Growth and Optimization
How Finance Automation Can Help the Public Sector Solve the Challenge of Doing More with Less
Doing more with less has been the mantra in the public sector for at least a decade but it has perhaps never been more necessary than at the moment. Every organisation is taking a long, hard look at every area of activity to see where economies can be made.
One area that offers scope is productivity.
According to the Office for National Statistics, 2019 saw consecutive quarterly declines in overall public sector service activities despite an increase in personnel. This suggests that productivity issues stem from the way work is being done, not who is doing it.
There are likely to be productivity gains to be made in every area of activity, but spend management processes are a prime example. It is something explored in our recently commissioned report with GlobalData: Modernising Spend Management in the Public Sector: Efficiency and Simplicity.
Productivity and Spend Management in the Public Sector
Paper-based spend management systems bring several efficiency disadvantages and require complicated logistical and administrative processes in the background, which are inherently slow.
Employees are required to save their receipts then send them by post or bring them to the office to be scanned and logged, categorised and approved so that expense claims can be paid. It is time-consuming for employees and may even impact on their ability to perform their jobs.
It is time-consuming for finance staff too. What’s more, when spend is logged on paper and in Excel, it is difficult to spot spending patterns to identify areas where economies could be made. It is also difficult to get a picture of planned or forthcoming spend. In addition, AP staff end up rekeying the data into the back end finance systems, sometimes as a full time job.
The problems with paper-based spend management processes are recognised. The Scottish Courts and Tribunals Service (SCTS) published a tender in April 2020 to automate their current Excel-based spend management process. The tender followed a report on the efficiency of its processes that identified some key issues that may sound familiar to many public sector organisations. They included a high proportion of incomplete forms due to the complicated claim process, inability to track proof of expenses, fragmented communication, and lack of consistency between courts.
How Automated Spend Management Solutions Help to Tackle Productivity
The solution, as SCTS recognised, is to procure a more advanced spend management solution. Such cloud-based solutions have the ability to transform inefficient processes and give better visibility into spend.
In the first instance, such systems mean organisations need no longer process paper receipts. Employees can use their mobile phones or laptops to submit expenses rather than bringing them into the office. It speeds up the process for everyone involved, enables employees to work remotely and frees them up to focus on more critical tasks. Automated spend management systems also give much greater visibility of data, enabling finance teams to spot trends and track cash flow more effectively.
Despite the recognition of the benefits of automated solutions, it is clear the public sector is reluctant to make the switch. Across the whole public sector there were only 24 dedicated contracts solely for spend management tools from 2015 to 2020.
Why should this be the case? One reason might be concern that investing in back office systems rather than front line services is not a good use of funds. But the savings spend management systems make are dramatic.
Quantifying the Financial Benefits of Automated Spend Management Solutions
Barnsley Metropolitan Borough Council, for example, processes around 3,000 expense claims each month from its employees.
Considering that an average manual expense claim takes 30 minutes to be scanned, logged and sent to the accounts payable team, this can add up to 18,000 hours (2,250 days) of paid labour a year just to process claims. This equates to hundreds of thousands of pounds in processing costs.
Further, a once a week trip of 30 minutes to the office to deliver receipts for a group of 120 social care workers in a given council can translate into a total of 3,000 hours of ‘lost’ hours a year. This is the equivalent of almost two extra full-time staff that could be used to enhance care given to residents.
Other examples include Mencap, which reported saving more than £70k per year in administration costs by moving to a fully digital solution in 2018.
For another charity that successfully automated their expenses, there is a direct correlation between the implementation of their new spend management system and their ability to expand services. With every £2k saved by using the new automated system, the charity can provide a six-month supported employment program to help someone return to work, showing a real societal benefit from their investment.
The Transformative Power of Automated Spend Management Solutions
As these examples show, investment in spend management tools is a valuable investment that delivers tangible rewards. It has the capacity to deliver improved productivity in the public sector, enabling organisations to do more with less.
To read more on this subject, download our recent independent report with GlobalData: Modernising Spend Management in the Public Sector: Efficiency and Simplicity.