May 22, 2024
Empowering Employees with Budget Autonomy
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As the economy changes, so does how we buy. Companies that move toward more decentralized structures must manage and control spend at all levels. This is why empowering employees with some financial autonomy becomes increasingly vital.
Granting autonomy with the budget helps encourage a sense of accountability and ownership among employees. It streamlines the procurement process and enhances overall operational efficiency. This is great news since companies with a high employee engagement rate are 21% more profitable.
In this article, we’ll examine the benefits of budget autonomy, the importance of establishing and enforcing policies, and how intelligent approval workflows can mitigate risks while providing real-time insights.
Establishing and Enforcing Company Policies
There’s a fine balance between the needs of the individual (buying to perform their job) and the needs of the business (retaining important compliance while automating systems).
Who Needs to be Involved?
Part of the intake experience should involve asking questions that map out who needs to be involved. When seeking approvals, there are processes for notifying the legal team or IT.
For example, when purchasing new software, IT must be involved to ensure all security measures are met. The same goes for legal. They may want to look it over if you're signing a document. There has to be a way to effectively loop in key stakeholders (like IT and legal) without further delaying the approval process.
Automation Tools Bridge the Gap
Procurement automation tools can bridge this gap. Instead of an employee sending out emails for different approvals, the entire process can be consolidated into a single digital experience that starts with custom intake.
Forms can be built during the buyer’s journey to steer all data in the right direction. Approvers get what they need, and the data can be pushed through to PO creation.
Not only does this refined system mitigate risk, it helps a business maintain compliance every step of the way.
Intelligent Approval Workflows
Due to financial technology, more than 40% of current financial roles will be new or reshaped by 2025. As manual tasks become a thing of the past, the focus will lie on strategy. Intelligent approval workflows can be based on the type of request being made. (hint: not everything is about costs).
For example, if the request is for travel, the department head is the first one who needs to approve it. This should be designated by role (not name), as people can leave or move on to different positions. You want to set up your workflows for success, so keep the approval roles generic. Automation makes it easier to create intelligent approval workflows.
Custom rules can also be created for expense caps. For example, anything over $10,000 triggers an additional approval, automatically generated and sent to that role (typically the CFO). The great thing is that teams can design these processes as they go. It’s completely intuitive.
Legal Compliance
In today's environment, there’s a new policy around every corner. There’s the CCPA in California, and in Europe, there’s the GDPR. Local rules, SOC1, SOC2, SOX, or different types of compliance are governing more and more business elements.
Here’s a quick overview of a few of the latest legislative requirements that continue to shape procurement:
- EU: CSRD, CSDDD, and ESRS
- Canada: Forced and Child Labour in Supply Chains Act
- Nordics (Norway): Transparency Act
- DACH (Germany): LkSG or Supply Chain Due Diligence Act
- California: Climate Accountability Package
Giving Budget Owners Autonomy
Budget autonomy is about decentralizing the actual buying process, empowering budget owners, and creating accountability in the organization.
In today's economy, fewer manufacturers and more businesses offer services and digital goods. A manufacturer uses direct procurement, which means you buy goods for the actual production floor.
With digital goods or services, the spending is to support the team. The team usually knows best what they want to buy. For example, Marketing knows what software tool they want to buy or where they want to spend their money on Google Ads or LinkedIn ads, et cetera. The same goes for IT. So every department, or even on the employee level, is becoming a buyer.
A business should empower employees to buy whatever they need to perform their jobs while balancing this with the company's needs. The more autonomy there is, the more risk there is, so refining an efficient procurement workflow takes some effort.
Involving Employees in Procurement Decisions
78% of CFOs say they actively collaborate with IT for advanced analytics, automation, cloud services, and other tech to increase the performance of finance. However, employee involvement should extend beyond a few departments. Everyone should have a hand in procurement.
It’s important to spend more time upfront, collaboratively, agreeing on things like a set budget, approval workflows, intake forms, etc. This answers inquiries like “Who will approve my request?” before they happen.
After employee input, procurement software will give managers and finance operations the visibility needed to take the architect's seat and design processes that are more strategic to business goals. When this happens and everyone is clear on processes, employee engagement and satisfaction will increase.
Trust and Accountability
Trust and accountability are behind the success of these workflows and having the funds proven. That's the core of empowering budget owners and giving them the spending autonomy. Through automation, you're empowering the budget owners at an executive level.
Gaining Insights
Procurement software enables a business to utilize vendor history for insight. It gives finance a holistic view of procurement management and enables them to allocate resources better.
PayEm features budget management that allows teams to see their performance against the total budget, including committed spending. Each budget owner can also be assigned a custom view, protecting sensitive financial data.
The system will calculate the variance between planned budgets and reconciled payments, including committed POs and bills. This grants budget owners and approvers unparalleled visibility into their fiscal planning and encourages a culture of accountability.
Real-time Spend
Say you’re the VP of Marketing and there’s a big event coming up that will cost $30,000. There’s no need to contact FP&A and start a lengthy email chain. Additionally, FP&A may only be able to give you an estimate based on the last quarter. Nothing is manually calculated in real-time.
Tools like PayEm empower budget owners to see what their budget is for every specific item, how much they have already spent, and how much they have committed but haven't spent yet. This can be further broken down into subsidiaries and departments.
Summing it Up
Only 14% of procurement leaders agree they have adequate talent to meet the procurement function's future requirements. Procurement is facing a crisis of confidence regarding talent.
Empowering employees with budget autonomy is a strategic approach that aligns individual initiative with organizational goals. By decentralizing procurement and involving employees directly, organizations can achieve greater responsiveness, efficiency, and transparency while minimizing risk and enhancing compliance.
By fostering trust and accountability, companies can create an environment where budget owners have the autonomy to make more informed decisions. This will lead to improved financial performance and a more engaged workforce.
