How to Reveal Hidden Spend and Improve Finance Efficiency in Higher Education
Who’s buying what, and when? Which department is nearing budget collapse and which lecturer keeps treating students to end-of-week treats paid for by the college’s discretionary spending?
A higher education institution can be a labyrinth of accounts and tax codes, all designed to help track the precious budget that is hard fought for every school year.
Higher education finance teams are facing rising operating costs, a reduction in government capital funding, and the constant pressures from students and regulators to know where the money is going – especially with real spending by UK universities increasing consistently over the past two decades. Everybody wants transparency but that requires your employees to play ball when it comes to spending the budget.
The robust procurement processes in place can help to explain the big ticket items, but what about those smaller, day-to-day costs – often paid for by corporate credit cards or from employee’s own pockets – that are essential to provide a good student experience, yet not big enough to be subject to rigorous examination? These variable spends are both hard to anticipate and hard to track. Each instance of unanticipated variable spend can quickly add up to a big dent in the budget.
Legacy Systems Can Cause Spend Blindness
While much of an education institution’s budget goes on teaching and research, the rest needs to support these activities. Teachers need supplies, after all, and can’t be expected to pay for them out of their own pocket. They cannot, however, accurately predict how much they’ll need for these day to day items so essential to the student experience.
This shadow spend is known as spend blindness, and in higher education finance it can be seen in three areas:
- Poor accounting practices
- The huge administrative burden that comes with inefficient, outdated modes of accounting
The Problem of Overspending
Handing out corporate credit cards and creating departmental budgets is the traditional way of dealing with budgets in a higher education institution, but it’s difficult to track spending with a card or with cash. This can have a knock-on effect across the organisation as budget has to be reallocated at short notice.
The Impact of Poor Accounting Practices
Spending is so diverse within higher education – it can range from marketing and staff costs to guidance and access programmes.
Finance teams must create incredibly complex budget tracking systems to keep up. However, finance won’t know until they do end of month reconciliations whether spending is within budget predictions. This lack of control of the flow of money means they struggle to operate accrual-based systems.
The Huge Admin Burden
From the employees trying to find that one receipt that went through the wash, to the finance team having to go through spreadsheets to tally up the budget, it can take days to reconcile predicted spending with actual spending each month. This means valuable resources are being spent on time-consuming, manual work.
There’s so much time spent chasing and reconciling that the finance team has little time left to look into how to improve operations. This is despite a national push to deliver efficiencies which has seen UK higher education institutions make more than £1 billion in savings over the last three years.
Regain Oversight With Financial Automation
It’s not all bad news, though: Financial technology can help higher education finance teams to regain visibility and control over both variable spend management and to undertake wider budget forecasting based on real time data.
For example, with Soldo the finance function can set budgets on an individual level for expenses – enabled via a prepaid card for work expenses – as well as on a departmental level. Each team or department can be given their own physical and virtual cards to act as “expense centres”, which means each team member spends from a shared pot or budget.
Soldo also helps to minimise that administrative burden by introducing automation, and empowering employees to submit expenses at the point of spend, via a mobile app, rather than spending hours each month compiling spreadsheets.
The system integrates with accounting programs, too, helping finance teams to reconcile on the go rather than at the end of the month – which then enables them to track individual and departmental spend in real time.
Adjustments and budget reallocations can be made where necessary before they cause credit problems.
In addition, dashboards and robust data mean that the higher education finance team can take control of forecasting by contrasting Y-o-Y spend, categorising spending, and, importantly, combating expense fraud.
Take Back Control With Soldo
Finance automation tools can shed the kind of light that eliminates spend blindness, delivering accurate, real time data that can help higher education finance teams to reign in duplicate and unnecessary spending, ease the burden of expense management, and help to address your budget challenges. By using a tool such as Soldo, you can regain control over variable spend management and get more time for analysis and strategic thinking.
Learn more about how Soldo can help higher education finance teams to reduce spend blindness; download the Untangling Spend in Higher Education eBook.