the first place.
Many companies simply can’t stick to their budget even though they try. And try. Why is that? Now, there are many different types of budgets and we all know what a budget is, but let’s go over some reasons why many companies trying to hit their budget goals are essentially playing a game of blindfolded darts.
Over-budget reason #1: Companies have no idea how much they are spending.
Seems obvious, right? If you want to make a company budget, you have to know exactly what you are spending. Well, for many companies, that is not the case. Shannon Potter, Corporate Staff Accountant at Integrated Wellness Partners (IWP), explains in a sit-down interview that in the past, IWP’s “budgets” were “essentially ‘this is what you owe’; [IWP] had no choice but to pay for what was already delivered.”
Many times, this comes down to a common company issue: they’ve got too many cooks in the kitchen. With too many teams purchasing products without a proper purchasing workflow or supervision, companies don’t know what they don’t know about their spend. Purchasing, essentially, becomes a free-for-all.
Unfortunately, “surprise” invoices are no surprise to many companies. Budgets require companies to have full spend visibility in order to see how much products cost and when their payments are due if they want to stay in the black.
Over-budget reason #2: Companies don’t have an established approval process.
Budget are essentially a “limit”—at least, they’re supposed to be. But, what good is a budget if there is no supervision on what is being purchased? A budget without an approval process is essentially the same thing as giving a teenager a credit card, sending them to the mall, and hoping they don’t bankrupt you. You need an established, easy approval system that gives managers the ability to accept or reject purchases that either fit in the company’s budget, or don’t.
When approval processes are convoluted, companies waste time and money. A perfect example of how a nonexistent approval process can cost companies a lot of money is CorePower Yoga. The lack of spend control that resulted from an unestablished approval workflow amounted to $50,000 a month in unapproved purchases. Yep, you read that right. $50,000…every month.
“Order has allowed us to essentially eliminate all unapproved spending, which had gotten as high as $50k per month.” -Stefanie Teintze, CorePower Yoga
It can also take companies hours—even days— to get purchases approved. Talk about a waste of time. With a delay in the approval process, companies don’t have the products they need to run their business—resulting in them losing more business. And the cycle continues.
Plain and simple: you want to cut out unapproved purchases to stay within your budget? Set up an easy approval system.
Over-budget reason #3: Companies have strained vendor relationships.
With a lack of both spend visibility and purchase approvals, miscommunications are bound to happen. Overdue payments and other ordering mistakes are inevitable. In worst case scenarios, some vendors will actually hold off sending products to companies until their invoices are paid. Can you blame them?
Reestablishing or cultivating entirely new vendor relationships can be very time-consuming and costly for companies. A “lack of professionalism” with vendors can prove to be a costly mistake when companies are looking to stay on budget. Keeping good relationships with vendors is one of many essential budgeting skills companies must prioritize.
It’s simple: you keep your vendors paid, you have all the products you need. It’s a win-win.
How to Budget Better
So, let’s backtrack: you need to see what you’re spending, have a clear-cut approval process, and stay on good terms with your vendors. That’s a lot to keep up with.
The good news? There is a platform that does all three.
No more “surprise invoices”; no more “I didn’t approve that”; no more product delays. Order keeps your company’s spend in check. Our platform gives companies real-time, line-level visibility, an established approval workflow, and allows you to not only construct a detailed budget, but actually stick to it.