B2B Payments

Consumer Habits Derail Schools’ Spend Management Goals

With procurement, B2B eCommerce and employee spend management solutions pushing for seamlessness, technology providers often attempt to provide a “consumer-like” experience to their end users. However, while corporate purchasing technologies must be user-friendly, failing to differentiate between the needs of consumer and corporate online shoppers can be dangerous to bottom lines.

For publicly-funded entities like charter schools, the inability to develop and implement a proper procurement and spend management strategy can introduce a host of problems that will come out in public reports and audits.

Charter schools use public funds and are exempt from some local and state regulations, but not all, explained Marco Rafanelli, co-founder and CEO of BuyQ, a group purchasing organization that provides procurement solutions to charter schools. Unfortunately, a lack of funding and minimal experience in procurement and spend management means professionals in this field — teachers and administrators alike often fall into consumer shopping habits. The budget restraints that make spend management so critical within charter schools are the same ones that make investments in sophisticated spend management technologies next to impossible.

“We see it as a problem  consumer-like shopping behavior in charter schools,” Rafanelli told PYMNTS in a recent discussion. “There are people in charter schools [tasked] with procurement without a professional procurement background, so what happens is they fall back on their personal, consumer behavior.”

Shopping on consumer websites may allow teachers and other school professionals to find a good price as a consumer, but it fails to achieve supplier discounts and negotiated rates that group purchasing organizations can achieve. Plus, added Rafanelli, agreements on orders, shipping and returns, and the ability to reconcile transaction data, aren’t optimized when procurement is done on consumer platforms. For organizations that use public funds, these barriers impose a lack of transparency and muddle the audit trail, too, he said.

However, it’s not just the procure-to-pay process that can cause leaked spend, overspending or a lack of transparency. Recently, BuyQ partnered with expense management company PEX to bridge charter school customers to PEX solutions, including payment cards for employees. Key to the solution, Rafanelli said, is its ability for managers in schools’ central offices to manage spend and ensure employees make purchases with approved vendors.

“If you can limit shopping to those vendors, it takes a lot of the guesswork out of teachers’ hands, and it takes consumer shopping behavior away, which is ultimately inefficient,” he noted.

These capabilities are important for any company, and still present challenges to many. Deloitte recently found that less than half of chief procurement officers are confident in their procurement teams’ ability to execute organizational spend strategies. In the public sector, only half of CPOs surveyed said they were able to deliver an improvement in savings performance.

Entities that rely on public funds, like charter schools, face greater pressure to manage costs, and greater obstacles to invest in the technologies that can help them do it.

“Often, charter schools are not large enough to either afford or properly manage the deployment of a procure-to-pay software system for purchasing,” Rafanelli explained, “or to take advantage of tools larger organizations can use to control rogue spending, manage every dollar and standardize vendors all best practice[s] in purchasing and procurement.”

Budget challenges are “compounded” by restraints on staff resources, he continued. Conversely, those resource restraints can compound inefficient purchasing and issues of financial waste.

By combining procurement and expense management solutions into a unified tool, Rafanelli said BuyQ can more efficiently and affordably provide charter schools with these capabilities. Otherwise, school central offices are burdened with administrative tasks, like answering teachers’ questions about how much they’re allowed to spend and where, whether they should make purchases with personal funds or use a central commercial card, and how to ensure purchases are approved.

“Charter schools, being public schools, they really have to watch every dollar they spend,” explained Rafanelli. “Often, there is a disconnect between staff-level spending and [the] policies, procedures and systems that the central office would like to keep in place.”

Even for schools that are just beginning to take a closer look at how to improve spend management, Rafanelli noted that opportunities remain, particularly when it comes to the mechanisms by which these schools make their payments. Purchasing cards integrated into a central system can provide greater control and visibility into employee spend.

However, when it comes to procurement, few charter schools have onboarded themselves to a supplier credit account, leading to a range of payment tools cards, checks, purchase orders and more. Rafanelli added that this can further impede visibility and management over spending in an area where purchasing volumes are typically larger than they are with employee expenses.

Public schools cannot afford to operate with a lack of transparency, especially when it comes to finances.

“For the most part, schools are looking for ways to become more efficient and effective in this area,” he said. “I would say there’s room for improvement there. As stewards of public funds, every charter school is concerned about knowing where every dollar is spent. They’ll have to be audited financially, they all need to have a trail for all expenditures, and financial records are public.”

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