From XU Magazine, 
Issue 25

How to set up spend control for schools

There is a huge variety in school systems around the world. Each country has its own approach to general education, from national curriculum to funding. However, if we step down to the level of each individual institution, we can see that they have a lot in common regarding finance administration; and establishing spend control is a common need.
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Why spend control is critical for school

All schools are accountable to their funding sources, so they have strict compliance rules and multi-level spend control workflows. Their budgets are usually rigid and limited and keeping within the budget is a challenge, especially with multiple requesters and decision makers. Educational institutions generally don’t have that many dedicated accounting staff, which basically means that a few people do a lot of work. To top it all, financial reporting requirements are even stricter than in other industries because of the external funding, which calls for very high transparency across all processes.

How to set up proper financial controls

Financial services outsourcing practices serving schools need to go well beyond common compliance services and get deeply involved in defining and enforcing financial controls across their client’s operations. At the very least this involves:

  • Identifying how the money is spent to get a real-life picture of who spends what, when and why
  • Setting up formal authorisation processes that make sure all spending is properly authorised by the appropriate people within and outside of the institution
  • Providing detailed audit trails to document that the approval process has been duly followed
  • Moving to a digital environment to ensure transparency and time efficiency

Spend control options: proactive, reactive, hybrid

There are several options for controlling spending, with each one focusing on a specific spend stage.

Proactive spend control works well when there is a formal buying process, e.g. with purchase orders. By setting up controls around purchase orders (who is authorised to raise them, what goods can be ordered, which suppliers can be selected, etc.) and establishing a robust review and authorisation process, proactive spend control can indeed eliminate, or at least significantly reduce, unwanted spending before it occurs. Introducing proactive spend control is the right choice for organisations that have many people engaged in similar, regular purchasing activities either in one or multiple locations, which is typical for educational facilities.

Reactive spend control ensures that incoming bills are actually correct and to be paid by the organisation. This is achieved by establishing a transparent review and authorisation process for all invoices to verify details like the amount, supplier payment account, etc. before any money is paid. It also serves as an additional fraud control layer by allowing to filter out fraudulent or erroneous bills.

The hybrid approach combines these two options and serves as a comprehensive spend control framework. It enables to check the details of finance documents, to compare what had been ordered in a proactively controlled process with what is being billed and confirms that the ordered goods or services have actually been received. This cross-reference capability is called X-way matching.

Spend management app stack for schools

Establishing proper financial controls may seem tricky. But it just requires the right tools.

A powerful app stack contains three essential components that make spend management effective, efficient and fully digital:

The cloud accounting platform Xero is at the core of the app stack, it also serves as the system of records for all pre-integrated apps. A cloud accounting platform can be accessed from anywhere, any time. This provides a clear financial overview in real time and enables not only informed decision-making but also simplifies collaboration within the organisation as all people involved see the same figures.

Tools for digital data capture automate the manual data entry from paper into the accounting system. Document data is captured by simply taking a photo or by forwarding receipts to a dedicated email address. The tool then extracts the relevant information from the submitted document and allows its review before publishing it to the cloud accounting system.

The process automation tool ApprovalMax moves the approval process outside of the accounting platform to keep external stakeholders away from it. No-one who approves a particular expense needs to see all the finance data. With ApprovalMax it’s easy to set up multi-layered bill and purchase order approval processes, which keep a detailed record of who approved what. This eliminates the need to carry paper documents around or wait for someone’s approval via email. ApprovalMax is also very useful for audit purposes because it automatically creates searchable reports with a complete record of all approval-related details to provide a good aggregated view and also the ability to easily drill down for any low-level details needed to perform analyses

Implementing such an app stack automates time-consuming manual procedures and delivers all data in real time – giving a major boost to efficiency and traceability. It ensures a fully paperless, web-based and mobile spend control solution that increases overall efficiency considerably and provides decision makers and purchasers with a convenient tool for acting on the go. It eliminates manual work so that the school staff can focus on their intended tasks.

Why leave it there?

Find out more about spend control for schools in the ApprovalMax playbook

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