Cost Savings using SAP Business One – Part 2 (Controlling Expenses)

By Dattatrey R.Kulkarni Posted September 17, 2016 In Benefits of SAP Business One, Management
Business Organizations incur expenses while running regular operations. They could be in the form of travel expense, fuel expense, utility expense, and other overheads. While drawing up a business plan for a year, companies usually budget for certain amount towards various expenses. The idea behind the budgets is to set a limit on the expenses in relation expected revenues. However, setting up budget is just a starting point. The rubber meets the road when the actual expenses start getting incurred and booked into the system. If the organization is not able to keep a track of such expenses in a near real time basis, it would be a challenge to implement the budgetary controls, thereby rendering the budgeting exercise futile.
SAP Business One has the necessary feature functionalities and tools which when used appropriately can deliver ability to track and control expenses.  Thanks to the strong integration between various functional modules it is possible to set hard or soft controls as needed at the point of expense. For example, if the budget for stationery items has been used up, system will stop the buyer from the raising the PO for this category of items, thus preventing a budget violation, should the material have arrived and vendor was paid. Going one step backward, SAP could actually send an alert to concerned users at pre-defined levels (say 50%, 75%, 90%, 95% of budgeted amount) informing them about the same proactively.
Tracking Expenses – Cost Center wise
A cost center is a company unit or division that performs a specific business function like Sales, Administration, HR etc. The cost center you define here represents the respective division or department, and is used to consolidate the expenses and revenues resulting from the ongoing activity of the specific organizational unit.
In SAP Business One it is possible to set-up a cost center hierarchy based on the MIS needs. Further, expenses can be allocated to these cost centers based on distribution rules, cost centers can be assigned to expense/revenue/Cost of Goods Sold account and budgets can be set-up at a cost center and expense account level. Plan versus budget reports can be drawn up proactively which may lead to decisions that help in reducing further expenses.
Tracking Expenses – Project wise
In simplest terms a project is a set of inter-related tasks to be executed over a fixed period of time within certain cost and other limitations.
In SAP Business One, projects can be set-up and can be used to manage your projects from start to finish, centralizing all project related transactions, documents, and activities. Further it helps you to monitor the progress of tasks, stages and phases, analyze budget costs, and generate reports on various aspects of the project, such as stage analysis, open issues, and resources. Using this feature project level budget can be set-up and used for tracking plan v/s actual cost effectively. Also, you can run a project level P&L statement at any time to understand the financial situation of the project and take proactive actions to ensure that you are within budget.
Reducing Costs on account of Improved Productivity
Companies that do not use software application to run their business, rely on manual effort to record data, which is usually a slow process prone to errors. In some cases it is observed that two different sets of teams are entering the same set of information in different formats – which is essentially a duplication of efforts. This not only slows things down but also potentially gives rise to information mismatch leading to an iterative process leading to delays.
Many companies use multiple software applications for different processes. For example, accounts are run on one application, inventory on other and sales invoicing on yet another. Such disparate systems lead to challenges with respected to generation of timely and accurate reports that need information from all three (or more than one) systems. The commonly seem practice is to download data from each application into a spreadsheet and manually integrated them. Being a manual task, it has its disadvantages as mentioned earlier.
As against this, when companies use SAP Business One, business transactions across several business processes are recorded in the very same system in a tightly integrated environment. There in minimum human effort and absolutely zero duplication of work. Due to this, the overall productivity of the company staff increases significantly. This may result in either reducing man power leading to reduction in costs or handling a larger volume of business with the same headcount which has a positive impact on bottom line.
Proactive Alerts – Raising the Red Flag
SAP Business One allows you to set-up alert for variety of business event triggers. It could be an alert for depositing tax to government before the last date or it could be for paying utility bills within time. The possibilities are many. Such alerts when received proactively can help reducing penalty or interest cost and improve company’s compliance towards statutory requirements.
Summary
The potential of SAP Business One helping companies reduce their expenses is significant.  Whereas only a few examples have been explored here, there are many more methods and tools available in the system that can help setting up an environment which once active can spare the business owners additional time which can be spent towards more value adding activities for their business.
In case you would like to discuss more or learn about our experiences please:
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