28 February 2018

Since April 2016, housing associations have been required to cut rents by 1% per year.

The Welfare Reform and Work Act 2016 requires registered providers of social housing in England to reduce rents for four years, and comply with maximum rent requirements for new tenancies. According to the Institute for Fiscal Studies (IFS), this means that by 2019-20, social rents will be 12% lower than they would have been without this new policy.

Meanwhile, the cost of compliance with new regulations – like the incoming General Data Protection Regulation (GDPR) – means housing associations are increasingly under pressure to do more with less.

So, with tightened purse strings and reduced rents, how can housing associations relieve the pressures on their finances?

Improving the purchasing process

Budgets play an important part in cost control. Being able to spot problems early means we can take timely and effective action. Systems that can streamline and improve the purchase order process, and provide budget holders visibility to the consequences of their actions at the point they make a spending commitment are much better.

This is particularly true when it comes to cost control and management agility. Historically, the problem with purchase order systems has been that they’ve not been user-friendly, providing an excuse to avoid using them.

Simplifying and streamlining the user experience

It’s important that any purchase platform is easy to use. Employees are far more likely to use the system if requests for purchases resemble their usual consumer experiences with ‘point and click’ functionality.

Businesses can benefit directly from introducing systems like this through less time spent processing transactions, and speedier processing, with invoices processed in days rather than weeks.

The indirect benefits derive both from faster processing and the improved visibility and control. Faster processing means transactions will be on the ledger by the end of the month.

It also improves the visibility of purchases, while highlighting those goods received without an invoice, making it easier to process those accruals.

The controls provided by purchase order systems include full audit trails from requisition to payment, so management and auditors can be assured that the process is complete and accurate This visibility also reduces both management time and audit costs.

Cash flow, planning and forecasting

Housing associations are not for profit organisations and any reduction in income can put an immediate and serious strain on cash flow.

Cash flow planning and forecasting is therefore critical and the visibility of future cash commitments at the point of purchase allows control against budgets and plans, and facilitates reliable cash flow forecasting.

North West-based housing association Adactus is one example of an association that successfully implemented a point of purchase (POP) solution to create more robust controls over spending across multiple departments. Prior to bringing in a POP system, they had continued with a manual operation which was leading to long delays in processing invoices. With the new solution now in place, Adactus is more in control of spending across departments, increasing transparency and accountability in the process.

It is highly unlikely, at least in the short term, that expenditure budgets for housing associations are going to increase, so they must continue to do more with less. A POP system that improves efficiency, visibility and control over the purchasing process can play an important part in helping them achieve this.

Ian Smith

Finance Director and General Manager at Invu

Invu is a document management, accounts payable and purchasing solutions provider.

Facing rent reductions, how can housing associations do more with less?