As the financial services industry continues to increase the speed at which it operates, funds large and small are grappling with the inefficiencies of manual expense management and expense allocation.
This time-consuming process wreaks havoc on the day-to-day workload of mid-office and back-office accountants, finance team members and administrators, forcing them to devote a larger portion of their busy schedule to reviewing expenses than they should. To boot, this overallocation of time to invoice review leaves far less time and mental energy available for catching mistakes and noncompliance in billing.
As a result, the antiquated pen-and-paper method for expense management is fading away in favor of smartly designed expense management and expense allocation software.
Expense management software and expense allocation software platforms are considered essential mid- and back office tools in the technology stack of hedge fund software and private equity fund software.
When a company makes the switch from outdated paper, PDF and spreadsheet processes to enterprise expense management software, it immediately experiences an increase in efficiency.
In the case of Resolvr, we have seen over 46x improvements in invoice review times within 6 months of implementation, and net annual ROIs on our license costs of 8-9x. How? We utilize machine learning to catch over 45 common billing mistakes that vendors make, and we handle the resolution of these issues on our end with our Resolution Desktop™.
Digital solutions enable team members and vendors to share information in a centralized hub that has built-in accounts reconciliation, oversight and control mechanisms to maximize productivity and minimize errors.
Simple gamification, such as ranking finance team members by invoices review, and time management email and in-software reminders increase the invoice throughput typically by a factor of ~50x.
Moreover, expense management platforms with built in expense allocation maximize compliance with Dodd-Frank Act requirements vis-a-vis advisor fee transparency. Asset managers, including hedge funds and private equity funds, are considered financial advisors.
Chief compliance officers and in-house general counsels should be able to utilize an expense compliance platform to download a real time audit trail of how expenses are allocated across vendors, with approval workflows baked in that ensure every limited partner is treated fairly in terms of their fair share of fund expenses.
When a company makes the time and capital investment required to incorporate expense management software into its operations, the fund needs more than a product that only creates greater efficiency — it needs a product that can also seamlessly integrate into any existing financial technology platform or software through Application Program Interfaces (APIs).
Cloud-based software programs typically deliver on this need, offering users additional value things further by including 1-2 free integrations, with 24/7 support. In our software, we have found clients find value through the integration of their email client, such as Outlook, with their expense management software. This integration allows our clients to automatically upload invoices from their email into our expense management software.
So, not only does SaaS expense allocation software remove the slow, labor-intensive and error-prone methods of manual expense management, but it also specifically designed to remove data input repetition and data siloes to make transactions as easy as possible.
The best expense management software is designed to improve upon the old-fashioned, human-powered process, not just replicate it. We consistently evaluate user acceptance and software capabilities, for example, to see if a refined six sigma process can unlock time savings or greater billing compliance.
Just one of example of this improvement, found through consistent testing, is invoice tagging. For example, any invoice you receive from a given vendor that's beneath a given threshold, say $1,000, will be only reviewed with our software and if there are no issues, it'll be automatically paid and recorded in your accounting software.
Through digital data streams and machine learning (an earlier form of artificial intelligence), expense management software, especially platforms custom made for funds, can generate ROIs on the software cost of well over 5x.
If your fund is looking for ways to ensure compliance in its expense management process while increasing productivity and profits, cloud-based enterprise expense management software might make sense for the aforementioned reasons.
Gary R Markham
Gary R Markham is co-founder and Chief Executive of aXpire fund solutions, which designs, develops and deploys an array of expense management tools. He is an author of many articles, regularly speaks at conferences, panels and symposiums, a Global Director of the Hedge Fund Association, a recent recipient of the Keys to the County of Miami Dade. Gary has over 20 years experience in FinTech, specializing in spend, expense management, vendor and allocation and apportionment software solutions.