Posted: 14/07/20 by Invu Services Limited
Flexible and remote working is being adopted far and wide, yet research has shown businesses are less prepared to be flexible with their finances.
UK businesses are becoming less “financially agile”, new research has suggested, with the proportion of companies proactively using budgets to manage their purchase commitment levels declining rapidly in the last two years.
In 2018 more than half (52%) of finance decision-makers reported that their business routinely used budgets as part of transactional controls (when raising requisitions or authorising purchase orders).
But this has now fallen to 33% in a new survey commissioned by automated accounts payable and document management software specialist, Invu.
The findings in Invu’s “Perception vs reality – the real state of Accounts Payable and Purchase Order Processing in UK business” report, suggest businesses are increasingly losing sight of their financial position.
According to the report, 57% of finance managers claim budgets are not used until the production of management accounts, but more than a quarter (27%) said these accounts were often delayed while waiting for a backlog of invoices to be processed.
The global pandemic being faced at the moment has taken its toll on many businesses who look to cut costs by furloughing staff, and a lack of foresight into company finances could make these challenges even greater.
Ian Smith, general manager and financial director at Invu, said: “Not using budgets proactively to understand current and future commitments can significantly hinder a company’s financial agility and their ability to identify spending problems as they evolve. If budgets aren’t used until the production of management accounts, it means variances which haven’t been identified could grow and become a serious problem.
“By the time problems are identified, purchasing commitments could already have been made. Inefficient Accounts Payable processes can result in late management accounts, extending further the period where spending problems are identified and rectified. Without timely and reliable spending data, it is difficult to make informed decisions when planning.
“In an economic environment dominated by the impact of the current pandemic, businesses can ill afford to use budgets as a reactionary tool. Currently, cash is king, and it is critical to have full visibility of spending commitments when cash flow forecasting. In the long term, agile businesses, who use budgets proactively, will find themselves ahead of the competition.”