FSN: Outsourcing expense management

Outsourcing expense management – an easy win?

13th February 2006
Expense management for many organisations is a tiresome and unrewarding process yet it is vital to the smooth running of the business. Ensuring that employees are re-reimbursed promptly for business journeys and expenses necessarily incurred during the course of out their work is vital to maintaining an efficient and motivated workforce. But managing the process in-house can be time consuming and expensive. In addition, increasingly complex tax laws in Europe and beyond coupled with a high volume of employee expense claims poses a significant compliance risk. However, with the advent of the web, there is an increasing move towards outsourcing expense management and leading outsource providers such as Globalexpense.com and Concur Technologies are witnessing significant growth. FSN investigates.

Ashley Whittaker, of, GlobalExpense, a British provider, is in no doubt that compliance is a major driver for growth in the expense management market place. “Organisations are very concerned that they process expense claims accurately from a tax compliance point of view because there are so many possible tax implications, such as VAT, Corporation Tax and Income Tax,” he told FSN. Whittaker, an ex-tax inspector should know. He points out that client companies appreciate the in-depth knowledge of taxation and accounting that is built into GlobalExpense's technology solution and process support. “Companies using our process not only have their expenses managed in a very efficient way but have the added comfort that they are complying with tax law.”

Simon Nelson, VP of operations at Concur Technologies agrees that control issues are driving the market. Concur has witnessed dramatic growth. Total revenue was $19.3 million for the first quarter of fiscal 2006, up 18% compared to the year-ago quarter and subscription revenue of $15.2 million for the first quarter of fiscal 2006 grew 26% from the year-ago quarter. Explaining the growth, Nelson told FSN, “Businesses have concentrated on their core financial processes and are now looking for the same degree of control and efficiency around expense management. Bringing the processing in-house rarely pays, so having expenses run by an external supplier who can ensure the adequacy of backup and security is attractive. In most cases, companies can expect a return of investment of less than six months,” says Nelson.

The enterprise expense management market is a relatively young industry. Inexpensive access to the internet from any where in the world has made it possible for employees to submit expense claims on the hoof. Furthermore, well developed application functionality not only checks that expenses are submitted in a tax compliant way but also that any expenses claimed fall within permissible categories and limits laid down in employment contracts and corporate HR policies.

Managing expenses within company policy is almost impossible to police in a high volume environment without a disproportionate level of manual effort but an automated submission system can apply the rules consistently as the expenses are entered. This added level of control can reduce the incidence of ‘rogue' expenses at a stroke whilst ensuring, for example, that all the applicable VAT is reclaimed. David Vine, the marketing Director at GlobalExpense says that benefits such as these can pay for the system in a very short period of time. Added to which, headcount that previously used to be tied up with expense claim processing can be diverted to more important processes within the business.”

“Our system allows expenses to be submitted on a line by line basis” Vine told FSN. “This means that if an employee submits a complex multi-line claim for re-imbursement then we are able to pay all of the valid items without delay whilst any lines incorrectly submitted are queried,” he says. Often, client companies leave money on deposit so that employee claims can be settled the next day. “Prompt re-imbursements of expenses is important for staff moral and reflects well on the company”, remarks Vine. It also cuts down the level of calls and enquiries to the accounts department querying when expenses will be paid.

Where expenses are paid by corporate credit card, the GlobalExpense system is automatically updated by a data feed from the credit card provider. This means that employees simply have to reconcile their credit card expenses with expense claims submitted. Once the claims are completed, the employee submits the relevant vouchers and receipts in specially provided envelopes marking the outside of the envelope with a batch number (allocated by the system after the expenses have been entered). These are then sent to the GlobalExpense back office for processing in central London . Vine explains that the central London location is important because there is a ready supply of multilingual staff that can cope with employee expense claims from around the world.

Once the batched expenses arrive in the processing centre they are all scanned and an electronic image is appended to each line of the expense claim. “Auditors find it so easy to carry out an expenses audit because all of the information they require is readily available on the system,” says, Vine.

There are so many compelling reasons to outsource expense management that it is difficult to see why anyone would want to process expenses in house. Global Expense has built up an impressive list of household name customers such as, Alcatel Telecom UK , Brakes and WH Smith PLC. However, Vine is keen to point out that even start-ups can benefit from their well oiled process. “We recently had a fund management company sign up with us. They had a handful of employees but they simply decided that expense processing was non-core and farmed it out from the start.”

Nelson of Concur Technologies, says that investment in outsourced expense management is becoming a “no-brainer” particularly when taking the ability to reduce costs and force adherence to group expenses and travel policies into account. “Fraud is becoming a big concern in many organisations and unfortunately the expenses system is seen as a soft target. However, our system of controls coupled with individual customers' travel and expense policies significantly reduces the scope for fraud.”

About Us