October 19, 2017
Profits are shrinking and investment managers are starting to look closer at the cost side of the profit equation. Efficiency is the goal and cries for better back office technology are finally being heard, and nowhere louder than in accounts payable.
When thinking of accounts payable one can be forgiven if a bleak cubicle and red stapler come to mind. Unfortunately, investment managers face unique accounts payable challenges that can’t be overlooked. Expenses must be managed and allocated fairly across multiple funds, legal entities, and management companies. (The SEC stresses the fair part). This process is known as expense allocation.
If you’re thinking about improving back office efficiency, expense allocation would be a good place to start. Here’s why:
The SEC has made expense allocation a top priority and has been hitting investment managers with average misallocation penalties of $4.9 Million. Expense allocation is a challenging and complex process and it’s not hard to make mistakes. Unfortunately, most firms rely on shaky Excel allocation workbooks that could be only one fat finger away from an SEC penalty. An expense allocation system can remove the risk of human error and ensure compliance.
For many investment managers accounts payable is a manual process involving double or more data entry: invoices must be captured, approved, allocated, and booked by different people in different places. Accounts payable and expense allocation software consolidates and automates the end-to-end process, strengthening controls, eliminating double data entry, and saving time.
Pinpoint Accurate Reporting
Good decision making requires good information, which is hard to get when it is strewn across multiple Excel worksheets, a general ledger system, and a bank portal or two. You can’t reduce costs and improve profitability if you don’t have an accurate picture of what your costs are. An expense allocation system centralizes all expenses firm-wide, providing an up-to-date view of global spend at the click of a button. Ever wonder when a fund invoice got paid or when vendor contracts auto-renew? Wonder no more.
Investing in an expense allocation solution will streamline efficiency, ensure compliance, and provide a holistic view of expenses at the touch of a button. If you’re looking to reduce costs, accounts payable and expense allocation – the ultimate cost centers – are a great place to start.
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