Effective Cost Control Processes

Mar 14, 2018 12:02:59 PM

I was recently talking to a maintenance manager who had left a large mining company to go and work for a small service provider. He was recalling some of the frustrations that he had and one of them, that I could also relate to from my experience, was the invoice approval process.

He said that the process in place for the company that he worked for was similar to the following:

  • Ensure the work was in the budget or request a variation to the budget for unforeseen work
  • Get the quotes for the required work
  • Raise a purchase order
  • Purchase order goes through the approval processes
  • Monitor the work that has been completed
  • And finally, physically review and sign the paper invoices for payment approval even though the invoice was as per the original approved amount

This was very much the same process as I had to follow previously although, the final invoice approval process was electronic rather than a paper version. Electronic sign off was not any quicker, in fact, it is slower, but probably fewer admin hours overall.

I am not sure why the approval processes are so demanding, I can only assume it is to force a detailed level of review and due diligence for cost control. I do not believe that this is an effective process as the sheer number of approvals means it would be a full-time job to read every invoice in detail. It is certainly not a good use of the maintenance managers time. These days it is difficult to understand why the invoices that are on or below the previously approved expenditure are not simply processed automatically.

I have previously written an article on tips for the maintenance manager to manage their budget (https://www.linkedin.com/pulse/4-practical-tips-maintenance-managers-manage-budget-gerard-wood?trk=prof-post). This article is about making sure the expenditure is always in line with the budget and that there is a level of cost control over the decision to spend the money in the first place, rather than imposing an inefficient and ineffective process of review. I believe that if we ensure that everyone who makes the spending decisions are aware of the budget and what is required to reduce the expenditure the cost control task is much more effective.

Have others experienced this frustration?


Author: Gerard Wood