Shirley R Cowcher
Working on a Tight Budget
Things are tight for us all, personally and on the work front. We are being told by government that they, and we, are facing large debts and we need to be “lifters” to solve the debt problems.
That means that in most cases your organisation is likely to have cut all divisional budgets. The cut that you have experienced may be as little as 1% but could be more than 20%. After all, records and information management are not the organisation’s core business! There is not much you can do in terms of finding more money to meet service requirements but you can ensure that you manage every dollar of your budget effectively.
How Do You Manage the Budget?
The best way to manage a budget is to know where the money is going and ensure that you are getting value for money. Look at every item on your budget and check against actual spending. Don’t just do it bi-annually, or quarterly, do it monthly.
When you are reviewing your budget against actuals don’t just look at the big project items also look at the smaller day to day items because it is usually here where slippage occurs.
What is Slippage?
I am using the word slippage in the context of your budget to mean the difference between your estimated budget amount for each cost centre and the actual amount that is spent. In my experience this slippage generally results in the organisation running over budget rather than under.
This slippage may not be obvious if you do not review your actual spend against budget on a regular basis; or reconcile invoices against goods and services. This is particularly important to consider if you work in an organisation where invoices are sent directly to an accounts payable department with an approved purchase order assigned. Depending upon the processes of your organisation, accounts payable may pay any and all invoices that have an approved purchase order number that does not result in the value of the purchase order being exceeded. That means that you may not have an opportunity to check that the invoice is accurate in terms of the services being provided. Even if you do get to review the invoice you may think that the systems of the service provider are so accurate that there couldn’t possibly be a discrepancy and so you wave them through. This is where slippage occurs!
A Cautionary Tale
Over the past nine months I have encountered three occasions where the same supplier has overcharged on provision of service. I won’t name names but I’ll outline what happened so that you can ensure it isn’t occurring in your organisation.
Information Enterprises Australia uses a records storage service to store and dispose of company records. Recently we had been reviewing the number of boxes we had with our provider and confirmed that we had 112 boxes in storage and yet the invoice that we received charged for 122 boxes.
On a separate occasion, 23 boxes were recalled to be reviewed and destroyed. The service provider charged a handling fee for each box retrieved as well as a one-off delivery fee. Upon destroying the box contents on our premises we notified the provider that the boxes would not be returned and should be marked as destroyed. The service provider charged a handling fee, as if they had retrieved the boxes from storage (which we had already been charged for), as well as a permanent retrieval fee (because the boxes would not be returned to them). NOTE Don’t get me started on records storage providers charging for the permanent removal of records especially when that removal has been for the destruction.
On the same day two separate requests were made to retrieve boxes from storage and deliver them to our offices. All the boxes were delivered the next day by the same courier company at the same time. When the invoice was reviewed the service provider had charged for two courier deliveries when only one had occurred.
These three occurrences would have resulted in an over charge of less than $50 (that’s not counting the permanent removal fee) which may not seem like a lot but if this happens every month that’s $600 slippage.
…and the Pounds Will Look After Themselves
Imagine if there were five or six cost centres in your budget that each had an annual slippage of $600. What could you do with that $3,600? I’m sure there are any number of projects that could benefit from that additional funding, but first you have to stop the slippage.
I would suggest that you look at your current processes in terms of approving the payment for services and reviewing your budget against actual spend. Improve the processes so that you can confirm that you are not being overcharged for services and so that on a monthly basis you can ensure that there is not a slippage of costs against budget.
You will be surprised at how much reducing slippage can benefit the division’s bottom line.