Budgeting is a business process where finance managers analyze the financial statements of business spends and set spending limits for each business unit in their organization. At the end of each month or quarter, finance managers compare actual data with budget amounts and make adjustments.
Budgetary control is enforced to prevent losses resulting from theft, fraud, and to manage risks. These instructions also help the organization to ensure that expenses remain within budgetary limits.
In this blog, we are discussing the advantages of budgetary control and how to enforce smoothly through automation software.
Why is budget control important?
- Financial Forecast – Organizations can create a roadmap about their financial objectives and ways to achieve them. It helps finance managers to identify departmental, operational, and individual goals and develop a plan of action in which scarce resources are allocated efficiently to achieve objectives.
- Complete Control – When the spending limitations are set, it allows the finance team to exercise full control over their business spending. On comparing the financial reports of actuals vs. budgeted performance, it will help them in identifying the weak spots, and immediate action can be taken to prevent further leakage.
- Enhanced Visibility – With the limitations put on the organizations’ accounts payable, finance teams will gain more visibility precisely to the business spending. It will help the finance team to streamline and curb the unnecessary expenses.
- Employee Accountability – Having a strict approval process increases transparency & accountability while procuring items to the organization. In this, the finance team gets to know which user is spending and on what thus increasing a responsible spend culture in the organization.
- Profit Maximization – Controlling the budget mainly helps in maximizing the profit for the organization. Reducing unnecessary business expenditure, using the resources to the maximum are few of the ways to grow the profitability.
How to enforce budget control?
Enforcing budget limitations manually is a very tedious process. It involves a lengthy process of creating, disbursing, collecting, and merging records, which are quite error-prone. These can be costly errors and might have an impact on the overall business objectives.
Finance automation software can seamlessly enforce budget control. It will eliminate the challenges faced by the finance teams and helps you to streamline & optimize your accounts payable.
Some of the salient features to look for in finance automation software are:
- Robust Compliance – A finance automation software will help in setting up advanced approval hierarchies and multi-stage approval workflow to process any business payments. You can Implement robust protocols and accounts payable procedures to categorize and automatically approve certain types of requests made by specific people to streamline the approval process.
- User-based Access – The finance automation software provides you with an option of limiting access for the user. By restricting the accessibility, you can further strengthen the governance and curb unnecessary spending. The authorized administrator can revoke access at any point in time.
- Avoiding Fraudulent Errors: With an automated financial system, you can minimize fraudulent money transfers, theft, or costly errors. Adding security layer and by scheduling a one-time set up of recurring payments, requiring more than one person to authorize a payment, email or SMS notifications for every payment made, etc. will help reduce the risk factor involved in payments.
- Automated Accounting – The manual accounting process is highly error-prone. There are chances of data mismatch or data manipulation taking place when entering data into your accounting software jeopardizing the organization’s financial objectives. The finance automation tool helps you to overcome this by automatically entering line-by-line entry of all financial transactions into the general ledger.
Which is the best financial software for budget control?
A Finance automation tool like Finly can help in enforcing a stringent budgetary restriction and help you to reduce business costs. The machine-learning powered finance automation software allows businesses by gaining complete control & visibility in streamlining and automating their accounts payable.
Finly not just helps in enforcing budget control but also has the following characteristics:
- Powerful Governance Engine – The automation tool consists of a powerful compliance monitoring engine which governs the limit of expenditure that is happening. The user gets immediately notified with a warning in case any policy violation occurs. Repeated offenders can be detected and blocked by the system automatically.
- Payment Automation – A finance automation software has the ability to make payments to your vendors. Instead of making the payments manually, you can schedule and automate the payments and avoid any fine for the delayed payments. Also, you can notify your vendors through emails/SMS and intimate them about the payouts.
- Audit Trails – Get the complete transaction details when purchase orders are processed. In Finly, all the events get recorded that occurs in the execution of any purchase order or payment transaction and get instant access to complete budget and spend details.
- Increased Productivity – Tasks like approving purchase orders, making payment against invoices, are very laborious and consumes more time of finance teams. Automating these tasks by setting up email notifications for any pending approval, processing payments, matching invoices against purchase orders, etc.can significantly increase the productivity and give them ample amount of time to focus on more critical tasks.
- Comprehensive Reporting Structure – Finance automation software helps in creating a structured report of all the accounts payable in a single dashboard. CFOs can get a combined report on the various expenses that are occurring in their organization. Based on the report generated, they can plan their budget accordingly.
- Deep Actionable Insights – A typical financial rata would be very raw and consists of large unprocessed sets that are usually in the form of numbers and can be quantitative or qualitative. Finly can provide a digitized financial report can help in analyzing information and decisive decisions. It can help in discovering insights which can then influence decisions and make drive change.
After implementing Finly, organizations were able to streamline their payments and exercised total control on their accounts payable. By enforcing stringent policy compliance, they were able to increase transparency and reduced unnecessary business expenditures.