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While expense management applications are available as specialist standalone applications or as modules within broader application suites, a number of providers also offer outsourced services to manage the process on customers’ behalf.

Managed services have long been popular in the HR and payroll field, where third party providers manage transaction processing and handle specialist activities such as cheque printing and tax filings. In the late 1990s, the broader outsourcing sector also enjoyed a boom with the emergence of specialist application ‘hosting’ services, where vendors take on responsibility for running an individual software application that users access via web browsers. Although that approach suffered a backlash in the wake of the dot com collapse, many of the world’s largest IT companies now offer ‘On Demand’ hosted services and the model is relatively mature. As well as passing over responsibility for setting up, maintaining and upgrading the core application, one advantage of this approach is that the systems require no software at the employee’s machine beyond a web browser, which reduces maintenance overhead for distributed workforces and allows users to access systems while they’re at home or on the road.

In addition to handling expense-related transactions, third party providers may offer additional services such as:

1) VAT reclaiming and auditing capability. A service provider may carry out random checks on mileage calculator claims, for example, to ensure that the number of miles claimed for particular journeys is reasonable. This is something that in practice, few finance departments have the resource to carry out regularly

2) Manage paper receipts. This kind of service sees clients pass all of their receipts and expense-related paperwork to the service provider, which verifies them according to pre-agreed business rules and sends back summary information on who and what to reimburse. Handling this kind of high-volume, low value paperwork removes a significant piece of the administrative burden

3) Volume discounts. Service providers can aggregate their various clients’ spend and use the combined weight of multiple organizations to negotiate further discounts with preferred suppliers. This gives small and mid-sized businesses access to the kinds of spending deals that have previously been the preserve of larger enterprises.

From a technology and organizational perspective, expense management may be easier to spin off into this kind of managed services arrangement than other business processes given that it’s a discrete activity. As with any outsourced arrangement, it does carry some level of risk compared to an outright expense management software purchase, and customers’ due diligence needs to focus on factors such as the service provider’s financial strength, technology infrastructure, service history, customer retention rate and domain expertise.

Expense On Demand Ltd
Abbey House
28-30 Chapel Street
Marlow
SL7 1DD
0870 366 2300