Budget spreadsheets as a way to verify a requested payment

Workspaces Software (General)
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(A contribution towards process reform – ping @matthias)

One of the issues in our current process reform is that the person in charge of payments currently has no clear and quick way to determine that a requested payment is justified. The “two directors rule” is useless here: if a director is not directly involved in the project requesting the payment, she will typically not know if the payment is legit or not. Payment requests are of the kind “can you please pay X’s bill?” or “can you refund Y’s plane ticket to Frankfurt?”. Outside of a project framework, there is no way of knowing what the bill or the trip to Frankfurt are for. It is not realistic to expect a random director to take responsibility for this stuff.

I propose we fall back on the project manager. Projects are sovereign in Edgeryders, and with great power comes great responsibility. It could work like this:

Scenario one: a planned expense comes to maturity. For example someone delivered something they were meant to. In this case:

  1. The project manager receives a bill or a claim for expenses fronted relative to her project. She creates the bill or expense payment claim on FreeAgent (remembering to assign them to her project on FreeAgent too), and uploads any receipts or PDF invoices that go with it.

  2. The project manager requests the payment in any way (Matrix, even orally).

  3. The person charged with making the payments (for the time being, this will always be a director) checks the budget spreadsheet of the relevant project. They should find an entry to the name of X, or dedicated to a travel budget. They may also find a second column or entry, dedicated to the money already paid to X or spent on travel. As long as the former is there, and the latter is not smaller than the payment requested, the payment can be made without further ado.

  4. After the payment is done, the project manager updates the spreadsheet to keep track of how much money she has left to spend.

Scenario two: an unplanned expense comes up. This would be requesting a payment for something that is not on the budget spreadsheet. In this case:

  1. The project manager receives a bill or a claim for expenses fronted relative to her project. She creates the bill or expense payment claim on FreeAgent (remembering to assign them to her project on FreeAgent too), and uploads any receipts or PDF invoices that go with it.

  2. The project manager requests the payment with a short post on the platform, in the cat judged most appropriate (normally where the project is coordinated). The post should contain a short explanation (“I have decided to hire W for a day, as I am trying to build a strategic partnership with her and want to show trust”), and the indication of where it gets recorded in the spreadsheet. There should be a residual category in the spreadsheet template for this kind of stuff. If the project’s resources are all spoken for, the project manager should indicate what other expenses she is going to slash to support the new expenditure.

  3. The person charged with making payments need only confirm that the project still has some available funds overall (by looking at the spreadsheet), and can then make the payment.

  4. After the payment is done, the project manager updates the spreadsheet to keep track of how much money she has left to spend.

Note that we are duplicating some information: occurred expenditure are being recorded both on the spreadsheet and on FreeAgent. I propose this is provisionally a good thing, as it teaches us sound financial project management and pushes financial responsibility back where it belongs, with project managers. If this turns out to be useless, in the future we might use the spreadsheets for planning purposes only, and use FreeAgent for ex-post monitoring of our finances and project profitability.

1 Like
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Hmm I like the proposal :slight_smile: It pushes one more function to the budget spreadsheets, which are a central tool in our future processes already. Better than introducing another tool or document.

A few modification proposals:

  1. To be trustable information that can justify payment requests, spreadsheets must be editable only by the project manager (and the other directors, because we have to trust them anyway). Certain parts of the budget spreadsheet will need to be editable by project contributors as well (for example the exact amount of expenses made), but this can be achieved with the “range editing permissions” feature in Google Sheets (“Protect Sheet …” from a sheet’s menu on the tab header).

  2. About recording budget items and expenses in the same spreadsheet:

    Our current plan (here) for the budget spreadsheet is to allow to gradually refine a budget, from a rough version submitted in the first stage of proposals to a very detailed version at the end of the project. To refine it, one would take a budget position and add sub-level entries below it that sum up to the budget position. The last hierarchy level of these sub-level entries will always be actual expenses – one entry for one expense. If we go with this, preparing a payment request would mean that the project manager records a corresponding line in the budget spreadsheet, authorizing the expense by doing so. Then, the person making the payments will look this up, check if the total budget is not exceeded, make the payment and add the payment date back into the budget spreadsheet. (This will make the expense count into “money spent so far”, and also include the expense with this date into the cashflow graph rather than a predicted date in another column.)

  3. If this process is acceptable (“payment manager enters payment date into budget spreadsheet”), it also solves a difficult issue that we had with the planned budget spreadsheet template so far: how to import expenses as CSV records back from FreeAgent into the spreadsheet (details). It needs some work to “reconcile” imported expense records with budget items, and I had no good idea how to do this with minimal work (once per expense record, not once per expense record and import). But that would be solved now! :slight_smile:

  4. In addition to the payment date, the payment manager would enter a link to the FreeAgent record for the expense or bill.

  5. We might want to treat the budget spreadsheet as the “payment task list”, without a need to notify the payment manager individually. Just fill the “Payment requested now?” column and wait. Notification e-mails might be send to the payment manager automatically.

  6. Later, to ease the job of the payment manager even more, we can create a one-click solution to fill a whole FreeAgent expense or bill form from a row copied from the spreadsheet (using Form-o-Fill or similar). The same to fill the online banking form. (The person will still have to check the form before confirming it.)

This way, budget spreadsheets would become the original data source. There are some loose ends with such a setup, still: where to store the receipts and PDF invoices before they make it into FreeAgent, and how to deal with the fact that payment requests for reimbursement cover an arbitrary number of expense records in FreeAgent (so that there would not be a single place to look up the payment authorization). But these seem solvable.

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I do not think that’s necessary, as long as there is a revision history and the project manager takes her job seriously. And if she does not, we’re screwed whatever the process. :smile:[quote=“matthias, post:2, topic:8771”]
the person making the payments will look this up, check if the total budget is not exceeded, make the payment and add the payment date back into the budget spreadsheet.
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I would prefer for the project manager to be the person handling the spreadsheet, and the person taking care of the payment handling FreeAgent. This is for easier accountability: if the spreadsheet is messed up, it’s my mess. If FreeAgent is not up to date, it’s your mess.

This makes sense also because the latter is a director (in my proposal at least), guarding the official accounting that forms the knowledge base for tax returns, grant proposals, due diligence tests etc. The project manager (who could be or not be a director) stays responsible for the spreadsheet, which is an internal planning document and a forecasting tool (in the part concerning the cash flow prediction), but has no legal value or implications.

Overkill, IMHO. FreeAgent has a handy search box. It’s simple to find anything in it. Stay minimal, man! :wink: [quote=“matthias, post:2, topic:8771”]
We might want to treat the budget spreadsheet as the “payment task list”, without a need to notify the payment manager individually. Just fill the “Payment requested now?” column and wait. Notification e-mails might be send to the payment manager automatically.
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This is great, but I guess we could implement a MVP without it. Just as long as the spreadsheet template is easy and well thought through. That is where I would invest brainpower.

Yes. This is more resilient (many spreadsheets) and coherent with the project sovereignty principle.

You are right. I will add it to my proposal. I think what needs to happen is that the project manager is responsible for the document justifying the payment being uploaded onto FreeAgent. In practice, the PM might have collaborators send her a bill, or create accounts for them so that collaborators can upload their own bills. Once that’s done, she starts the process, requesting the payment.

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Well of course, the first version will be simple, without the bells and whistles. So we basically are in agreement I think. (I only like to explore future options to know we won’t get stuck with a chosen process if the volume of payments grows and we want things to be more automated.)

The only thing where I don’t agree is this:

It’s my observation from Edgeryders projects that form-filling and record-keeping tasks that involve any communication and research effort only get done sluggishly. In this case, the project manager would have to inquire from the person who was paid or from the payment manager if the payment was made, and at what date. The total time efficiency is higher, and the number of annoying messages with questions lower, if we make the payment manager enter the payment date (into the same row that contained the data relevant for payment, so no need to look around). So the payment manager will be responsible for just that column “payment date”, the project manage for the whole budget spreadsheet.

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No need to worry about that. The person who does not get paid complains, so that error is easily spotted. And the project manager has access to FreeAgent, so she can check on the status of her payments. She might have a “blind spot” of a few days between requesting the payment and seeing it reconciled on FreeAgent, nothing more.

As for the date, it’s not important. This is because cash flow is important only in projection; what’s done is done, and it does not really matter what at what precise data money was paid out or collected. What matters is more or less when we expect to have money coming in or out in the future.