An accidental budget overrun is something no finance manager wants to deal with – especially if it has arisen as a result of a pending payment being overlooked.

Commitment accounting refers to the ability to track and manage future financial obligations. Getting it right involves recording future obligations as soon as they arise, ensuring that funds are reserved and can’t be spent elsewhere.

One of the best aspects of the U4FbC Procurement module is the fact that it makes you much better equipped to track and account for committed future spend. Two things are essential for this: visibility and control. The U4FbC Procurement module gives you both.

Visibility stems from the fact that Unit4 Financials by Coda is built around a single integrated database. This allows you to analyse your commitments in the round: for any account, you can see what you’ve spent and will spend as a consequence of approved purchase orders. This means you can instantly and accurately compare your budget against committed spend.

The control element ensures you are warned of possible budget overruns before managers enter binding commitments. Let’s say a departmental manager submits a requisition for approval. The system automatically checks this against the budget to see if sufficient funds are available. We can configure the system for you so that if there’s going to be an overrun, relevant budget holders and other stakeholders are immediately alerted. You can then decide whether to approve the requisition or put it on hold.

The Procurement and Invoice Matching modules work the same way as the main U4FbC platform, so users can get to grips with them immediately.

As with Unit4 Financials by Coda, the Procurement module uses position hierarchies to determine authorisation workflows. A position determines the monetary authorisation limit for different categories of employees. So, for example, you might have three positions: £10k, £50k, and £100k, with employees assigned to positions according to their department and level of seniority.

The system also lets you distinguish what employees can sign off on based on elements of responsibility. For instance, you might have two managers at the same seniority tier, both of which are assigned a £10k spend position. Thanks to element responsibility, you can ensure that, for example, an IT manager can only sign off on IT-related business, and the finance manager can only sign off on finance-related expenditure. This way, you can build an approvals hierarchy matching your organisation’s approval matrix.

When goods or services are received, but the supplier’s invoice has not yet been issued or processed, Unit4 Invoice Matching can automatically generate an accrual entry. This means the cost of the received item is reflected in your accounts even before the invoice is matched and paid.

Of course, not every expenditure item needs a purchase order (utilities, rent, and routine employee reimbursements are just some examples). For these types of expenses, a non-PO invoice will only be accrued at month-end if it hasn’t been approved through the workflow by that time.

In U4FbC, selectors control all of this. Throughout the system, you use selectors to filter, retrieve, and organise data and control all activities – whether it’s reporting, payment runs, currency, or revaluation. The Procurement and Invoice Matching modules both use selectors in the same way as the rest of the Unit4 ecosystem, so when you’re putting these add-ons to work for the first time, it’s very much ‘business as usual’, with no steep learning curve.

The Procurement module is designed to consolidate procurement processes linked to indirect spend (i.e. not inventory). Therefore, it makes sense for many businesses to implement this module alongside their inventory/stock control system and apply the Invoice Matching module to both. The use of selectors facilitates this, enabling us to set up different accrual control accounts for you and using the selectors to determine which account different categories of invoice are sent to.

The platform’s comprehensive intercompany capabilities are one of the significant benefits of U4FbC, making it as straightforward as possible to automate, simplify, and manage transactions between different entities within your business. This functionality extends to the Procurement and Invoice Matching modules.

Let’s say a manager raises a purchase order comprising three lines relating to three separate companies within the business. Thanks to the intercompany purchase order option in Procurement, you can raise a single purchase order, but each expense line goes to the P&L of the corresponding entity. In contrast to many systems which require you to carry out intercompany allocations after the event, it’s all handled at the start of the process: you tell the system which company each expense line relates to, and the platform does the rest.

Self billing means you can process transactions without waiting for third parties to send through their invoices. It’s common when you have a long-standing relationship with a supplier, particularly involving frequent, repeat transactions.

Unit4 Procurement and Invoice Matching both support self billing. For example, you raise a PO in the Procurement module. On fulfilment, a goods received notice (GRN) is generated. You can also configure the system to automatically generate an invoice on the supplier’s behalf. The Invoice Matching module will then match the GRN to the invoice, post it to your account, and automatically email the invoice to the supplier for their records.

An excellent invoice matching tool should reflect the realities of commercial relationships. And, of course, in contrast to fulfilment taking place via a single neat event, it’s very common for it to happen in stages, with invoicing based on things like batch delivery, services required, or project milestones met.

Under these scenarios, identifying discrepancies between invoices, purchase orders, and fulfilment records becomes much more challenging. This is why you need robust deferred matching capabilities, which Unit4 Invoice Matching provides.

For example, let’s say you have engaged a third party marketing company. You’ve negotiated a fixed fee of £100k to cover a marketing campaign and agreed on an advance payment of £10k.

Under this scenario, you can raise a PO of £100k using the Procurement module. At the same time, the marketing company invoices you £10k for the advance payment. But of course, you haven’t received any services yet, so there’s no fulfilment for it to be matched against.

This is where the deferred matching functionality comes into play. The £10k invoice will be posted to your balance sheet, and the payment will be processed. However, it is also posted to a dedicated prepayment account. Later, upon completion of the contract, the marketing company issued an invoice for the remaining £90k. This is matched, and the system automatically takes the £10k out of the prepayments account and posts it to the same expense item as the £90k.