Five Trends in Expense Management Automation

There is a major shift happening in expense management with innovative technology replacing traditional receipts and spreadsheets. In short, automation has taken over, ushering in an era of unprecedented efficiency.

In light of this ongoing transformation, here are five trends in expense management automation to watch in 2024.

1. AI and Machine Learning

 AI simplifies the expense management process by automating repetitive tasks such as scanning receipts, categorizing expenses, and detecting policy violations. Incorporating AI within expense management solutions not only saves time but also reduces the risk of errors, makes expense reporting more convenient, and ensures compliance. One part of this is using OCR technology to automate invoice capture by extracting text from images or scanned documents, which eliminates the need for manual data entry and greatly reduces the risk of errors. Moreover, an expense allocation solution can create automated review and approval workflows for each type of invoice, eliminating the need to route individual invoices from one department to the next via email.

2. Integration with Financial Systems

Traditionally, expense management processes have been fragmented, with relevant data scattered across multiple platforms and systems. By integrating expense allocation solutions with accounting platforms and other systems, investment firms can streamline and centralize expense-related workflows. Some solutions come with out-of-the-box integrations that seamlessly connect to popular accounting and expense platforms.

With automatic synchronization of data, there is no need for manual entry and a much lower risk of errors. This improves efficiency and time-savings for finance teams. In addition, integration with core systems provides a more holistic view of financial data, enabling better planning, budgeting, and forecasting, and ultimately improved decision-making.

3. Regulatory Assistance

Managing compliance is critical in expense management. It’s important to ensure that expense allocations comply with SEC regulations to avoid heavy fines. New rules and regulations are introduced frequently to increase transparency and prevent potential fraud. In fact, the SEC has highlighted disclosures related to fees, expenses, and conflicts of interest as one of its top concerns for OCIE examination.

In a significant move, the SEC recently adopted new rules under the Investment Advisers Act of 1940 (Advisers Act) to enhance the regulation of private fund advisers. These rules are designed to increase the accountability of private funds while protecting investors.

Circumstances such as undercharging funds can have as much impact on a management company’s revenue as overcharging. With the right expense allocation software, you can be sure expenses are thoroughly scrutinized against established policies and relevant regulations. Automated solutions help create audit trails to establish detailed records of activities and transactions related to expense allocation, including all records of invoice approvals and specific dates of allocations. This makes compliance and tracking much easier.

4. Real-Time Expense Tracking and Reporting

Data is now easily accessible, and expense management is expected to keep up with these expectations. Real-time data provides detailed insights into spending, enabling funds to quickly identify potential risks, operational bottlenecks, and excessive spending. Funds can also use real-time data to inform cost-cutting measures, improve operational excellence, and close the books faster. Automated expense allocation solutions can distribute expenses across various categories and cost centers, making it easier to track expenses in real-time. By integrating with other financial systems and using algorithms, these solutions can instantly categorize expenses, allocate them to relevant departments or projects, and generate reports in real-time.

5. Customization and Scalability

Firms can adapt automated expense allocation solutions to unique workflows, preferences, and regulatory requirements through customization. This includes the ability to configure expense categories, approval workflows, and reporting formats to align with internal policies and practices.

Hedge funds and private equity firms often have complex investment strategies that result in complicated expense allocation. As they grow in size and complexity, firms require scalable solutions that can accommodate rapidly increasing volumes of transactions, users, and data. A large number of incoming invoices makes it challenging to track and allocate expenses accurately across investment portfolios, leading to a high number of receivables from funds back to the management company. In some cases, the management company would bear these expenses due to the lack of support for complex allocations.

Automated expense allocation solutions can scale to handle large volumes of expenses without compromising performance or reliability. This ensures smooth and efficient operations even during periods of rapid growth or expansion.

The expense management industry is undergoing a transformative technological shift. As investment management firms strive to adapt to changing expectations, it is important to choose an automated solution that can enable these five trends and many others.

The IVP Expense Allocation Solution can do all of this and more. It simplifies the cumbersome process of expense tracking and reporting, making it easy to capture receipts and submit expense reports from any location, at any time. Its streamlined process significantly reduces the total workload for finance departments, freeing up valuable time and resources for more important tasks and strategic initiatives.

Learn more about the IVP Expense Allocation Solution right now or contact sales@ivp.in to schedule a live or online demo.