Spend management

How to minimize operating costs with digital spend management


Benjamin Franklin, one of the leading Founding Fathers of the United States in his time, with his likeness still adorning $100 bills, was only able to attend school for two years, due to financial constraints in his family. Despite his circumstances, he began working as an apprentice to his brother in the printing trade, went on to found one of the first American newspapers, formed the Junto group and created one of the first public libraries, and then became an author, scientist, and successful politician.

In 1758, Franklin published The Way to Wealth, in which he states: “If a man empties his purse into his head, no man can take it from him. An investment in knowledge pays the best interest.”

The United States has certainly invested a great deal into its education. The National Center for Education Statistics within the Institute of Education Sciences recently published an international comparison, Education Expenditures by Country [1], where they analyzed data collected from various OECD (Organization for Economic Cooperation and Development) countries. One of the key indicators used in the publication was expenditures on public and private education institutions per full-time equivalent (FTE) student.

In 2017, long before the global Covid-19 pandemic and current international economic crises, the US population spent 37% more than the OECD member state average per full-time equivalent (FTE) student in elementary and secondary schools and institutions. On a tertiary level in colleges and universities, the US expenditure per FTE student was a colossal 102% higher than the average spend of the OECD member states.

Over the past two years, this very same education industry—comprising schools, colleges, and universities—has had to undergo a rapid transformation and adaptation to global physical and economic circumstances. In a constantly changing world, educational organizations must react strategically to ensure continuity, providing students and teachers with adequate resources for increasingly challenging conditions; all while managing spend, cutting costs and mitigating risk.

While the expenditure from private sources (payments from individual households for school-based expenses) may remain the same due to the necessity of students furthering their education, expenditure from public funding has been on the decline due to allocation of resources to critical essential services recently, such as the healthcare industry. In addition to this, education spending within institutions is on the rise, with operational efficiency fluctuating due to pandemic restrictions.

Inflation and supply chain disruption

A wide range of factors, including rising commodity prices, soaring energy costs, supply-chain disruptions, expansionary economic policies, and the move to sustainability are driving the current market uncertainty and inflation. The US Consumer Price Index accelerated to 7.5% in January 2022; the highest since February of 1982.

For institutions to endure the months to come and to prosper in future, once global events have stabilized, education procurement stakeholders must ensure that spend management processes are collaborative and optimized for furthering best practices.

How can the education industry ensure a successful future in spend management, add value, and decrease operational costs?

Efficiency through digitalization

With schools on a global scale facing budget cuts as far back as the 1990s, many institutions are still using manual, paper-based spend management processes. Unfortunately, while some still believe that there just isn’t budget for cloud-based spend management or procure-to-pay (P2P) software, you tend to get what you (don’t) pay for—in this case, not investing in spend management technology actually costs institutions more in the long-term, due to the time-consuming manual burden that administrative staff have to bear.

In fact, a recent analysis by Huron, a global consultancy that drives strategic growth, found that the effective implementation of P2P technology results in 49% time savings on travel planning (for example, field trips and tours), 70% time savings on expense reports, and 35% increase in staff compliance with institutional policies.

Tooling for every environment 

Workforce agility is paramount today—with educational stakeholders working from multiple locations and possibly travelling frequently, administrators and faculty need tooling that is convenient and mobile. The long-term financial health of educational institutions is challenging when stakeholders need to access inelegant solutions on local servers from various sites at different times, and even more so when paper-based systems are confined to physical locations.

With Fraxion's cloud-based spend management technology, these challenges are eliminated in their entirety. The tooling is browser-based and accessible via any laptop or desktop computer, and mobile apps. Expense receipts and attachments should be uploaded directly to the system via any mobile devices. Approvers can approve on-the-go, after being notified by push notifications on their mobile devices, or via email on their laptops or tablets. The procurement department can generate purchase orders from anywhere, anytime, and email them directly to vendors.

Transparency and visibility

You need to see education spend to manage it—spend management technology combines and leverages spend data from several locations, to create a holistic yet comprehensive view of the institution’s total spend, with various breakdowns per location, department, cost center and other divisions.

Not only does this allow for complete institutional control over spend, it also provides clear transparency and audit trails for any auditing and compliance issues.

Procurement through pre-approved vendors

P2P costs can be significantly reduced when vendors are loaded and pre-approved for requisitions in certain categories or locations. This provides significant savings in time and effort costs in sourcing vendors, setting them up on internal systems, transacting with and managing them.

Fraxion's spend management technology provides this vendor control, and can also provide vendor-provided catalogs (often with fixed prices or institution-specific discounts) as well as PunchOut facilities, making the entire procurement workflow seamless.

Expense claims made easy, yet accountable

The National Center for Education Statistics (NCES) recently published a report on the out-of-pocket expenditure of public and charter schools’ teachers on classroom supplies, across 50 states and the District of Columbia. Among teachers who paid for classroom supplies out-of-pocket without reimbursement, 94% of teachers across all types of public schools (including charter schools) spent their own money during the 2014-15 school year in varying amounts of expenditure. 43.9% spent $250 or less for that year at the bottom end of the spectrum, with 7.3% reporting that they spent over $1,000 annually on their students [2].

While the figures listed portray only the out-of-pocket expenses that were not claimed back from schools, logic follows that expenses actually claimed by teachers for various school-related costs were along similar figures and values. The reasons for teachers not being reimbursed for their expenses were not listed in the report; they could be due to a lack of funding, due to expense claims being rejected because forms were filed incorrectly, due to the expense claim process being to complex, or perhaps even that these were simply the out-of-pocket expenses that were simply not claimed against.

If the latter is true, it is reasonable to assume that expense claims constitute a large category of spend among educational institutions. Several institutions even have their expense claim forms for personnel and visitors available on their websites—all of which represent tedious and manual processes.

With integrated, intuitive, browser-based and mobile P2P apps able to capture and attach receipts or reports, spend management solutions streamline the expense claim workflow, increase visibility, and ensure complete accountability for claims and accurate payments.

Built-in budgets

The education industry has always had to endure limited funding across their various locations, departments, and projects. P2P software does away with the need for department heads to constantly monitor and supervise faculty and administrative staff for overspending.

Fraxion's spend management solution enables you to build rules, alerts and controls into your configured P2P system—if there’s no money in the budget for a particular requisition, the transaction can be flagged or rejected.

Compliance

With decentralization of educational spend becoming more common, and decision-makers spread across various departments and even separate facilities, fraud risk, rogue spending and abuse of funds can also increase, if compliance is not strictly adhered to. These incidents can have harsh consequences for institutions, both for their finances and their reputations.

In the USA, the Every Student Succeeds Act (ESSA) is one of the most significant laws for public schools to comply with. In a report on school spending reports across 50 states by The Education Trust, the authors state that equity-oriented school spending data reporting is vital to improving the quality of resource allocations in schools. In fact, many states now include information on per-student school spending in school report cards, to show parents and community members that they are compliant with ESSA’s minimum reporting requirement of each school’s per-student spending [3]. However, although several states have attempted to comply with the minimum fiscal transparency requirements, only one state out of the 50—Illinois—actually developed a school spending report that aligned closely enough to earn a 100% rating for ESSA compliance. Ten schools failed the rating, while the remainder only partially passed.

Implementing fully-automated and integrated spend management solutions allow schools, colleges or universities to be more efficient at budget management, have more protection from risk, and have a much easier experience in remaining compliant—not only with ESSA, but with all other statutes demanding visibility and reporting on school spending.

Bringing it all together

As Huron points out in their article [2], educational leadership assessing spend management solutions have various considerations, or dimensions, to address during their P2P transformation. These include people, processes, and technology.

People

  •       Identify the essential talents and skills not currently in the workforce.
  •       Ensure that all employees understand how spend management furthers the goals and strategies of the educational institution.
  •       Encourage staff to provide feedback on the efficacy of the current spend management or P2P strategy.

Processes

  •       Examine whether existing processes, systems, or strategies ensure the best balance of compliance and efficiency.
  •       Identify which processes can be improved by spend management technology.
  •       Eliminate existing redundancy in spend management functions.

Technology

  •       Pinpoint issues or barriers with the current spend management tools or processes.
  •       Ascertain whether the existing technology integrates emerging technologies, and how frequently the tool is upgraded.
  •       Investigate visibility over spend data with the current tooling, to examine whether it enables better control over spend.

How can we help you?

Fraxion’s cloud-based procurement software provides purchase requisitioning, expense and approval management, with advanced spend analytics. Automate your educational institution’s procurement processes and streamline the procure-to-pay cycle with complete visibility, budget insight, and policy compliance.

Contact us today for advice on how to optimize your institutional and departmental processes, proactively manage your operational spend, and achieve paperless efficiency.

References

[1] National Center for Education Statistics, “Education Expenditures by Country,” 2021. [Online]. Available: https://nces.ed.gov/programs/coe/indicator/cmd.

[2] M. Spiegelman, “Public School Teacher Spending on Classroom Supplies,” National Center for Education Statistics, Washington, 2018.

[3] R. Presume and I. Smith Morgan, “Going Beyond ESSA Compliance: A 50-State Scan of School Spending Reports,” The Education Trust, Washington, 2021.

[4] D. Smith, J. Brown and K. Nolfo, “The Strategic Spend Management Imperative in Higher Education,” 2020. [Online]. Available: https://www.huronconsultinggroup.com/insights/strategic-spend-management-imperative.

Similar posts

Subscribe for updates and spend management insights.

Get our latest content, updates, and how-to resources delivered to your inbox.