Rob Biedron, Author at Planergy Software Tue, 02 Jul 2024 16:32:56 +0000 en-US hourly 1 https://wordpress.org/?v=6.6 https://planergy.com/wp-content/uploads/2021/07/Planergy-Symbol-150x150.png Rob Biedron, Author at Planergy Software 32 32 Catalog Management in Procurement: What Is It, Types of Catalogs, Challenges and Best Practices To Manage Them https://planergy.com/blog/catalog-management/ Thu, 18 Jan 2024 14:03:36 +0000 https://planergy.com/?p=15662 KEY TAKEAWAYS Product catalog management requires a consistent process to ensure data is accurate. Your catalogs are only as good as the data quality used to create them. Using a dynamic punchout catalog ensures customers can access data directly from their procurement software, and the data is always correct. Catalog management in procurement is the… Read More »Catalog Management in Procurement: What Is It, Types of Catalogs, Challenges and Best Practices To Manage Them

The post Catalog Management in Procurement: What Is It, Types of Catalogs, Challenges and Best Practices To Manage Them appeared first on Planergy Software.

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What's Planergy?

Modern Spend Management and Accounts Payable software.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

King Ocean Logo

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

  • Where the best opportunities for savings are in indirect spend.
  • How to gain visibility and control of your indirect spend.
  • How to report and analyze indirect spend to identify savings opportunities.
  • How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Catalog Management in Procurement: What Is It, Types of Catalogs, Challenges and Best Practices To Manage Them

Catalog Management in Procurement

KEY TAKEAWAYS

  • Product catalog management requires a consistent process to ensure data is accurate.
  • Your catalogs are only as good as the data quality used to create them.
  • Using a dynamic punchout catalog ensures customers can access data directly from their procurement software, and the data is always correct.

Catalog management in procurement is the strategic process of managing and maintaining a product catalog within an organization.

It ensures that suppliers’ products, services, and pricing are consistent, accurate, and up-to-date. This vital process streamlines purchasing, enhances spend visibility, and improves supplier relationship management.

Different Types of Supplier Catalogs

Understanding the different types of supplier catalogs providers use can help streamline your procurement process. Here are the four main types of digital catalogs.

  1. Internal Catalogs

    These are created and maintained within the organization. They include products or services sourced from multiple suppliers or distributors and are standardized according to the company’s requirements.

  2. External Catalogs

    Suppliers provide these catalogs. They contain detailed information about the products or services they offer. There are two types of external catalogs – vendor self-managed and punch-out catalogs.

    Supplier-managed catalogs live within the buyer’s purchasing system, but the supplier has access to the catalog so they can maintain it.

    On the other hand, a punch-out catalog gives buyers access to the vendor’s website through the buyer’s procurement software.

  3. Static Catalogs

    Static catalogs are non-interactive, meaning product details remain constant until someone manually updates them. This is the most time-consuming type of catalog since it can quickly go out of date and requires frequent updates.

  4. Dynamic Catalogs

    In contrast, dynamic catalogs are interactive, allowing real-time price updates, availability, and other product details based on external factors.

    These are usually handled with a catalog management solution connected to your system via API – allowing you to make edits in one place and push the updates live to all the places where your catalog is used.

    However, the frequency that dynamic catalogs are updated can vary greatly. So there can still be a risk of out of date data.

Different types of supplier catalogs

Tools for Catalog Management

Suppliers use various tools for catalog management.

These range from basic Excel spreadsheets for small-scale catalog management to more advanced systems like Product Information Management (PIM) systems, which allow suppliers to manage complex product information across multiple channels.

Procurement software offers robust features for catalog management, including integration with eCatalogs and PunchOut catalogs.

Modern suppliers like Amazon Business use the PunchOut catalog format. But, you will likely have a mix of suppliers that offer varying options for catalog integration.

Planergy is an Amazon Business partner with an approved integration with PunchOut and Amazon Business’ own Punch-in format. We also support integration with other PunchOut catalogs and other options for integration and ordering online.

The catalog management tool you choose needs to be based on several factors, including:

    • Usability

      Is it easy for your team to understand and use? If you already have a catalog, can you import it and update it accordingly?

      If you’re starting the catalog creation process from scratch, does it have the configurable options you need to make maintaining high-quality data and procurement analysis possible?

    • Integration with Other Systems

      Does the procurement system integrate with the other tools you use across your supply chain?

      For example, does it connect to your ERP, e-commerce platform, and inventory management system? Does it integrate with relevant marketplaces and other channels you use?

    • Scalability

      As your product catalog management system grows, you may run into performance issues like poor data loading time or even complete system failure.

      As the volume of information increases, you need more data management resources.

      Whether that’s hardware to support the system, software to manage the data, or staff to update product information, you need something that can quickly adapt as you grow.

    • Compliance and Legal Requirements

      All businesses must provide prospective buyers with compliant information applicable to industry regulations and laws. It can be quite a burden, as many regulations exist, from product safety to labeling and privacy legislation.

      If you purchase globally, ensuring compliance with multiple international data regulations is crucial.

    • Access, Catalog, and Procurement Controls

      Having an up to date and accurate catalog for all your preferred vendors and approved vendor list is a good starting point. But should everyone be able to order anything from any supplier?

      Controlling what each individual can order, who should approve different types or values of purchases, budget management, and much more will be covered by a procure-to-pay software, like Planergy.

What to consider when choosing your catalog management tool

No matter how many products you have, or what your ideal customer looks like, effective product catalog management can improve your bottom line.

Catalog Management Challenges

Catalog management is a critical function in procurement, but it comes with its unique set of challenges.

The process involves organizing and maintaining a product or services catalog to streamline procurement operations.

However, the task becomes complicated due to factors such as maintaining data accuracy, ensuring catalog compliance, and ineffective catalog maintenance.

  • Maintaining Catalog Compliance

    This involves aligning the catalog with the company’s procurement policies and regulations, which can be daunting.

    Non-compliance can lead to legal issues, reputational damage, and financial loss.

    The challenge arises when suppliers update their products or services, change their pricing, or when companies revise their procurement policies, making it challenging to maintain constant compliance.

    Regular audits can help identify any discrepancies early and allow for corrective measures.

    Establish clear communication channels with suppliers to facilitate prompt updates about product, service, or pricing changes.

    Train the procurement team on the importance of catalog compliance and how to ensure it can also be beneficial.

  • Keeping Catalog Data Accurate

    Data accuracy is the backbone of effective catalog management. Inaccurate data can lead to wrong decisions, over or under-stocking, and financial loss.

    Incorrect data makes it impossible to turn your big data into actionable insights.

    The challenge lies in the fact that catalogs are often handled by multiple individuals across different departments, increasing the chances of human error. Suppliers might provide incorrect information, or items may be duplicated.

    Centralizing everything with catalog management software is the best option to keep the data current and accurate. This makes identifying and correcting errors, removing duplicates, and updating outdated information easier.

    With an adequate PIM, you can automate the process. But, it’s crucial to have strict data entry protocols and train staff on using them appropriately so that information is consistent across the board.

    Consider using templates with all the necessary information, such as SKU, product description, category, etc.

  • Maintaining Effective Catalog Management and Maintenance

    Ineffective catalog maintenance and management can disrupt procurement, causing delays, increased costs, and operational inefficiency.

    The challenge here is keeping up with the constant updates from suppliers, technological advancements, and changes in organizational needs.

    To address this, use a comprehensive and flexible procurement software tool like Planergy to help with catalog maintenance.

    It allows for easy integration with eCatalogs and Punchout catalogs, provides real-time updates, and facilitates internal catalog management.

Catalog management challenges

Best Practices for the Catalog Management Process

Catalog management is crucial to procurement, and implementing best practices can significantly enhance its effectiveness.

  • Select the Right PIM System

    A PIM centralizes your product information to keep it consistent and accurate across multiple platforms.

    Not all systems are created equally, so choosing the right one for your business is essential. Demo multiple platforms before adding all your product content.

    For instance, some PIM systems also include digital asset management (DAM) tools. DAM systems manage your creative assets, including product images, marketing creatives, and more. Linking to the two can make content enrichment easier.

    This provides everyone with a single source of truth for data – making it easier to keep it consistent and accurate across the board.

    This ensures a positive customer experience, because no matter where they find your product information, it is the same – eliminating potential confusion and making the purchase decision easier.

  • Segment Your Product Information

    Break down your product information into different categories or segments to make managing and locating specific items easier.

    The category management process can be very beneficial in procurement.

    How you choose to segment the data is entirely up to you but consider how you might want to restrict ordering of categories of items as well as how you would like to analyze spend.

    Good categorization and good control of the data can help automate spend analysis.

  • Personalize Your Product Catalog

    Personalizing your product catalog to align with your business needs can significantly improve efficiency and user experience.

    You can adjust the layout, design, navigation, and tailor custom fields to meet the specific needs of your customers or employees.

  • Ensure Data Integrity

    Ensure your catalog’s data is accurate, consistent, and up-to-date.

    Include regular audits in your workflow to review your catalog data for errors, outdated information, and duplicate products. You want to ensure the information is the same across all touchpoints.

    Factor in catalog management to your supplier onboarding process to ensure new suppliers are accounted for as you start to purchase from them.

  • Provide a Fantastic User Experience (UX)

    A well-organized, easy-to-navigate catalog can enhance user satisfaction and increase the likelihood of repeat purchases from the perspective of the supplier.

    Suppliers should review and update often to ensure it remains user-friendly to ensure customer experience management.

    The same applies when managing catalogs for procurement. The easier it is to use the better internal procurement compliance will be and the easier it will be to onboard new employees.

  • Implement Consistent Product Categorization

    This is crucial for easy navigation. Create and use a consistent set of categories and subcategories across your catalog so it’s easy for people to find what they’re looking for.

  • Write Detailed Product Descriptions

    The more information you can include in your product descriptions, the better. Include all relevant details, including features, benefits, and specifications.

    This will reduce the risk of errors and discrepancies and reduce your return rate.

  • Automate Inventory

    Automating your inventory management can maintain real-time updates of inventory levels, preventing you from ordering too much stock or having too little on hand.

    Connecting your inventory management system allows it to update quantity information based on sales.

  • Assess Product Data Relevancy and Credibility

    To keep your online catalogs relevant to your audience, regularly review the product data to ensure it meets current market trends and customer expectations. Remove or update any outdated or irrelevant information.

    Specify Attributes and Create Clear Product Taxonomies

    Clearly define product attributes and organize them into clear, logical categories. Training your team on these features and how you want them used is important when adding new products or updating existing product listings to ensure consistency.

    Best practices for the catalog management process

    Common Questions About Catalog Management in Procurement

    • What Is the Role of Catalog Management in Procurement?

      Catalog management is crucial in procurement as it ensures that all product or service information is accurate, up-to-date, and consistent, streamlining the purchasing process.

    • What Are the Challenges of Managing Supplier Catalogs?

      Challenges include keeping the catalogs up-to-date, dealing with multiple types of catalogs, and ensuring consistency across all platforms.

    • What Are the Components of Procurement Catalogs?

      There are several components: catalog content, processes, buyer/seller relationships, establishment of pricing, billing management, data storage and transmission, system maintenance, and user maintenance.

    Catalog management is a multi-faceted process that requires careful planning and execution.

    By adhering to these best practices, businesses can optimize their strategy, leading to streamlined operations, improved customer satisfaction, and increased profitability.

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

2. Download our “Indirect Spend Guide”

Download a free copy of our guide to better manage and make savings on your indirect spend. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

Related Posts

The post Catalog Management in Procurement: What Is It, Types of Catalogs, Challenges and Best Practices To Manage Them appeared first on Planergy Software.

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Multi-Academy Trust (MAT): What Is It and How Can Schools Benefit? https://planergy.com/blog/multi-academy-trust/ Mon, 11 Dec 2023 14:21:32 +0000 https://planergy.com/?p=15542 KEY TAKEAWAYS Multi-Academy Trusts (MATs) are a group of state-funded schools that work together under one central board of directors. MATs aim to band multiple schools together to strengthen all of them. Joining a MAT is a complex process that can go wrong if not well planned and managed. What is a Multi-Academy Trust (MAT)?… Read More »Multi-Academy Trust (MAT): What Is It and How Can Schools Benefit?

The post Multi-Academy Trust (MAT): What Is It and How Can Schools Benefit? appeared first on Planergy Software.

]]>

What's Planergy?

Modern Spend Management and Accounts Payable software.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

King Ocean Logo

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

  • Where the best opportunities for savings are in indirect spend.
  • How to gain visibility and control of your indirect spend.
  • How to report and analyze indirect spend to identify savings opportunities.
  • How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Multi-Academy Trust (MAT): What Is It and How Can Schools Benefit?

Multi-Academy Trust

KEY TAKEAWAYS

  • Multi-Academy Trusts (MATs) are a group of state-funded schools that work together under one central board of directors.
  • MATs aim to band multiple schools together to strengthen all of them.
  • Joining a MAT is a complex process that can go wrong if not well planned and managed.

What is a Multi-Academy Trust (MAT)?

A MAT is an academy trust that operates more than one state-funded school with direct funding from the Department for Education (DfE).

The group of academy schools operates under a single governing body or central board of directors.

This model is primarily used in the United Kingdom, where state-funded schools can become academies, giving them more autonomy over their operations than traditionally maintained schools.

What is a multi-academy trust

History of MATs

According to the House of Lords Library, the 1997-2010 Labour Government first introduced the concept of academies.

Initially dubbed ‘city academies’ under the Learning and Skills Act 2000, they were officially renamed academies under the Education Act 2002, drawing inspiration from the city technical colleges initiated by the Conservative Government in the 1980s.

The academy policy was significantly expanded under the 2010-2015 Conservative-Liberal Democrat coalition Government, which passed legislation allowing all types of schools to become academies.

This included primary, special schools, and pupil referral units that previously needed eligibility. 

The number of academies surged from 202 in 2010 to 4,722 in 2015, with student enrolment increasing from 192,640 to 2,742,394.

Since 2015, the Conservative Government has continued to promote academies. 

Their March 2016 budget announced plans to convert all state-funded schools in England into academies by 2020.

They aimed for every primary and secondary school to either be an academy or be in the process of becoming one. 

This policy encouraged top-performing schools to form and manage MATs to share their success with other schools.

The 2017 and 2019 Conservative Party manifestos reiterated their commitment to academies, pledging to encourage more organizations to sponsor academies or establish new free schools, a type of academy.

They also vowed to intervene in schools with persistent underperformance.

By the 2020/21 academic year, the number of academies had risen to 9,444, with 4,591,865 pupils attending these academies.

The Parliament published a 2022 whitepaper outlining the plan for all schools to be part of a MAT by 2030.

According to The Guardian reports, the last time this was tried in 2016, ministers were forced to reverse course partly due to pushback from Conservative councils.

The Role of Academy Schools

Academy schools are state-funded but independently run, meaning they have greater freedom over their curriculum, school budgeting, and staffing than regular state schools.

They are also free for pupils to attend. 

They are inspected by Ofsted, like state schools. Pupils attending academy schools take the same assessments and aim for school improvement across the board.

Structure of a Multi-Academy Trust

In a Multi-Academy Trust, several of these academy schools join together under the leadership of a single governing body.

This central governing body has responsibility for strategic decisions across all the schools in the trust, including financial management, staffing, and educational performance.

Purpose of a Multi-Academy Trust

The aim of a MAT is to improve and maintain high educational standards across several schools through shared resources, best practices, and expertise.

The schools within a MAT often share common values and ethos, fostering a collaborative environment to improve educational outcomes for all students within the trust.

Overall, the main objective of a MAT is to provide a structure that allows for collaboration, resource sharing, and mutual support among a group of academies, with the ultimate goal of enhancing educational provision and outcomes for students.

Financial Aspects of a MAT

MATs are not-for-profit organizations, meaning any surplus funds must be reinvested into the trust’s schools.

They also have charitable status, which provides certain financial benefits such as exemptions from some forms of tax.

Rather than being controlled by the local authority, they receive funding from the government, in the form of a General Annual Grant (GAG).

Each unit within the family of schools can pool all or part of their GAG together to benefit all the individual schools in the entire trust.

They can also pool skills and knowledge to better benefit the entire trust. A good example of this is when it comes to addressing common problems in education procurement and sharing resources.

MATs will usually centralize specific business functions, like finance, to improve efficiency and reduce costs across the group of schools.

Single Academy Trust vs. Multi-Academy Trust

It’s important to note that while all academies are part of an academy trust, not all academies are part of a multi-academy trust. Some operate as a standalone academy under a single academy trust.

A Single Academy Trust operates only one school, giving it autonomy over its operations, including curriculum, budgeting, and staffing.

On the other hand, a Multi-Academy Trust involves several academy schools operating under a single governing body.

This structure allows for collaboration, resource sharing, and mutual support among the schools in the trust to improve educational outcomes for all students.

Single-academy trust vs multi-academy trust

Whether a single or multi-academy MAT, proper allocation of resources is key to success.

Top 6 Performing Large Multi-Academy Trusts in the UK

The UK is home to numerous high-performing MATs, each with unique strengths.

These trusts stand out due to their consistently high performance, innovative teaching methods, robust governance, and commitment to continuous improvement and digital transformation.

The Progress 8 score is a key performance metric in the UK education system. It measures students’ progress from the end of primary school to the end of secondary school, compared to other students nationally with similar prior academic achievement.

According to recent data from Schools Week based on performance data reported by the government, these are the top MATs in the UK that have 10 schools or more. They all surpass the national average for Progress 8 performance of -0.03.

This achievement is all the more notable because most larger MATs include sponsored academies. These academies would have had ‘inadequate’ performance before joining the MAT.

Top 6 multi-academy trusts in the UK

  1. Harris Federation

    Established in 1990, the Harris Federation is one of the most successful MATs in the UK.

    It manages a network of academies in and around London, with a strong record of transforming underperforming schools.

    The trust has a reputation for high academic standards, strong discipline, and an emphasis on student character development.

    Harris Federation had the highest progress 8 results among larger MATs with 0.39.

  2. United Learning Trust

    United Learning Trust operates a mix of state and independent schools across England. Known for its “Best in Everyone” ethos, United Learning Trust focuses on providing a well-rounded education that helps every student reach their full potential.

    They emphasize character education, enriching learning opportunities, and strong partnerships between schools within the trust.

    United Learning Trust had the second highest progress 8 results among larger MATs with 0.35.

    This is all the more impressive as the trust includes 42 academies included in the evaluation.

  3. Star Academies

    Star Academies is a renowned multi-academy trust known for its commitment to educational excellence in the UK.

    This commitment is demonstrated by the impressive scores achieved on the Progress 8 measure by schools within the trust.

    Star Academies had the third highest progress 8 results among larger MATs with 0.33.

  4. Delta Academies Trust

    The Delta Academies Trust is a multi-academy trust that operates a network of schools to improve educational outcomes and change lives for children.

    The trust’s residential center, Dallowgill, provides an environment for students to thrive as individuals.

    Established as an exempt charity, its values are drawn from the public sector, and its directors are appointed voluntarily.

    The Department for Education regulates the trust and operates 46 schools, making it a significant educational provider in North England.

    Delta Academies Trust had the fourth highest progress 8 results among larger MATs with 0.30.

  5. Ark Schools

    Ark Schools is an international charity that runs a network of academies in the UK. The trust is recognized for its commitment to providing high-quality education in disadvantaged communities.

    Ark Schools follows a knowledge-rich curriculum and provides robust training and development opportunities for staff.

    Ark Schools had the fifth highest progress 8 results among larger MATs with 0.25.

  6. Northern Education Trust

    Northern Education Trust is a multi-academy trust in North England. It was established in 2012 and has grown to become one of the North’s largest MATs.

    The trust operates 22 academies; 10 primary academies and 12 secondary.

    Northern Education Trust had the fifth highest progress 8 results among larger MATs with 0.09.

Characteristics of an Excellent Multi-Academy Trust

An outstanding MAT typically features strong leadership, effective governance, and a dynamic curriculum.

The governance structure should be transparent and accountable, promoting the best interests of all schools within the trust.

Leadership is crucial in setting strategic direction, fostering a positive culture, and driving academic excellence.

Additionally, the curriculum should be broad, balanced, and flexible to cater to diverse learning needs.

  • Strong Leadership

    Exceptional leadership is a cornerstone of any successful Multi-Academy Trust.

    The leaders set the strategic direction for all schools within the trust and are responsible for fostering a positive culture that encourages collaboration, innovation, and continuous improvement.

    They play a crucial role in driving academic excellence, ensuring that the trust’s vision and values are embedded in every aspect of the school’s operations.

  • Effective Governance

    Effective governance is another key characteristic of an excellent MAT. The governance structure should be transparent, accountable, and focused on promoting the best interests of all schools within the trust.

    The governing body should include individuals with diverse skills and experiences who can provide robust oversight, challenge the status quo when necessary, and make informed decisions that drive the trust’s strategic objectives.

  • Dynamic Curriculum

    A dynamic and adaptable curriculum is essential in a top-tier MAT. The curriculum should be broad and balanced, offering a wide range of subjects and learning experiences to cater to students’ diverse learning needs and interests.

    It should also be flexible enough to allow for local adaptations, ensuring that each school within the trust can tailor their curriculum to reflect its unique context and community.

  • Collaborative Culture

    A collaborative culture is a defining feature of a high-performing MAT. This involves fostering a spirit of cooperation and mutual support among all schools within the trust.

    Schools should be encouraged to share resources, expertise, and best practices, and work together to tackle common challenges and achieve shared goals. Cross-functional collaboration can benefit everyone.

    This collaborative approach can improve educational outcomes, greater efficiency, and a stronger sense of community across the trust.

  • Commitment to Continuous Improvement

    An excellent MAT is committed to continuous improvement. This involves regularly monitoring and evaluating the trust’s performance, seeking stakeholder feedback, and using this information to inform strategic planning and decision-making.

    This may involve tracking and reviewing academic performance, mental health of staff and pupils, etc. This will ensure the best educational and well-being outcomes.

    It will also likely include tracking common business KPIs like procurement KPIs and accounts payable KPIs. This will ensure the best business efficiency and value for money is realised by the trust.

    A commitment to continuous improvement ensures that the trust always strives to enhance its educational provision and deliver the best possible outcomes for all students.

Characteristics of an excellent multi-academy trust

Potential Drawbacks of Multi-Academy Trusts

While MATs offer many benefits, they have potential drawbacks. These include the risk of losing individual school identity, potential inconsistencies in educational standards across the trust, and challenges in managing diverse school needs.

Effective leadership with a strong chief executive, clear communication, and regular monitoring can help mitigate these issues.

  • Loss of Individual School Identity

    As schools join a MAT, they often adopt the trust’s common ethos and strategic direction.

    While this can foster unity and collaboration, it may dilute each school’s unique culture and traditions.

    This can concern parents, students, and staff who value their school’s existing identity.

  • Inconsistencies in Educational Standards

    While one of the aims of MATs is to improve and maintain high educational standards across all schools, achieving this consistently can be challenging.

    There might be variations in performance between different schools within the trust due to various factors, including leadership quality, resources, and community context.

    This could lead to disparities in student outcomes and experiences across the trust.

  • Managing Diverse School Needs

    Managing the diverse needs of multiple schools can be a complex task. Each school within a MAT has its unique challenges, opportunities, and community context.

    Balancing these diverse needs while maintaining a unified strategic direction can be a delicate juggling act.

  • Centralization of Power

    The power within a MAT is often centralized in the hands of a few key individuals or the central board of trustees.

    This can lead to decisions being made that are distant from the unique contexts of individual schools. If not managed carefully, this can result in decisions that do not fully consider the specific needs of each school.

  • Financial Risks

    While pooling resources can lead to efficiencies, it also presents financial risks. If one school in the trust faces financial difficulties, it could impact the entire trust.

    Additionally, as MATs grow in size, they may face increased scrutiny and regulatory requirements, adding to their operational complexity and cost.

    Potential drawbacks of multi-academy trusts

Many headteachers have raised issues with joining a MAT, according to The Guardian.

Alex Smythe is headteacher of Newcroft primary school in Leicestershire who says, “We were already supporting another school quite significantly and, to an extent, we were forced to form a multi-academy trust (MAT) because that school was close to being closed or taken over by others.” She likened it to doing a favor for the DfE.

Rob Campbell, principal of Impington Village College, said, “Moving into a MAT is even more complex; are you the lead school? How are you working together? What’s your scheme of delegation?”

Rob continues, “Becoming part of an MAT is like marriage without the possibility of divorce – and let’s face it, most of us would think very carefully if there was no divorce. Talk to as many people who have gone through it as you can. You really need to know and understand the process, and if you don’t yet, find a way to make damn well sure that you do.”

That’s why due diligence is so important.

Is the Multi-Academy Trust Model the Future of UK Education?

The MAT model has become increasingly prevalent in the UK education sector in recent years.

Its emphasis on collaborative working, resource sharing, and mutual support aligns well with the evolving needs of today’s learners.

However, like any educational model, its success largely depends on effective implementation and continuous improvement.

Examples of successful MATs show that with robust governance, strong leadership, and a student-centred approach, the MAT model can contribute significantly to UK education’s future.

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

2. Download our “Indirect Spend Guide”

Download a free copy of our guide to better manage and make savings on your indirect spend. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

Related Posts

The post Multi-Academy Trust (MAT): What Is It and How Can Schools Benefit? appeared first on Planergy Software.

]]>
GAG Pooling: What Is It, Challenges, and Benefits https://planergy.com/blog/gag-pooling/ Fri, 13 Oct 2023 11:12:47 +0000 https://planergy.com/?p=15393 KEY TAKEAWAYS GAG pooling allows multiple schools within a multi-academy trust to group the GAG funding from each school into one central budget. While it offers numerous benefits, there are several challenges to consider. Policies and agreements are necessary to ensure all school budgets are adequate and supported. GAG pooling, short for General Annual Grant… Read More »GAG Pooling: What Is It, Challenges, and Benefits

The post GAG Pooling: What Is It, Challenges, and Benefits appeared first on Planergy Software.

]]>

What's Planergy?

Modern Spend Management and Accounts Payable software.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

King Ocean Logo

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

  • Where the best opportunities for savings are in indirect spend.
  • How to gain visibility and control of your indirect spend.
  • How to report and analyze indirect spend to identify savings opportunities.
  • How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

GAG Pooling: What Is It, Challenges, and Benefits

GAG Pooling: What Is It Challenges and Benefits

KEY TAKEAWAYS

  • GAG pooling allows multiple schools within a multi-academy trust to group the GAG funding from each school into one central budget.
  • While it offers numerous benefits, there are several challenges to consider.
  • Policies and agreements are necessary to ensure all school budgets are adequate and supported.

GAG pooling, short for General Annual Grant pooling, is a principle in UK education funding where the funds allocated to each school within a Multi-Academy Trust (MAT) are combined.

Rather than each school managing its budget independently, all the funds are pooled and then distributed based on strategic decisions made by the MAT.

The GAG is a block grant from the Education and Skills Funding Agency (ESFA), calculated based on student numbers and needs. The grant covers running costs like salaries, utilities, and learning resources. As such, it’s a crucial lifeline that enables schools to operate effectively and provide quality education.

Not all Trusts limit themselves to pooling only the GAG income. Some also pool other ESFA or Local Authority income streams and self-generated, non-government income.

While the ESFA encourages GAG pooling, they have not provided detailed practical management guidance. There are no strict rules regarding which income streams should or shouldn’t be pooled.

As stated in the Academies Trust Handbook by the ESFA, the only exception is Private Finance Initiative (PFI) funding. According to the academy’s funding agreement, PFI funding should not be pooled.

What is GAG pooling?

GAG pooling is a strategic approach in financial management where the GAG funding of all schools within a MAT is combined into a single, central fund.

It deviates from the traditional model where each school manages its budget independently.

Instead, the MAT leadership redistributes the pooled funds across schools based on strategic priorities and individual school needs. This approach fosters collective responsibility, financial stability, and strategic resource allocation.

Why Use GAG Pooling?

The primary purpose of GAG pooling is to enable more strategic and flexible use of resources across a MAT.

It can enhance purchasing power as larger orders or contracts may attract discounts, allow for flexibility in budget allocation based on specific needs, and even help struggling schools through financial difficulties.

However, implementing GAG pooling comes with its challenges.

  • Individual schools may resist due to fear of losing control over their budgets.
  • New governance structures must be established to oversee and manage pooled resources, potentially adding complexity to the existing system.
  • Managing a larger budget can also be difficult, requiring financial expertise and robust management systems.

Top Slice GAG

Top slicing is a practice where the Trust Central Management retains a portion of each school’s GAG funding for central services.

These services can include HR, IT support, and other shared services that benefit all schools within the trust.

Top slicing aims to reduce operational costs at individual schools by leveraging economies of scale. However, unlike GAG pooling, top slicing doesn’t involve the complete consolidation of budgets.

Top Slice vs. GAG Pooling

While both GAG pooling and top slicing are financial strategies employed by MATs, they differ significantly in how they handle funds.

In top slicing, only a portion of the GAG funding is taken by the Trust, leaving the rest for individual schools to manage. This model allows for some centralisation of resources but maintains a degree of financial autonomy at the school level.

On the other hand, GAG pooling involves fully consolidating all GAG funding into a single pool managed by the MAT. The MAT then allocates funds strategically across schools based on needs and strategic priorities.

This model promotes greater financial flexibility and strategic resource allocation but requires robust governance structures and clear communication to ensure fair and effective distribution of funds.

It’s up to school leaders in the MAT to build and develop the trust board, agreements, policies, etc. in a way that will benefit all members.

Benefits of Gag Pooling

  • Enhanced Purchasing Power

    One of the primary benefits of GAG pooling is increased purchasing power, for better and faster procurement.

    By consolidating funds they can also consolidate and centralize purchasing in certain areas of spend, MATs can negotiate better deals with suppliers and service providers, thus saving costs and maximizing resources.

    For example, a MAT might negotiate a bulk purchase of IT equipment or learning resources across its schools, securing a significant discount that wouldn’t be accessible to individual schools.

  • Flexibility in Budget Allocation

    GAG pooling allows for greater flexibility in budget allocation. Funds can be directed towards schools or projects that need them the most, ensuring resources are used strategically and effectively.

    This flexibility can be particularly beneficial during times of unexpected financial strain, such as the need for sudden infrastructure repairs or investment in new teaching resources.

    When exceptional costs arise during the year individual schools will no longer need to make very difficult decisions to find the needed funds, this can be absorbed by central funding.

  • Supporting Struggling Schools

    GAG pooling provides a safety net for weaker schools facing financial difficulties. Instead of struggling schools trying to navigate financial challenges alone, resources can be allocated from the pooled funds to support them.

    This collective responsibility fosters a supportive environment and ensures all constituent academies within the MAT can thrive.

Benefits of gag pooling

Challenges of GAG Pooling

  • Economic Challenges

    One of the primary economic challenges is the fear of losing financial autonomy. Schools may resist GAG pooling as they worry about losing control over their budgets. Losing autonomy is a key cultural challenge for any school joining a MAT.

    This resistance can be particularly strong in financially healthy schools that might perceive GAG pooling as a risk to their stability.

    Another economic challenge is the potential for financial mismanagement. Handling a large, consolidated budget requires powerful financial systems and expertise.

    Without these, there’s a risk of misallocating funds, which could lead to financial instability within the MAT.

  • Cultural Challenges

    Culturally, GAG pooling represents a significant shift from ‘my school’ to ‘our schools.’ It requires a collective mentality and trust among all stakeholders, which can be challenging to cultivate.

    Individual schools may fear that their unique needs will be overlooked in favor of a one-size-fits-all approach. Headteachers may feel their autonomy being eroded.

  • Systemic Challenges

    Systemically, implementing GAG pooling requires changes to governance structures. New decision-making processes must be established to manage the pooled resources, adding another layer of complexity to the existing system.

    There may also be legal hurdles to overcome, as the current policies may not fully support the concept of GAG pooling.

Challenges of gag pooling

Steps for Effectively Pooling GAG

Steps for effectively pooling gag

  1. Draft a Pooling Policy or Agreement

    The first step is to draft a formal GAG pooling agreement or policy. This document should clearly outline how the pooled funds will be managed and allocated.

    It should cover everything from the decision-making process to the procedures for handling any disputes. The agreement should be transparent, fair, and agreed upon by all schools within the MAT.

  2. Maintain GAG Receipts

    Keeping accurate records of GAG receipts is crucial for transparency and accountability.

    Detailed records of the GAG funding received per school should be maintained, this is usually the responsibility of the Trust. These records can then be audited to ensure all funds are correctly pooled and distributed.

  3. Operate with Budget Centralisation

    Centralising the budget is a key aspect of GAG pooling. This involves consolidating all budgets within the MAT and having a central body – usually the MAT leadership or a designated committee – manage them.

    The central body is responsible for allocating funds strategically across schools, ensuring resources are used effectively and efficiently.

    Individual schools are not required to operate at cost neutral or surplus avoiding the need for budget deficits to be explained to the ESFA at school level as the Trust as a whole is not in deficit.

  4. Monitor Schools

    Regularly monitoring schools within the MAT is necessary to determine their financial needs and ensure funds are being used appropriately. It is also mandatory as part of the governance guidance for MATs.

    This could involve regular financial audits, reviews of spending, and assessments of financial performance. Monitoring helps identify any issues early and allows for timely interventions if needed.

  5. Maintain Centralised Spend

    Maintaining a centralised spend involves managing certain expenditures at the central level rather than at individual schools.

    This could include shared services like IT support or HR, or bulk purchases of resources. Centralising these expenses can lead to cost savings through economies of scale.

  6. Decide How to Treat Brought Forward Reserves

    Each school within a MAT may have its reserves brought forward from previous years. Deciding how to treat these reserves under GAG pooling is an important step.

    Some MATs may pool these reserves, while others may allow schools to keep them. The decision should be clearly stated in the GAG pooling agreement.

  7. Appraisal Process

    Finally, implementing an appraisal process is crucial for evaluating the effectiveness of GAG pooling. This could involve regular reviews of financial performance, school feedback, and assessments of whether the GAG pooling meets its objectives.

    The appraisal process helps identify areas for improvement and ensures the GAG pooling strategy remains effective and beneficial for all schools within the MAT.

Tips for Successfully Implementing GAG Pooling

To help address the challenges in the organisational process, there are several things you can do to mitigate everything.

  • Communicate Clearly

    A key element of any successful change management plan is communication.

    Clear and transparent communication is key to overcoming resistance towards GAG pooling.

    Stakeholders, including headteachers and staff at all levels, should be informed about the process, its benefits, how funds will be allocated, and how it may affect them.

    Regular updates and an open-door policy for questions can help build trust, alleviate fears about the loss of autonomy, and avoid employee pushback during the process of change.

    It’s also important to communicate success stories and demonstrate the positive impact of GAG pooling on schools within the MAT.

  • Invest in Robust Financial Management Systems

    GAG pooling requires robust financial management systems and expertise. MATs must invest in developing or upgrading their financial systems to handle the complexities of managing a large, consolidated budget.

    This could involve hiring additional finance staff, training an existing finance team, or investing in financial management software.

    With a strong system in place, MATs can ensure effective management of pooled resources, reducing the risk of misallocation and promoting financial stability.

  • Cultivate a Collective Mentality

    Cultivating a collective mentality among the schools within a MAT is crucial for successfully implementing GAG pooling.

    This involves fostering a sense of collective responsibility and unity. Workshops, team-building activities, and regular inter-school meetings can help achieve this.

    The goal is to shift the mindset from ‘my school’ to ‘our schools,’ emphasizing that GAG pooling benefits the MAT as a whole.

  • Effective Governance Structures

    Developing clear and effective governance structures is another critical step.

    This involves setting up a decision-making process that is fair, transparent, and considers the unique needs of each school, as well as an appeals process to address any issues that may arise.

    When everyone understands the appeals mechanism, individual academies can speak up about appealing decisions they don’t agree with.

    A representative committee could be formed to oversee the management of pooled resources, with members from each school within the MAT.

    This central team would make strategic decisions about fund allocation, ensuring all member schools have a voice.

  • Advocate for Policy Change

    Advocacy for policy changes that support GAG pooling can help overcome legal and systemic hurdles. Lobbying relevant local authorities or working with education policy specialists can play a crucial role.

    By advocating for supportive policies, MAT leadership teams can ensure a more conducive environment for GAG pooling, helping to streamline its implementation and maximize its benefits.

Tips for successfully implementing gag pooling

Is GAG Pooling the Way to Go?

GAG pooling requires careful financial planning, robust systems, and ongoing monitoring.

By following these steps, MATs can ensure effective and efficient GAG pooling, leading to strategic resource allocation and improved financial stability for every school within the organization.

A centralized spend management software, like Planergy, can help MATs in many ways.

Giving better visibility of spend across schools, accurate real-time spend versus budget reports, report on expenditure by fund, enforce internal controls for purchasing, automate accounts payable processing, and much more.

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

2. Download our “Indirect Spend Guide”

Download a free copy of our guide to better manage and make savings on your indirect spend. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

Related Posts

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Discretionary Expenses: What Are They, Examples, and How To Control Them In Business https://planergy.com/blog/discretionary-expenses/ Fri, 08 Sep 2023 15:18:54 +0000 https://planergy.com/?p=15310 KEY TAKEAWAYS In business and personal finance, many essential expenses are the same. These are what you have to pay to keep business running as usual (or to maintain a home, job, etc.) Discretionary spending is what you choose to spend – it’s not required to keep things running – but is nice to be… Read More »Discretionary Expenses: What Are They, Examples, and How To Control Them In Business

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What's Planergy?

Modern Spend Management and Accounts Payable software.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

King Ocean Logo

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

  • Where the best opportunities for savings are in indirect spend.
  • How to gain visibility and control of your indirect spend.
  • How to report and analyze indirect spend to identify savings opportunities.
  • How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Discretionary Expenses: What Are They, Examples, and How To Control Them In Business

Discretionary Expenses

KEY TAKEAWAYS

  • In business and personal finance, many essential expenses are the same. These are what you have to pay to keep business running as usual (or to maintain a home, job, etc.)
  • Discretionary spending is what you choose to spend – it’s not required to keep things running – but is nice to be able to do.
  • Budgeting isn’t optional if you want to make the most of your money.

Discretionary expenses are costs that are not essential for the maintenance of a home or business.

These expenses can be adjusted or eliminated depending on an individual’s or a company’s financial situation and priorities. 

When finances are tight these will be the costs that you can cut when tightening your belt.

In this article, we will explore discretionary expenses in both personal and business contexts, including their definition, examples, and best practices for managing them.

Discretionary Expenses in Personal Finance

In a household setting, discretionary expenses are incurred for non-essential items such as entertainment, vacations, and hobbies.

These expenses are considered discretionary because they are unnecessary for maintaining a basic standard of living, unlike non-discretionary expenses such as housing, utilities, groceries, and transportation.

Some examples of discretionary spending, or non-essential expenses in households include:

  • Entertainment

    Entertainment expenses can include many activities that provide enjoyment and relaxation.

    These may consist of movie tickets, streaming service subscriptions, concert tickets, and other forms of amusement.

    While entertainment is essential for personal well-being, it is not necessary for maintaining a basic standard of living, making it a discretionary expense.

  • Vacation

    Vacation expenses encompass all costs related to travel and leisure, such as hotel stays, airfare, car rentals, and sightseeing.

    These expenses are considered discretionary because they are not required for day-to-day living and can be adjusted or postponed based on an individual’s financial situation.

  • Hobbies

    Hobby-related expenses include the costs of pursuing personal interests and passions, such as art supplies, sports equipment, club memberships, and classes.

    These expenses are discretionary because they are not essential for maintaining one’s basic needs and can be reduced or eliminated.

discretionary expenses in personal finance

Essential Expenses

Essential expenses are the costs necessary for maintaining a basic standard of living. 

These expenses are fundamental to your well-being and cannot be eliminated without significantly impacting on your quality of life.

Examples of Essential Expenses

  • Rent or Mortgage Payments

    Rent or mortgage payments are essential expenses for maintaining a place to live. They represent the monthly cost of occupying a residence, whether a rental property or a home purchased through a mortgage loan.

  • Property Taxes

    Property taxes are levied on homeowners by local governments and are based on the property’s assessed value. These taxes contribute to funding public services such as education, public safety, and infrastructure.

  • Homeowner’s Insurance

    Homeowner’s insurance is a policy that provides financial protection against damage to your home and personal belongings due to events like fires, storms, or theft. It may also cover liability for accidents that occur on your property.

  • Utility Bills

    This includes things like your electricity, water, gas, etc. Other essential utilities may include basic telephone service, trash removal, and sewer services.

  • Food Expenses

    Groceries are an essential expense, as they provide the food necessary for daily sustenance and nutrition.

    Basic dining expenses include occasional meals at affordable restaurants or takeout options. Luxury or non-essential dining experiences are considered discretionary expenses.

  • Travel Expenses

    Costs associated with commuting to work may include public transit fares, carpooling fees, or parking expenses.

    Car payments are a necessary expense if you have financed the purchase of a vehicle through a loan.

    Fuel costs are essential for vehicle operation and depend on fuel efficiency and driving habits.

    Auto insurance premiums provide financial protection in case of accidents or other incidents involving your vehicle.

  • Health Insurance Premiums

    Health insurance premiums are paid to maintain coverage for medical expenses, including doctor visits, hospital stays, and prescription medications.

  • Medication and Specialized Treatments

    Medication costs include prescription drugs and over-the-counter medicines required to maintain good health. You may also need to pay for medical devices, therapy, or other specialized treatments.

  • Minimum Payments on Credit Cards

    Credit card debt payments are essential to avoid late fees, maintain a good credit score, and eventually eliminate debt.

  • Student Loans

    Student loan payments are necessary to repay educational loans and avoid defaulting on the debt.

    Essential expenses

Many of these essential personal expenses also translate to the business world. You must pay for your building/offices/product facilities (whether through rental or mortgage), utilities, credit cards, loans, etc.

While you don’t necessarily have to pay for employee healthcare expenses but if you choose to offer benefits, that benefits package becomes an essential expense.

Discretionary Expenses in Business

In a business context, discretionary expenses are costs that can be adjusted or eliminated without directly impacting the company’s core operations. 

These expenses often vary across departments, such as marketing, human resources, and operations.

Examples of discretionary expenses in various business areas include:

  • Employee Perks and Benefits

    Employee perks and benefits are incentives offered to employees beyond their regular salary.

    These include gym memberships, team-building events, workplace wellness programs, tuition reimbursement, retirement planning, and flexible work arrangements.

    While these perks can improve job satisfaction, employee engagement, and staff retention, they are considered discretionary because they are not essential for the day-to-day functioning of the business.

  • Office Decor and Aesthetics

    Office decor and aesthetics involve the design and layout of your workspace, including furniture, artwork, and other decorative elements.

    The basic elements of desks, chairs, and computers will be a required part of the office management setup to cover core business operations. Above and beyond that it will depend where the leadership team want to draw the line.

    These expenses can create a comfortable and visually appealing work environment, positively impacting employee morale and productivity.
    However, they are considered discretionary expenses because they do not directly affect the business’s core operations.

  • Professional Development and Training Programs

    Investing in professional development and training programs for your employees can enhance their skills, knowledge, and overall performance.

    These programs may include workshops, seminars, conferences, or online courses.

    While professional development can benefit your business in the long run, it is considered a discretionary expense because it is not essential for daily operations.

  • Non-Essential Software Subscriptions

    Non-essential software subscriptions refer to tools and applications that are not crucial for the daily functioning of your business but may offer convenience or additional features.

    Examples include project management tools, graphic design software, and social media scheduling platforms.

    These might be paid for on behalf of the member of staff or handled by an expense reimbursement fulfilled based on a properly returned expense report.

    While these subscriptions can provide value, they are considered discretionary expenses because they are not vital to your business’s core functions.

  • Business Travel and Entertainment Expenses

    Business travel and entertainment expenses include attending conferences, networking events, trade shows, client meetings, employee outings, and recreational activities.

    If travel and expense management practices are poor, or worse if there is no travel and expense policy in place, these expenses can get out of hand when financial circumstances are strong.

    This makes them an ideal candidate for cutting back on when times are hard.

    These expenses can help build relationships, foster collaboration, and expand your business network. There is a lot of value to the business created when this expenditure is managed correctly.

    However, they are discretionary because they are not required for the business’s day-to-day operations.

  • Donations and Sponsorships

    Donations and sponsorships are voluntary contributions a business makes to support charitable causes, community events, or industry initiatives.

    These expenses can improve your company’s reputation and public image, but they are considered discretionary because they do not directly impact the core functions of your business.

    Discretionary expenses in business

Monitoring and controlling discretionary expenditures is crucial for businesses, as it can significantly impact overall expenses and help avoid potential financial setbacks.

Distinguishing Between Essential and Discretionary Expenses

The primary difference between essential and discretionary expenses lies in their necessity for maintaining a basic standard of living.

Necessary expenses are fundamental and cannot be eliminated without negatively impacting one’s quality of life. 

Discretionary costs, however, are non-essential and can be adjusted or eliminated based on an individual’s financial priorities.

To effectively manage your finances, it’s crucial to distinguish between these two types of expenses.

By categorizing your expenses as either essential or discretionary, you can better identify areas where spending can be reduced and allocate resources more effectively.

In most cases a split of direct and indirect expenditure is a good starting point. Indirect spend categories are where you likely find the majority of your discretionary expenses.

Improving how you manage indirect procurement will have a lot of benefits for your indirect procurement process now but can also help if you need to review what expenses you can cut out without impacting core operations.

In times of financial hardship, it’s crucial to prioritize essential expenses and cut back on discretionary spending.

Focus on maintaining the core functions of your business, including paying employees, keeping the lights on, and ensuring that your products or services are still available to customers.

Reducing non-essential spending can help your business weather the storm and emerge stronger when conditions improve.

Closely monitoring spending and comparing it to your budget can help control expenses.

Best Practices for Managing Discretionary Expenses

  • Create a Clear Budget

    Establishing a comprehensive and strategic budget is crucial for effectively managing discretionary expenses.

    A detailed budget should outline all discretionary and non-discretionary expenses, making it easier to identify areas where spending can be reduced.

    Both individuals and businesses can benefit from tracking their income and expenses, setting spending limits, and prioritizing financial goals.

  • Regularly Review Spending

    Periodically assessing spending habits is essential for identifying and eliminating unnecessary expenses or areas of overspending.

    By regularly reviewing bank statements, credit card transactions, and expense reports, individuals and businesses can gain better control over their finances and adjust as needed to stay within their budget.

    For businesses, a dedicated spend management software, like Planergy, with automated spend analytics and drill down reporting makes this much easier.

  • Negotiate with Suppliers

    Seeking better deals or alternative options for products and services can lead to significant cost savings for both individuals and businesses.

    Negotiating with suppliers, comparing prices, and exploring different vendors can potentially secure more favorable terms and reduce discretionary expenses.

  • Encourage Employee Cost-Saving Efforts

    Implementing company-wide initiatives that promote cost-saving behaviors among employees can help businesses manage their discretionary expenses more effectively.

    These initiatives may include offering incentives for cost-saving ideas, providing training on expense management, and encouraging employees to be mindful of their spending habits.

    By fostering a cost-conscious culture within the organization, businesses can reduce expenses and improve their financial health.

Best practices for managing discretionary expenses

Using Software to Manage Discretionary Expenses

Software solutions, such as Planergy’s spend management software, can be instrumental in better management of discretionary costs.

By tracking spending, identifying areas of overspending, monitoring employee spending habits, and providing detailed reports for more accurate budgeting you can improve the management of discretionary spend.

Tools like this ensure you have enough money to cover mandatory spending and can appropriately plan for discretionary items.
Some common questions about using software to manage discretionary expenses include:

  • Can the software integrate with existing financial systems?

    Planergy, and many other expense management software, can integrate seamlessly with popular accounting systems and ERPs, making tracking and analyzing expenses easier.

  • How customizable are the reports?

    Planergy offers customizable reporting options and dashboards, allowing businesses to focus on specific areas of concern or interest. Create standard reports, schedule them, and use spend analytics software to gain better insights.

    This is not standard for all spend management software. Often they include basic reporting options without significant flexibility.

  • Is the software user-friendly?

    Look for a solution that is easy to use and offers accessible customer support. If you fail to achieve user adoption across the company, you will be missing out on valuable data.

Understanding and managing discretionary expenses is vital for both individuals and businesses to maintain healthy finances.

By implementing best practices and utilizing tools such as expense management software, it is possible to gain control over discretionary spending and make informed decisions that benefit overall financial health.

Whether business or personal, financial planning and saving money when and wherever possible is important.

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

2. Download our “Indirect Spend Guide”

Download a free copy of our guide to better manage and make savings on your indirect spend. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

Related Posts

The post Discretionary Expenses: What Are They, Examples, and How To Control Them In Business appeared first on Planergy Software.

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Office Management: What Is It, Roles, Best Practices Guide, and More https://planergy.com/blog/office-management/ Fri, 18 Aug 2023 13:50:46 +0000 https://planergy.com/?p=15202 IN THIS ARTICLE What Is Office Management? The Evolution of Office Management Educational Requirements for an Office Management Position Office Manager Skills What Does an Office Manager Do? Types of Office Managers Office Environment Types: From Traditional to Virtual Software for Office Management Best Practices for Modern Office Management Modern Office Management Needs Strong Managers… Read More »Office Management: What Is It, Roles, Best Practices Guide, and More

The post Office Management: What Is It, Roles, Best Practices Guide, and More appeared first on Planergy Software.

]]>

What's Planergy?

Modern Spend Management and Accounts Payable software.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

King Ocean Logo

Cristian Maradiaga

King Ocean

Download a free copy of "Preparing Your AP Department For The Future", to learn:

  • How to transition from paper and excel to eInvoicing.
  • How AP can improve relationships with your key suppliers.
  • How to capture early payment discounts and avoid late payment penalties.
  • How better management in AP can give you better flexibility for cash flow management.

Office Management: What Is It, Roles, Best Practices Guide, and More

Office Management

In today’s fast-paced business world, efficient business office management is more critical than ever.

Since the dawn of the industrial revolution, office management has undergone numerous transformations along with the ever-changing business landscape.

This blog post will explore how office management has evolved, delve into various types of offices, and provide practical best practice guidelines for modern office management, including innovative software solutions.

What Is Office Management?

Office management refers to the administration of key processes related to running an office. It includes overseeing scheduling, planning, organizing, staffing, budgeting, communication, and problem-solving tasks.

The role of an office manager is to ensure that these processes are carried out efficiently to optimize productivity and improve overall office operations.

The Evolution of Office Management

The history of office management dates back to the early 1900s when secretaries typically performed essential office work like typing, filing, and bookkeeping.

Over time, businesses grew more complex, as did the roles and responsibilities of office managers.

With technological advancements and the prevalence of telecommunication, office management shifted towards collaboration, communication, and a focus on employee well-being.

Educational Requirements for an Office Management Position

Office managers typically require an associate’s or bachelor’s degree in business administration, management, or a related field. They may also have relevant work experience in the field or a similar role in place of formal education.

Some employers may prefer candidates with additional certifications, such as a Certified Office Manager (COM) certification by the International Association of Administrative Professionals (IAAP) or a Certified Manager (CM) certification by the Institute of Certified Professional Managers (ICPM).

These certifications demonstrate an additional level of expertise and professionalism in office management.

While formal education is important, an individual’s skills and experience may be just as significant for a successful career as an office manager.

A combination of education, certification, and other relevant experience can be a significant advantage in a competitive job market.

Office Manager Skills

Office managers are often the unsung heroes of many businesses. 

They handle the day-to-day operations that keep a business running smoothly, from managing paperwork and ordering supplies to customer service inquiries and planning meetings.

It takes a special type of person to do all this and more; someone who is organized, efficient, and can juggle multiple tasks at once.

  • Organizational Skills

    Organizational skills are essential for any office manager. A good office manager needs to be able to find files quickly, keep track of deadlines, prioritize tasks, and manage multiple projects without getting overwhelmed.

    If your office manager is organized, they’ll ensure everything runs like clockwork—which makes a huge difference in efficiency.

  • Communication Skills

    Effective office managers need strong communication skills to interact with customers, colleagues, vendors, and other stakeholders.

    They should be able to explain complex concepts simply but effectively, so everyone understands them. Good communication also means listening attentively and asking questions when necessary to get the information required for a project or task.

  • Problem-Solving Skills

    Office managers have many tasks that require problem-solving. From troubleshooting technical issues with printers or computers to resolving conflicts between coworkers or customers, an effective office manager needs strong problem-solving skills to develop solutions quickly and efficiently.

    They also need good critical thinking skills to anticipate potential problems before they arise so that they can take proactive steps as needed.

  • Time Management Skills

    Effective time management is critical for office managers because it enables them to prioritize and complete tasks efficiently. The ability to prioritize tasks ensures that critical and urgent tasks are attended to first.

    This allows the office to function smoothly and on schedule. In addition, prioritization allows the office manager to plan to allow adequate time for important projects or initiatives.

    Proper time management also means knowing how to allocate resources properly, including time, staff, and budget.

    Successful office managers are often tasked with juggling many responsibilities and must know how and when to delegate tasks and manage their time to avoid overloading themselves.

Office manager skills

What Does an Office Manager Do?

The duties of an office manager can vary widely depending on the size and type of organization.

Generally, they are responsible for overseeing or performing a variety of tasks, these may include:

  • Managing payroll and other financial operations
  • Taking inventory and ordering supplies
  • Setting up administrative procedures
  • Organizing meetings and conferences
  • Providing customer service support
  • Maintaining office equipment
  • Coordinating the work of other staff members

Additionally, office managers may train new employees and assist with human resources tasks such as recruitment and benefits administration.

In addition to daily administrative tasks, office managers are often tasked with implementing long-term strategies that help create a more productive workplace.

They may also be responsible for developing effective policies and procedures, tracking performance metrics to ensure goals are being met, creating reports detailing the progress of projects and tasks, handling customer inquiries and complaints, and working with external stakeholders.

They must be able to multi-task efficiently while remaining organized and professional. 

They should also understand recruitment and benefits administration well to ensure that the office complies with all legal requirements.

Finally, office managers must be pleasant when working with internal and external stakeholders. 

With these skills, an office manager can create a productive, positive work environment for employees.

Types of Office Managers

Several common types of office managers can be distinguished, depending on the organization:

  • Traditional Office Manager

    This office manager is responsible for managing administrative functions, such as budget management, arranging office services, and implementing policies, procedures, and systems.

  • Executive Office Manager

    This office manager focuses solely on supporting top-level executives or senior management. They are responsible for all the administrative functions associated with running the office of the executive team.

  • Financial Office Manager

    This office manager typically manages the financial aspects of an organization, including accounting, bookkeeping, payroll, and tax compliance.

  • HR Office Manager

    This office manager handles human resources management functions, such as recruitment, employee relations, leave management, and benefits administration.

  • Legal Office Manager

    This office manager handles the office administration for a law firm. They oversee the administrative staff, manage the law firm’s budget and finances, organize files and documents, implement office policies and procedures, and handle client relations.

  • Medical Office Manager

    This office manager oversees the daily operations of a healthcare office, including clinics, hospitals, and private practices.

    They manage budgets, schedule appointments and procedures, maintain patient records, supervise office staff, establish office policies and procedures, ensure compliance with regulations and laws, manage medical billing and coding processes, and maintain supplies and equipment.

  • Virtual Office Manager

    This office manager manages a remote team in a virtual capacity. They should possess excellent communication skills, be self-directed, and have experience in effectively managing remote teams.

Types of office managers

Office Environment Types: From Traditional to Virtual

  • Traditional Offices

    The classic workspace comprises cubicles, private offices, and open floor plans. Office managers in these settings typically oversee various tasks, including equipment maintenance, space allocation, and utility management.

  • Remote or Virtual Offices

    The increasing preference for flexible work arrangements gave rise to distributed workforce teams and home-based employees.

    Office managers have had to adapt and develop new strategies for efficient communication and collaboration when managing remote team members by leveraging cloud-based technology.

    They face specific remote working challenges faced by employers. this includes managing procurement for remote teams and helping staff manage their mental health while working remotely.

  • Co-working Spaces

    Shared workspaces offer a cost-effective solution for businesses seeking flexible, professional environments. In this setting, an office manager may liaise with the co-working space provider for accommodation needs, administrative support, and event organization.

Today’s office managers are an integral part of business management. Without their support, businesses struggle to remain organized and profitable.

Software for Office Management

Many software options are available today for office management, each with its own features and benefits. Depending on your business, you may have any number of programs, including more niche and specialized options.

  • Workspace Suites

    The most obvious example will be Microsoft Office, or Microsoft 365 as the cloud version is now known. Also, the Google alternative, Google Workspace, has gained a lot of traction.

    Formerly known as G Suite, Google Workspace offers a suite of collaboration and productivity tools that includes Gmail, Google Drive, Google Docs, Sheets, and more. These tools allow teams to collaborate on documents, spreadsheets, and presentations in real time.

    Many offices use Google Workspace as an alternative to Microsoft Office since it has a complementary product for each in the Office suite. For instance, Gmail replaces Outlook, Docs replaces Word, Sheets replaces Excel, and Slides replaces Powerpoint.

  • Note-Taking and Task Tracking Apps

    Evernote is a note-taking app that allows you to save and organize your notes, ideas, and tasks in one place. You can use it to capture information from the web, add tags, and create notebooks to organize your notes.

    While Evernote can also be used for organizing tasks. Tools that incorporate a Kanban format, like Trello, will generally be more useful for task management.

  • Video Conferencing Tools

    Zoom became synonymous with video conferencing during the Covid pandemic. It has placed itself as a leader for video conferencing software but other tools, like Microsoft Teams, are growing in popularity to fill this roll.

    Zoom is a video conferencing tool that allows you to conduct virtual meetings and webinars. It provides features such as screen sharing, recording, and virtual backgrounds to make communicating and collaborating with remote team members easier.

  • Communications and Collaboration Tools

    Slack is a communication and collaboration platform designed for teams of all sizes. It provides chat rooms for teams or departments, direct messaging between team members, and voice or video chat for calls.

    Microsoft Teams offers similar functionality and has grown in popularity, especially where businesses are already using the Microsoft suite of software.

    Slack also offers a range of integrations that allow you to connect it to other tools and services like Trello, Asana, Google Drive, and more.

  • CRM

    CRM tools are essential for effectively running sales and marketing initiatives.

    HubSpot offers an all-in-one marketing, sales, and service platform. Its CRM offers a range of features, including contact management, email marketing, social media management, content management, and more.

    With HubSpot, you can manage all your marketing, sales, and customer data in one place and automate tasks to save time.

  • Accounting Software

    Accounting software, or an ERP that incorporates accounting functionality, is an essential tool for running a business.

    QuickBooks Online and Xero are examples of cloud-based accounting software that makes it easy to manage your business finances.

    Using these tools you can track expenses, manage invoices and payments, and view reports on your financial performance. QuickBooks also offers payroll, inventory management, and tax preparation features to help you manage your finances more efficiently.

    Both also integrate with other tools, like Planergy for Spend management and AP Automation.

  • Spend Management Software

    Ensuring spend is managed with correct approval processes ensures only correct purchases are made adhering to budgets and internal controls for purchasing.

    Planergy spend management software incorporates AP Automation software, so when processing invoices it is much easier to approve invoices with all the procurement data available.

Software for office management

Best Practices for Modern Office Management

  • Adopt Agile Work Environments

    Embracing agility in workspace design or management style helps businesses adapt to change and cater to diverse employee needs. Depending on your office type, this could include reconfigurable workstations, remote work policies, or access to shared spaces.

  • Enhance Communication

    With modern office layouts and remote teams, effective communication is essential. Utilize team messaging apps, video conferencing, and project management software to streamline communication and ensure everyone is in sync.

  • Focus on Employee Wellness

    Investing in employee well-being can lead to higher productivity and increased retention. Consider offering standing desks, ergonomic office furniture, stress management workshops, or flexible work schedules to promote a healthy work-life balance.

  • Implement Efficient Filing and Record Keeping

    A well-organized filing system minimizes operational inefficiencies and reduces misplaced or lost documents risk. Opt for digital and physical storage solutions backed up in secure cloud-based platforms.

  • Leverage Time and Task Management Software

    Time and task management tools simplify scheduling, prioritize tasks, and monitor progress. Choose software solutions that best align with your team’s needs to optimize productivity and efficiency.

  • Encourage Employee Development

    Providing employee growth and development opportunities contributes to overall office morale and performance. Create a learning culture by offering regular training, workshops, or career development resources.

Best practices guide for modern office management 

Modern Office Management Needs Strong Managers

Modern office management is intricate, demanding a balance of efficiency, productivity, and employee well-being.

By understanding the evolution of office management and implementing best practices, business owners and procurement professionals can create a robust and adaptable work environment that promotes success in the changing business world.

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

Related Posts

The post Office Management: What Is It, Roles, Best Practices Guide, and More appeared first on Planergy Software.

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Services Procurement: What Is It and How To Manage It https://planergy.com/blog/services-procurement/ Fri, 21 Jul 2023 11:42:24 +0000 https://planergy.com/?p=15088 IN THIS ARTICLE What is Services Procurement? What Is The Difference Between Goods and Services Procurement? Steps in the Services Procurement Process Benefits of Services Procurement Challenges in Services Procurement Tips For Successful Services Procurement Understanding services procurement is essential for any successful business. It is the process of acquiring external services to meet the… Read More »Services Procurement: What Is It and How To Manage It

The post Services Procurement: What Is It and How To Manage It appeared first on Planergy Software.

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What's Planergy?

Modern Spend Management and Accounts Payable software.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

King Ocean Logo

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

  • Where the best opportunities for savings are in indirect spend.
  • How to gain visibility and control of your indirect spend.
  • How to report and analyze indirect spend to identify savings opportunities.
  • How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Services Procurement: What Is It and How To Manage It

Services Procurement

Understanding services procurement is essential for any successful business.

It is the process of acquiring external services to meet the needs of an organization and involves different steps, such as identifying a need, setting up a contract, and managing the relationship between the service provider and the customer.

In this article, we will discuss services procurement, how it works, and how to manage it best.

What is Services Procurement?

Services procurement is acquiring services from external vendors or suppliers to fulfill organizational needs. 

It involves procuring services from outside sources and managing the relationship with supplier or service provider.

This type of procurement can be used for virtually any service, including IT, consulting, legal advice, web design, marketing services, engineering support, etc. It typically is project-based and relies on a statement of work, or SOW.

For example, you could hire a contingent workforce of freelance writers to handle your company’s website content rather than hiring for the position in-house.

You set the budget and deliverables, then work with various freelancers with a test assignment. You hire the freelancer (or freelancers) you feel do the best job, and they follow your processes to provide what you need.

This contingent labor allows you to optimize your marketing without fully engaging an internal marketing department or marketing agency. Marketing procurement is a common case where services procurement is required.

You don’t pay for the service if no content needs to be created, so there’s no need to keep a retainer or spend money on unused services, allowing for better control over spend management.

Types of Procurement and How Services Procurement is Different

  • Direct Procurement

    Direct procurement is the process of obtaining items necessary to produce a desired end product. This typically includes raw materials and components.

  • Indirect Procurement

    Indirect procurement involves purchasing items essential for day-to-day operations but not necessarily related to the company’s final product. Examples include office supplies or advertising campaigns.

  • Goods Procurement

    Goods procurement primarily entails obtaining physical items and usually consists of direct and indirect procurements.

  • Services Procurement

    Services procurement focuses on acquiring people-based services such as hiring contractors or security services, which could also involve direct and indirect procurement.

Types of procurement

What Is The Difference Between Goods and Services Procurement?

Goods procurement involves the buying of tangible goods, while services are non-tangible services provided by vendors.

Goods have fixed prices, whereas services usually involve negotiation between buyers and sellers to reach a pricing agreement.

Goods can generally be bought off the shelf, but most service procurements require custom contracts to meet specific requirements.

Services procurement is a complex task that involves finding the perfect individual or organization to complete the job.

It’s more than just selecting the service that best fits a need; it requires writing a job description of someone who may never be seen during the selection process, making a judgment call on estimating demand for services, and then ensuring the quality of those services.

Quality assurance can also be challenging since conversations between procurement and suppliers are more direct and personal when sourcing services.

Technology solutions are incredibly helpful in dealing with goods, but they must have an agile stance to maximize value creation as they are applied to service category sourcing.

Fitting skills and requirements into a single box is undeniably one of the most intricate components of services procurement.

Steps in the Services Procurement Process

Before beginning any services procurement process, you should establish goals and requirements for what you are looking for in terms of service delivery.

This helps ensure you get what you need the first time instead of having to go back and renegotiate contracts or change vendors mid-way through your project.

Once your requirements have been established, it’s time to search for potential vendors.

Here are some key steps to consider when developing a services procurement plan:

  1. Requirements Gathering

    Determine precise specifications for what type of service is needed and set expectations regarding quality, cost, and timeline.

  2. Vendor Selection

    Research potential vendors and compare each one against your criteria before selecting a few finalists with whom you can negotiate contracts.

    Send multiple requests for proposals (RFPs) to learn more about each business partner and what they could offer you.

  3. Contract Negotiation

    Finalize agreements with selected vendors, considering budget constraints and legal considerations.

  4. Doing Business

    Once you’ve started working with a vendor, having a clear statement of work and adequate contract management is key. There should be purchase orders and milestones to ensure your project remains on course.

    Whether you work with a small business or enterprise-level partner, strategic sourcing is key because you want to keep stakeholders happy.

Steps in the services procurement process

Services procurement may be more complex, but when done correctly, it can make a world of difference for an organization.

Benefits of Services Procurement

Services procurement offers numerous advantages for businesses, particularly when done effectively by experienced professionals who know how to find the best deals while maintaining quality standards.

Here are some major benefits of utilizing services procurement:

  • Cost Savings

    By leveraging existing partnerships or getting competitive bids from multiple vendors, companies can save money on specific projects or ongoing activities such as employee recruitment or training programs.

  • Improved Quality

    Choosing reputable companies with proven track records ensures that businesses get high-quality services from experienced professionals who understand their industry and specialize in delivering effective solutions to clients’ needs quickly and efficiently.

  • Faster Time To Market

    By outsourcing certain tasks related to new product launches or marketing initiatives, businesses can significantly cut down on development time and maximize their return on investment (ROI).

Benefits of services procurement

All of these benefits provide businesses with a competitive advantage over their competition.

Money savings can be funneled into other business areas to fuel further growth. 

Improved quality boosts the user experience and customer satisfaction levels, and a faster time to market ensures businesses can sell quicker for higher profits.

Challenges in Services Procurement

Although many advantages are associated with procuring external services for business operations, organizations also face some common challenges during this process.

  • Inadequate Budgeting

    Without a budget, a business may not be able to negotiate favorable terms with providers.

    Without sufficient funds, businesses may be unable to pay for the necessary components of their service, such as technical support or maintenance fees, leading to reduced quality and performance.

  • Unclear Requirements

    Without fully understanding what a business needs from the service they’re looking to procure, it’s easy for businesses to purchase services they don’t need or hire vendors that don’t have the necessary skills and resources to fulfill requirements.

    That’s why it’s critical to have a comprehensive and detailed list of requirements before engaging with potential suppliers.

  • Lack of Appropriately Skilled Personnel

    This can prevent businesses from finding the right providers.

    Without the necessary expertise, businesses may be unable to evaluate and compare potential vendors correctly and make informed decisions.

    Without the right level of skill in-house, businesses may not accurately define their requirements when engaging with potential vendors.

  • Difficulties Managing Relationships

    Managing supplier relationships in services procurement can be difficult as several parties are involved, including the business and its vendors.

    Without effective communication and collaboration between these parties, it may be hard for them to work together to meet the service requirement.

    Maintaining strong relationships with vendors can be tough due to changing market conditions, increased competition, and different expectations from both sides.

    Establishing clear objectives at the outset and constantly improving understanding and trust between the various parties is essential.

  • Wasted Spend

    Without adequate supply chain management, organizations risk wasting a lot of money.

    Oxford Economics and SAP research shows that external service providers account for 42% of external workforce spend.

    Statista reports that approximately 31% of sourced projects are not completed on time, within budget, or do not meet the company’s original goals.

    limited visibility into these service providers can wreak havoc. If nearly one out of every 3 projects goes south, that’s a lot of lost time (and money.)

  • Security Risks

    Without effective oversight, organizations face increased security risks. In a world of digital transformation, service providers are often entrusted with sensitive data and customer information.

    Organizations risk unexpected outages or data breaches if supplier compliance is not properly managed, especially when it comes to applicable regulations such as GDPR or HIPAA.

Challenges of services procurement

Tips For Successful Services Procurement

The following tips will help ensure successful services procurement:

  • Set Realistic Expectations

    Both parties must enter into an agreement knowing exactly what they expect from each other so as not to be disappointed later down the line if something goes wrong or an unexpected expense arises due to unforeseen circumstances beyond either party’s control.

  • Leverage Existing Relationships

    If you already have strategic partnerships with certain suppliers/providers, then use those connections instead of starting from scratch when sourcing new vendors & negotiating contracts.

    This will enable you to take advantage of better terms due to pre-existing trust between buyer & seller.

  • Have an Experienced Team Member Lead the Negotiations

    Having someone knowledgeable oversee negotiations ensures smoother transactions since they will be able to anticipate issues before they arise and craft strategies based on collected data points that maximize savings while ensuring compliance with company policies.

Tips for successful services procurement

Services procurement is an essential part of running any successful business today.

By understanding what it entails and properly managing relationships with suppliers through clear objectives, ongoing communication, and tracking payments/invoices, businesses can ensure they get exactly what they need from these external sources while remaining profitable in the long run.

With careful planning and management, services procurement doesn’t have to be daunting; instead, it should be seen as another tool for success within any organization’s operations strategy.

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

2. Download our “Indirect Spend Guide”

Download a free copy of our guide to better manage and make savings on your indirect spend. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

Related Posts

The post Services Procurement: What Is It and How To Manage It appeared first on Planergy Software.

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Expense Reimbursement: What Is It, How To Manage, and What Should You Cover https://planergy.com/blog/expense-reimbursement/ Wed, 05 Jul 2023 09:02:11 +0000 https://planergy.com/?p=15032 KEY TAKEAWAYS Proper expense management ensures employees are reimbursed for qualified out-of-pocket spending and that you receive the appropriate business tax breaks. Clearly outline a policy that covers what expenses are eligible for reimbursement and what are not. Make sure employees are aware of the policy and what documentation they will need to submit with… Read More »Expense Reimbursement: What Is It, How To Manage, and What Should You Cover

The post Expense Reimbursement: What Is It, How To Manage, and What Should You Cover appeared first on Planergy Software.

]]>

What's Planergy?

Modern Spend Management and Accounts Payable software.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

King Ocean Logo

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

  • Where the best opportunities for savings are in indirect spend.
  • How to gain visibility and control of your indirect spend.
  • How to report and analyze indirect spend to identify savings opportunities.
  • How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Expense Reimbursement: What Is It, How To Manage, and What Should You Cover

Expense Reimbursement

KEY TAKEAWAYS

  • Proper expense management ensures employees are reimbursed for qualified out-of-pocket spending and that you receive the appropriate business tax breaks.
  • Clearly outline a policy that covers what expenses are eligible for reimbursement and what are not.
  • Make sure employees are aware of the policy and what documentation they will need to submit with their reimbursement request.

Expense reimbursement is when an organization provides money to its employees or contractors to cover expenses they have incurred while conducting business on behalf of the organization.

This payment type is typically used when employees purchase items or services necessary for their job, such as travel expenses. Let’s take a closer look at expense reimbursement and why it matters.

Why Is Expense Reimbursement Important?

Expense reimbursement allows businesses to accurately track their spending and ensure that employees are not out of pocket for any legitimate business-related costs.

It also prevents employees from paying upfront for items they may need to complete their job tasks; instead, they can wait until they have been reimbursed before purchasing them.

For companies with multiple employees or contractors who travel frequently, expense reimbursement is especially important to ensure accurate tracking of all expenses.

How to Streamline Your Reimbursement Process

Reimbursing business expenses can become quite complex, especially if many employees make work-related purchases with their own money.

Regardless of how many reimbursement requests you expect to process within a calendar year, keeping records is crucial for accounting and taxes. Any reimbursement to employees is a business tax deduction.

How to Streamline Your Reimbursement Process

    1. Track Every Detail

      The first step in streamlining your business’s expense reimbursement process is to track every detail. This means having a system to track all expenditures, including travel expenses, meals, and other miscellaneous costs.

      Having detailed records of where the money is going makes it easy to reconcile the expenses with their respective accounts when it comes time to reimburse them.

      Tracking each expenditure will help you identify potential issues or discrepancies that could cause problems later.

      You’ll need to know the five Ws to track, monitor, and effectively handle expense management properly. These are:

      • What

        What are you spending your money on? This is important to understand what kind of expenses you should be aware of and manage.

      • Who

        Who is making the purchases? Knowing who is responsible for each transaction will help you build accountability into your system.

      • Where

        Where are expenses being made from? Tracking where the money was spent is essential for accurately tracking your finances.

      • When

        When were these purchases made? It’s important to know when items were purchased, or services were rendered so that you can properly manage payments.

      • Why

        Why were the purchases made? Understanding why an expense was made will help inform future budgeting decisions.

The 5 Ws of Expense Tracking

  1. Use Automation

    Expense management automation tools can save time and eliminate tedious tasks such as manually entering data into spreadsheets or sending emails requesting receipts.

    Automation can also be used to set up reminders for employees who are late submitting their expense reports or need additional information from their managers before they can be reimbursed.

  2. Implement Policies and Guidelines

    The policy should include definitions of what constitutes an eligible expense, including travel costs, meals, supplies, and training materials.

    It should also include details on what type of documentation is required for the claim—such as receipts and itemized statements—as well as a timeline for submitting the claims.

    Additionally, it’s important to note if there will be limits on certain types of expenses, such as entertainment costs or mileage reimbursement rates.

    Explain the process after the claim has been submitted is important—including when and how employees will receive their reimbursements.

    If there is an internal audit process for all claims, then this should also be noted in the policy so that employees can expect delays if their claims are flagged for review before approval.

Creating Your Employee Expense Reimbursement Plan Step-by-Step

How to Create Your Employ Expense Reimbursement Plan

  1. Ensure Your Plan Is Accountable

    If your plan is “accountable,” it generally allows for tax-free reimbursement.

    To be considered accountable, the plan must have these elements:

    • Business Purpose: A legitimate business reason for the expense.
    • Validation: Proof of the total expense via receipt.
    • No Extras: Only the exact amount of the business expense is reimbursed. If there are any extra funds available from an employer-provided stipend, such as per diem rates, it must be returned to the employer. Only the actual cost of expenses will be reimbursed.
  2. Make Your Plan Department of Labor Compliant (for USA-Based Companies)

    The U.S. Department of Labor has set regulations regarding the proper documentation of employee expenses, requiring all items to be meticulously recorded with receipts provided and all five “Ws” attended to.

    Itemized receipts are required for meal reimbursements. For organization-owned or leased vehicles, accurate data must be supplied, including date of travel, number of miles driven for personal/business purposes, and odometer readings.

    Though the DOL does not make any exceptions for costs under $75, a signed statement from the employee can be provided as proof of expense if a receipt is lost.

    These guidelines ensure proper recordation and compliance with government regulations while legitimately safeguarding all employee expenses incurred while on duty.

  3. Define What Business-Related Expenses are Eligible for Reimbursement

    Your plan should clearly state what expenses you’ll reimburse and what expenses you won’t. It should also state at what rate they’ll be reimbursed.

    For instance, the General Services Administration publishes per diem and standard mileage rates. Your business can pay employees those standard rates or for the actual expenses.

    Per diem rates provide allowance for food, lodging, mileage/transportation, and other expenses.

    They’re based on location, so travel to Los Angeles, New York City, or other high-cost locations will have higher limits than lower-cost locations.

    Several business-related expenses can be eligible for reimbursement when proper documentation is provided. These include:

    • Travel costs such as airfare, hotel accommodations, rental cars, ground transportation, and other related expenses
    • Meals while traveling including breakfast, lunch, and dinner
    • Supplies purchased for business use, such as stationery, pens, and other necessary items
    • Training materials such as books or online subscriptions
    • Mileage for business travel taken in a personal vehicle
    • Any additional costs required to fulfill the job duties of an employee

    Your policy should clearly state the types of expenses that are not eligible for reimbursement, such as entertainment expenses, gifts, or alcohol purchases.

    It should also outline the types of expense claims that may require additional documentation beyond a standard receipt—such as itemized statements or proof of payment.

    For example, will you require employees to use public transportation while on a business trip? If they’re traveling to an area where public transportation isn’t widely available, will you provide a stipend for ride-share services? Will they be allowed to rent a vehicle? If they rent a vehicle, will they be required to share it with other employees who may also be on the trip?

    If your small business policy requires that they use public transportation where available and choose not to, employees should be aware that they will use their own money to pay for commuting during the trip.

  4. Outline How to Handle Reimbursement Requests

    Your expense reimbursement policy must tell employees what the organization will cover, how they should submit reimbursement requests, and how quickly they can expect payment.

    It should include the required documentation to submit with the request, the timeframe for submitting the request, where to submit the request, and who to submit it to.

Any time an employee pays a business expense out of their pocket, they should be aware of what is covered by the expense reimbursement policy.

Reimbursements and Income Taxes

What Is the Difference Between a Reimbursement and a Deduction?

A reimbursement is a compensation your company pays to an employee for out-of-pocket expenses they pay. 

Typically, they aren’t considered taxable income.

A deduction is an expense that can be subtracted (deducted) from a taxpayer’s gross income to reduce the amount subject to taxes.

If the reimbursement is considered taxable income, then the employee can deduct it from their taxes. If it is not taxable, it cannot be deducted.

Do Expense Reimbursements Count as Income?

Under IRS regulations, job-related expenses shouldn’t be counted as taxable income. 

You aren’t to include them on the W2 form as part of the employee’s income because job-related expenses are deductible business expenses for your organization.

Per diem rates, as long as they remain below the top rate, are not subject to taxes.

However, if your company uses a nonaccountable plan, reimbursements received outside the rules of that plan are considered taxable income and required to be reported as income on a W2.

This allows employees to deduct the expenses on their personal tax returns.

How Are Expense Reimbursements Taxed?

If the expenses are made, reported, and paid under the terms of an accountable plan outlined above, they are not taxed.

If the expenses are made, reported, and paid under the terms of a nonaccountable plan, then it is taxed as part of the employee’s income. Unless it is deducted, it would be taxed as income.

Expense Reimbursement and Independent Contractors

The same rules apply here to employees with accountable vs. nonaccountable plans.

The reimbursable expenses should not be included as income on the 1099 NEC or 1099 MISC form, as they are not part of the contractor’s income under accountable plans.

If your expense reimbursement plan is not accountable, those reimbursements are added as income and can be deducted from the contractor’s tax return as business expenses.

Expense reimbursement is an important part of any organization’s accounting system.

It helps businesses accurately track their spending and ensures that employees aren’t left paying out-of-pocket for any legitimate business-related costs.

By understanding what expense reimbursement covers and why it matters, businesses can better manage their organization’s finances effectively and efficiently.

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

2. Download our “Indirect Spend Guide”

Download a free copy of our guide to better manage and make savings on your indirect spend. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

Related Posts

The post Expense Reimbursement: What Is It, How To Manage, and What Should You Cover appeared first on Planergy Software.

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Xero Features You Need To Know About https://planergy.com/blog/xero-features/ Mon, 27 Mar 2023 08:57:18 +0000 https://planergy.com/?p=14842 IN THIS ARTICLE What Is Xero? Xero Pricing Xero Features You’re missing out if you’re not using Xero for your accounting and bookkeeping needs. Xero accounting software is packed with features that make it easy to track your finances, stay compliant, and get paid—all in one place. What Is Xero? Xero, based in New Zealand,… Read More »Xero Features You Need To Know About

The post Xero Features You Need To Know About appeared first on Planergy Software.

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What's Planergy?

Modern Spend Management and Accounts Payable software.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

King Ocean Logo

Cristian Maradiaga

King Ocean

Download a free copy of "Preparing Your AP Department For The Future", to learn:

  • How to transition from paper and excel to eInvoicing.
  • How AP can improve relationships with your key suppliers.
  • How to capture early payment discounts and avoid late payment penalties.
  • How better management in AP can give you better flexibility for cash flow management.

Xero Features You Need To Know About

Xero Features

You’re missing out if you’re not using Xero for your accounting and bookkeeping needs.

Xero accounting software is packed with features that make it easy to track your finances, stay compliant, and get paid—all in one place.

What Is Xero?

Xero, based in New Zealand, is a powerful cloud-based accounting software that has become increasingly popular recently.

Unlike many traditional accounting tools, it does not require you to manually enter your financial data, as it is connected directly to your business’s bank account and credit cards.

All bank transactions are automatically added to the system, reducing the time required to stay on top of your finances.

Xero also provides extensive reporting features, allowing you to keep track of income, expenses, and other key data.

It has a user-friendly interface and is known in the accounting software industry for its ease of use. It’s great for budgeting, expense tracking, and time tracking, and it comes with unlimited users.

Xero Pricing

Xero has three pricing plans to choose from, and you can move through the plans as your business scales. Every plan includes:

  • Bank connections
  • Inventory management functionality
  • Reporting
  • The ability to accept payments
  • Purchase orders
  • Files
  • Manage Xero contacts
  • Sales tax
  • Early

    Priced at $12/month, this plan is great for new businesses, freelancers and other sole proprietors. You can send quotes and up to 20 invoices per month.

    You’ll also be able to enter and pay five bills a month, reconcile your bank transactions, capture bills and receipts, and get an idea of your short-term cash flow.

    Price is changing to $13/month as of November 14, 2022, at 4 PST and will bill at the new rate from that point forward.

  • Growing

    Priced at $34/month, this plan is ideal for growing businesses. There’s no limit on the number of invoices and quotes you can send, or the bills you can enter.

    As with the Early plan, you’ll be able to reconcile bank transactions, capture bills and receipts, and see reports for your cash flow.

    Price is changing to $37/month as of November 14, 2022, at 4 PST and will bill at the new rate from that point forward.

  • Established

    Priced at $65/month, this option is best for established businesses. In addition to the features of the Growing plan, businesses can also:

    • Use multiple currencies
    • Track projects
    • Handle employee expense claims (capture costs, submit, approve, and reimburse spending)
    • See more in-depth analytics

    Price is changing to $70/month as of November 14, 2022, at 4 PST and will bill at the new rate from that point forward.

Each plan can add the Gusto Add-on, starting at $40/month, so businesses can easily take care of their payroll needs.

Xero Features

Here are the top 11 Xero features you need to know about.

  1. Automatic Bank Feeds

    Gone are the days of manually entering transactions into your accounting software.

    With Xero’s automatic bank feeds, all your transactions are pulled directly from your bank or credit card statements and entered into your account—saving you hours of data entry every month on bank statement reconciliation.

  2. Invoicing and Billing

    Xero makes it easy to create and send invoices and bills to get paid faster.

    With customizable templates and online payments, your customers can pay you in just a few clicks—without ever having to leave their desks.

    Plus, automated payment reminders take the hassle out of chasing late payments.

    • Quick Quotes

      Once you’ve quoted someone for the cost of a job, you can easily convert it into an invoice in a click or two to save time.

      Once the quote has been sent to the customer, the status gets updated in Xero as either accepted or rejected. You’ll also be able to see client comments so you know how to follow up.

    • Invoice Templates

      Every account starts with the default invoice template, but you can change it as needed.

      Navigate to Settings > General Settings > Invoice Settings. You’ll see the invoice template feature “Branding Themes.”

      You can add a logo to your invoice with the Standard Branding Themes. Click Options > Upload logo. You can also use Options > Edit to change some of the text.

      If your business requires more invoice customization, you’ll use a Custom Branding Theme. A Custom Branding Theme uses template files when printing invoices, quotes, purchase orders, and credit notes.

      You can add backgrounds, tables, lines, images, and text to create a cohesive, professional look across all your documents.

    • Faster Invoices with Saved Items

      If you’re often entering the same line items (same prices, item descriptions, etc.), you can save time with “Items.”

      In the Item column, look for the dropdown box. You can use it to create a new item or select an item you’ve used before. It’s also possible to search for items with the search box.

      It’s also possible to show or hide the item code and name on invoices (printed or emailed) with Invoice Branding Themes.

      That way, if you raise your prices, you can adjust them from Accounts > Inventory and have them updated on any future invoices you create without affecting approved invoices.

  3. Reporting and Analytics

    Xero’s reporting and analytics tools give you real-time insights into your business so you can make informed decisions about where to invest your time and money.

    With over 80 built-in reports, you can track everything from revenue and expenses to inventory levels and employee performance.

    You can even create custom reports to suit your business needs. And with the Xero Dashboard, you’ll get a quick overview of everything happening in the business so you can focus efforts where you need to.

  4. Mobile App

    Xero’s mobile app allows you to stay on top of your finances even when you’re on the go. With the app, you can send invoices, reconcile transactions, approve bills, and more from your smartphone or tablet.

    So whether you’re at the office or out on the job site, you can rest assured that your finances are always under control.

    The Xero mobile app is available for Android and iOS devices.

  5. Account Watchlist

    With this feature, you can choose the accounts you want to keep a closer eye on. You’ll see the balance for the month and the financial year to date. This is helpful for things such as:

    • Monitoring your tax debts
    • Watching sales grow over time
    • Watching expense accounts to prevent overspending

    You can use it with the Profit First Framework to ensure you’re putting in enough money to pay your taxes.

    To add or remove accounts from your Account Watchlist:

    1. Navigate to Settings > General Settings > Chart of Accounts
    2. Click the name of the account you wish to add or remove from the watchlist.
    3. Click the checkbox next to the “Show on Watchlist Dashboard” and then click Save.

    Xero is a highly versatile software that can be adapted to suit the needs of any industry.

  6. HubDoc

    Xero HubDoc is a software platform that makes managing and organizing financial documents easier.

    With simple tools for scanning and uploading documents and powerful search features to help you find exactly what you need, Xero HubDoc ensures that your financial data remains organized and easily accessible at all times.

    Whether you’re a small business owner or a team of accountants, Xero HubDoc provides the tools you need to improve your workflow and stay on top of your financial data.

    You’ll never have to worry about losing track of a receipt again.

    Xero added the HubDoc feature to all plans for free in March 2020.

  7. File Attachments

    How many times have you sent an email that says, “I’ve attached,” only to send it without actually adding the attachment?

    Since sending file attachments with quotes is common, you can easily attach files to your quotes from nearly any Xero quoting screen.

    You can attach a PDF to a quote, an invoice, or even a journal entry, so information is there whenever and wherever you need it.

  8. Integrations

    Xero integrates with a wide range of third-party apps to help streamline your workflow and save you time. From payroll and CRM to eCommerce and point of sale, there’s an integration for almost every business need.

    It integrates with popular payment gateways like Stripe and Square. Xero integrates with Planergy also. So if you need AP automation software or procure-to-pay software that is compatible with Xero, you know where to come.

    So whether you’re looking for a way to automate repetitive tasks or want to work more efficiently, Xero has you covered.

  9. Securely Share Data with Financial Managers

    Whether you work with an internal bookkeeper or an outsourced financial manager, you can allow the system to share all the relevant data with them.

    The data is secure, and updates in real-time, so they can easily do their jobs.

  10. Credit Limits

    Credit limits are common in purchasing and allow you to extend customers a certain amount of credit based on their financial stability and history with your company.

    This feature is easy to overlook but can be found in the financial details screen for any customer.

  11. Xero Email Templates

    You can email a lot of things directly from Xero, including quotes, invoices, purchase orders, statements, credit notes, receipts and remittances. The defaults work quote well, but you can also customize them.

    And instead of having to change each email, you can create and use your own email templates. It’s a great way to send invoice reminders, so you’re always paid on time.

If you’re not using Xero for your accounting needs, you’re missing out on some serious time-saving features—like automatic bank feeds, online invoicing and billing, reporting and analytics tools, mobile app access, and integrations with popular business apps.

Switching to Xero is easy—and once you see how much time it saves you each month, you’ll quickly see why so many people consider it the best accounting software available.

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Travel and Expense Policy: What Is It, Example Template, and Best Practices https://planergy.com/blog/travel-and-expense-policy/ Thu, 09 Feb 2023 11:24:33 +0000 https://planergy.com/?p=14620 IN THIS ARTICLE What Is a Travel and Expense Policy? Why You Need a Travel and Expense Policy? Considerations for a Policy that Works for Your Business How to Create an Effective Policy for Your Organization Travel Expense Policy Template What Is a Travel and Expense Policy? To travel for work-related purposes, employees often need… Read More »Travel and Expense Policy: What Is It, Example Template, and Best Practices

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Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

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Cristian Maradiaga

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  • Where the best opportunities for savings are in indirect spend.
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Travel and Expense Policy: What Is It, Example Template, and Best Practices

Travel Expense Policy

What Is a Travel and Expense Policy?

To travel for work-related purposes, employees often need to submit a travel expense report detailing their costs.

This can include travel costs like airfare, hotel, and other miscellaneous expenses like meals and incidentals.

Many companies have a travel and expense policy outlining the rules and procedures for submitting these reports.

In this blog post, we will discuss what a travel and expense policy is, provide an example template, and outline some best practices.

Why You Need a Travel and Expense Policy

Establishing a travel and expense policy for your business is a wise choice. 

A clear policy defines allowable expenses for any business trip, which reduces the chance of unnecessary or inappropriate charges.

It’s efficient and cost-effective to have a predetermined budget for each employee that adheres to the company’s financial regulations – this ensures employee reimbursements are issued following company standards.

Having all of these processes itemized allows you to track spending more accurately, so there won’t be unwelcome surprises during the budget season either.

With a travel and expense policy in place, your organization can manage employee journeys and reimbursements competently.

With rules in place, it’s easier to predict how much each traveler will spend on business travel expenses, making overall expense management easier.

Other benefits include:

  • Tax write-offs for the company and IRS regulations compliance.
  • Fraud prevention.
  • Streamlines reimbursement.

Considerations for a Policy that Works for Your Business

Using a blanket T&E policy may be tempting, but the fact is, no two companies operate the same way. 

They should have customized policies that fit the company’s needs while supporting employees.

At its core, the policy should address how employees are expected to pay and be reimbursed for trips taken on behalf of their company.

The policy must also feature detailed guidelines surrounding who is authorized to book travel arrangements and any limits and restrictions.

Companies may also want to consider implementing a pre-trip authorization process, and requiring all expenses related to the trip to be documented in order due documentation for reimbursement purposes.

Keeping your travel and expense policy up-to-date with current laws, regulations, and industry standards is important for maintaining compliance with current laws, so companies should stay aware of changes that may affect their policies.

Put Finance and HR to Work Together

To start crafting a T&E policy for your organization, arrange a meeting with both finance and human resources. 

Collaboration and cooperation between these two teams are crucial.

The finance department provides information about current expenses and supports creating the guidelines employees need to follow. HR then communicates the policy to employees and enforces compliance.

Consider Multiple Factors Unique to Your Organization

Some companies may choose to reimburse incidental expenses. Some companies provide a per diem allowance, while others only reimburse actual expenses.

Start by looking at your organization’s current travel spend. As you analyze the data, consider the following:

  • How often do employees travel?
  • How much does the average business trip cost?
  • What percentage of employees travel?
  • What is the return on investment of these trips?

    Measuring ROI on business trips can be difficult, depending on the nature of the trips and the reason for them.

With the answers to those questions in hand, consider:

  • Methods of Travel: Which methods of travel are acceptable? Will employees be able to travel in business class or first class, or is air travel limited to coach only? Will you cover any extra luggage fees? What about ground transportation? What’s the maximum spending limit? Are there special rules that apply to international travel?

  • Lodging Expenses: What is the limit for a hotel room? Are employees required to stay at a certain hotel or within a certain chain?

  • Personal Vehicle Expenses: How will employees report mileage? What’s the maximum you’ll reimburse for parking expenses?

  • Meal Expenses: What is the per diem for meals? Are all three daily meals covered? Are they allowed to take clients to dinner? Will you reimburse room service? Are entertainment and related expenses included while on the trip?

  • Miscellaneous Expenses: Think of this as the unexpected. What if an employee’s luggage is lost and they need to purchase new clothes? What if they get bumped from their flight, and there’s an additional fee to rebook? What if the car rental company doesn’t have the economy car that was booked?

  • Company Credit Cards: Who is allowed to use the cards, and what can they use them for?

  • Expense Reporting Process: How are employees to track their out-of-pocket expenses? Who do the employee expense reports go to? How do they submit them? Are original receipts required, or will scanned/photographed versions suffice?

How to Create an Effective Policy for Your Organization

Outline everything you deem acceptable in the above categories. If certain things aren’t covered, make sure those are clearly defined. 

For example, meals are covered, but alcoholic beverages are not.

  1. Define what is considered an acceptable business purpose. Will you cover trips for continuing education?

  2. Define who is authorized to book travel arrangements. What booking tools can be used?

  3. Define how to turn receipts and expense reports.

  4. Define the acceptable timeframe for reimbursement requests (such as within 15 days after the trip is complete) and when employees can expect to receive the reimbursement.

  5. Include any other guidelines for reimbursable expenses, including rules for upgrades, tolls, mileage rate, per diem rates for each department, gratuities, etc.

How to Create Travel Expense Policy

Once these details are outlined, it’s time to put them together into a formal travel policy.

Your business needs a travel management policy, but it can be hectic to put one together. Our template will help.

Travel Expense Policy Template

Your policy should be broken down into six sections:

  1. Introduction
  2. Travel Booking Process
  3. Business Expense Categories
  4. Non-Reimbursable Purchases
  5. Expense Reporting and Reimbursement Process
  6. Travel Support, Safety, and Duty of Care
  1. Introduction

    Use this section to let your staff know your policy isn’t just more red tape – it’s designed to keep them safe, keep things fair, reduce confusion, and ultimately, save time.

    Depending on your organization, you may have multiple policies – different policies depending on the department or type of employee. If that’s the case, your introduction should also include who the policy is for.

  2. Travel Booking Process

    Use this section to include everything your team needs to know about where and how to book travel – whether someone will make the arrangements for them or they will make the arrangements themselves.

    Here’s where you outline:

    • How to Book Travel

      Include your process, method, and platform for booking any company travel. It’s ideal to use a platform to allow employees to book options within policy. If you do, include the name of the platform.

      If employees cannot book their own travel, include the name and contact information of the travel agency or company employee who will take care of booking the travel arrangements.

    • Approval Process

      Include the details of the approval process, especially for senior management. The approval process for the C-Suite and senior employees may vary from others.

    • Leisure Extensions

      If you want business travelers to be able to extend their trip to the weekend or use vacation days for additional time, include rules around these extensions.

      Include details about the allowable difference for return flights and what separates personal expenses from business ones.

      Make it known that they will incur additional costs that your company will not reimburse.

    • Loyalty Program Usage

      Many companies don’t let employees accrue personal loyalty points on business travels.

      But, if you trust your team to do the right thing, include a line that says something along the lines of, “Employees must not choose more expensive travel options for the sole purpose of gaining additional loyalty points.”

    • Traveling with Non-Employees

      Expenses related to traveling with spouses or other family members, pets, or friends outside of the company aren’t generally eligible for reimbursement.

      If any situations are subject to approval, such as attending a networking event, outline these possibilities.

  3. Business Expense Categories

    This is a crucial part of your template as it outlines what employees can expense. This is key to keeping things as cost-effective as possible.

    Air Travel

    • Preferred vendors
    • Approved tools or methods of booking
    • Rules regarding allowed travel class
    • How many days in advance must flights be booked for both domestic and international travel.

    Accommodations

    • Preferred vendors and negotiated rates, if any
    • Approved tools or methods of booking
    • Maximum nightly rate
    • Rules regarding standard rooms and upgrades – for instance, upgraded rooms are only allowed when standard is completely booked
    • Reimbursable costs – parking, etc.
    • Rules for booking house-sharing or apartment rentals

    Rental and Personal Vehicles

    • Allowed types of rental car class
    • Number of employees expected to share a vehicle when traveling together
    • Mileage reimbursement rate, per mile or kilometer

    Rail Travel

    • Approved tools or methods of booking
    • Type of ticket allowed

    Taxis and Ride-Sharing Services

    • Maximum amount per transaction
    • When use of these services is allowed (particularly in areas where airport shuttles or public transport isn’t practical)

    Events and Conferences

    • Reimbursement process for registration if it was not pre-paid.
    • Process for other event or conference-related expenses, such as meals or things not included in the registration cost

    Meals, Travel, and Entertainment

    • The maximum reimbursable amount for each breakfast
    • The maximum reimbursable amount for each lunch
    • The maximum reimbursable amount for each dinner
    • Or a daily maximum or per diem
    • Personal meal expenses throughout the trip
    • Rules for business meals
    • Rules for client entertainment expenses, including maximum amounts and what’s allowed

    Personal Telephone Use

    • The amount of the cell phone bill or percentage that can be reimbursed during the employee’s travel period. Include whether calls made for personal reasons will be covered.
    • Whether or not theft of or damage to the personal phone is reimbursable during business travel, and if so, the maximum allowable amount.
  4. Non-Reimbursable Purchases

    Keep a list of the things your company won’t reimburse, so people know ahead of time that certain things will come out of pocket at their expense.

    Get input for your chief financial officer and the employees who travel most often to determine what’s far to exclude across the board.

    It should be clear that your business expense policy will only cover travel-related and business-related expenses and nothing else.

    Examples include:

    • In-flight purchases
    • Childcare or pet boarding
    • Costs related to non-employee travel
    • Laundry and dry cleaning
    • Room service
    • Damage to personal vehicles
    • Airline ticket change fees
    • Traffic violations or parking tickets
    • Airline club memberships
    • Excess baggage fees
    • Premium or luxury car rentals
    • Rental car insurance coverage
    • Minibar or alcoholic beverages
    • Online entertainment, movies, newspapers, etc.
    • Clothing and toiletries
  5. Expense Reporting and Reimbursement Process

    This section should cover the following:

    • The expensing tool to use
    • The items that do not need to be added to the expense tool (such as if the trip is booked within the approved booking tool)
    • Who to submit reports to
    • What to include in the reimbursement requests
    • Deadline for request submissions
    • Typical processing time for requests
    • Policy on personal credit card use
  6. Travel Support, Safety, and Duty of Care

    Your policy needs to be something people want to read. It must include information they need to know to familiarize themselves with.

    Your staff wants to stay safe while traveling, so including information about their safety and what to do if an emergency arises is key.

    Tracking Whereabouts

    Let your employees know that when they book with your approved tools or methods, the trip is tracked, so if there is an emergency, you’ll take steps to evacuate them. If you don’t know where they are, you can’t assist.

    Include the approved tool’s name, and what they need to do to ensure their trip is tracked if they cannot book within the tool for a valid reason.

    Travel Support

    Include information about who to call if there are trip changes or cancelations. Provide contact information for the travel support provider, such as email address, phone number, etc.

    Emergencies

    If an emergency arises, there should be information about who to contact, including your travel insurance policy information. Include employee and vendor contact information for the point of contact in an emergency.

Implementing Your Policy

Customize the template to your needs, and automate it when possible. 

This ensures employees will always book within policy guidelines at any given time.

Deploy the policy with employees, and collect feedback. 

Make sure your team is clear on the policy and all its details. Ask them about how easy it is to use the approved tools.

Developing and deploying a travel policy is critical for procurement to keep a close eye on corporate travel expenditures. We hope this makes the process easier for you.

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

2. Download our “Indirect Spend Guide”

Download a free copy of our guide to better manage and make savings on your indirect spend. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

Related Posts

The post Travel and Expense Policy: What Is It, Example Template, and Best Practices appeared first on Planergy Software.

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