Introduction
Controlling corporate spend is always high on the list of priorities for CFOs and every year brings about another complication. Yet corporate expenses remain notoriously difficult to control.
It’s not uncommon for employees to accidentally submit duplicate or out-of-policy expenses, which are easily overlooked in the expense report shuffle. Unfortunately, misuse is also common, thanks to inattentive managers and enterprising employees who know how difficult it can be to track thousands of missing receipt affidavits.
Partial expense report audits are the norm for many companies that can’t afford to pore over thousands of monthly expenses and want to pay their employees back promptly.
However, partial audits are far from ideal. They’re tedious, time-consuming, and require a lot of manual work. Even with a thorough team of auditors, the probability of catching all errors is small, and not worth the hundreds of hours spent.
Traditional technology solutions don’t solve this challenge because they can’t compare what was entered in an expense report with what’s on receipts themselves, nor check every merchant for legitimacy or appropriateness. But AI can help. AI-powered spend automation allows your finance team to accurately identify high-risk spending without wasting time or budget.
8 areas of company expense risk
Problematic expenses come in many forms. Sometimes, employees don’t fully understand their company’s policy (see below). Sometimes, they’ll submit an expense by mistake, and sometimes they test the limits. No matter their intent, out-of-policy expenses can add up to significant spend leakage.
Here are 8 common risks AI-powered spend automation systems look out for:
1. Hybrid work-from-home expenses
Many companies have updated their expense policies in response to post-pandemic working practices. Some employees remain remote or partially so, while others are required to be in the office. Ensuring every employee expense follows the correct policy based on location is time-consuming and requires checks that may be overlooked.
Making changes to expense policies is only part of the equation—communicating those changes quickly and clearly is equally essential. AppZen research has shown that employees are 50% more likely to follow updated expense policies if they are well communicated. They are also three times more likely to feel fairly compensated if the expense policy is clear and updated.
Some companies provide for productivity-enhancing purchases like headphones or monitors. With expanded policies to allow working from home, employees will hit lifetime thresholds quickly through no fault of their own. AI can automatically monitor employees who are nearing these thresholds and adapt thresholds accordingly.
3xEmployees are 3x more likely to feel fairly compensated if expense policies are clear and up-to-date.
“”3x
Employees are 3x more likely to feel fairly compensated if expense policies are clear and up-to-date.
2. Duplicates
Duplicate expenses come in many forms. An employee might:
- Submit a receipt for the same expense, more than once, on separate expense reports, intentionally or not
- Submit an expense twice, once with a receipt, and once with an MRA (missing receipt affidavit)
- File a cash expense for an expense they put on a company-paid corporate card
3. Out-of-policy expenses
Catch flagrant policy violations, from massages to sports cars to couches bought as home office furniture. Even if a business is operating under another name, AI can reference online sources such as Google or Yelp to determine the true nature of a merchant’s business. For example, AppZen’s AI has discovered the merchant name “K-Kel, Inc” as the DBA name for the strip club Spearmint Rhino.
4. Bribes and other illegalities
Gifts to clients or vendors can be legitimate expenses. But gifts to certain foreign government officials or other politically exposed people could be considered bribes under U.S. federal regulations—and land your company in hot water. AI that can cross-reference names against databases and verify gift recipients is essential for compliance.
5. Travel upgrades
Expense misuse can be simple or elaborate—from submitting personal expenses on a trip to buying a pricey airline ticket only to cancel and rebook a lower fare to pocket the difference. Unnecessary upgrades are also common. For example, an employee might bump their plane ticket up to first class or their standard hotel room to a suite, claiming nothing else left on the flight or in the hotel. While other solutions may flag an unusually high rate, only AI systems can look for cost variances across various categories and use contextual evidence to flag the correct expenses for manual review.
6. Testing boundaries
Most companies are clear about how much they’ll reimburse for food and alcohol expenses on specific occasions (e.g., a solo lunch on a work trip vs. a client dinner out), but that doesn’t mean that employees won’t try to push the envelope. While an extra drink or appetiser is usually no big deal, recurring £500 meals at Michelin-starred restaurants can damage your bottom line. AI-powered systems should call your attention to the most egregious spending so your team doesn’t spend time policing petty overages.
7. Repeat offenders
Maybe an employee has been regularly adding extra padding to regular expenses, such as expensing a £75 airport taxi ride when they spent £50. Or they repeatedly submit expenses with missing receipts or just under your company threshold for requiring receipts to hide fraudulent claims. Emburse and AppZen can detect suspicious patterns in individual expense reports and individual employees’ spending patterns to ensure your organisation isn’t being taken for a ride.
8. Unique policy compliance requirements
Large organisations often have specific requirements that are difficult to control manually, much less automate. For example, some companies require employees to purchase software subscriptions through procurement, not expenses, so they can accurately track subscription obligations.
However, accurately identifying a potential software purchase is tricky. (Which companies sell software? Which SKUs are software versus training or support?) AI models can lift this burden by allowing organisations with unique classification needs to automate the work, delivering significant time savings and avoiding allocation errors.
Another practice common in project or grant-driven organisations is creating unique thresholds and policies for specific projects. For example, some overseas clients may reimburse business class airfare, but only economy is acceptable in other situations. AI-based systems can enforce spending within specific general ledger (GL) codes representing client projects, funding grants, company events, etc.
How AI can help
AI-based spend automation solutions are a fast and cost-effective way to manage company expenses. While rule-based systems and manual audits can catch some overspending and misuse, only AI-powered software can give you the complete picture of every expense.
The following are the critical requirements when considering an AI solution to ensure your Emburse T&E program is always in policy:
Audit 100%, prepayment
Automatically audit 100% of expenses before reimbursement for duplicates, discrepancies, and potential fraud to determine which expense reports require manual review and which can go straight to payment. This allows you to reject expenses that don’t adhere to policy before they’re paid rather than trying to retrieve spend after it’s too late.
Enrich with intelligence
Critical information you need to validate spending is likely scattered across the company or in external online sources. AI can check the internet to verify merchants and prices and check people against regulatory lists, like those identifying politically exposed persons. This allows you to fully assess your risk by bringing in additional context to understand every transaction
Understand documents
OCR can digitise text and look for numerical amounts or keywords, but it doesn’t understand the context. AI understands expenses and can learn to read custom, expense-related documents like business justification forms. It knows that a root beer float on a receipt is a dessert, not a beer. And if special pre-approval is needed before entertaining specific clients, AI can validate that, too.
Customise
Enterprise finance teams often have unique corporate spending policies that are hard to enforce automatically. This is because they often rely on a nuanced understanding of a particular circumstance or being able to read and understand supporting documents. AI can be configured to address these situations at scale. If you can dream it, AI can automate it.
Assess and refine risk
Determine which expenses are erroneous, fraudulent, or noncompliant with your company policy—spot duplicate expenses across the company, whether from the same person or different people. Effective AI solutions continuously assess risk, allowing you to take automated action.
Streamline processes
With the ability to calculate each expense’s risk, you can confidently automate the expense approval process. AI integrates into your existing expense automation system to audit every expense in real time to spot errors, waste, and fraud. This helps you shorten reimbursement times, delighting your employees while still finding all instances of errors, waste, fraud, and non-compliance.
Understand and improve
Automating expense spend management takes insights, trends, and benchmarks out of the heads of your auditors (who can only see so much) and makes them available at your fingertips. From a 360º view of your spend that allows you to pinpoint and control risk in real-time to comparing your spend, risk, and operational performance against your year-over-year performance, AI-based data analytics is the key to turning a good program into a great one.
Conclusion
Getting a grip on company expenses starts with crafting clear company policies and communicating them effectively across all team levels. AI solutions on top of your Emburse solutions can enforce compliance, root out fraud and other risk factors, and prevent significant spend leakage.
You gain an automated solution to address expense processing without additional human resources. At a time when spend management is more critical than ever, doing more with less is a very welcome suggestion.
About Emburse
Emburse delivers innovative end-to-end travel and expense management solutions that solve for what’s next in forward-thinking organisations. Our suite of award-winning products is trusted by more than 12 million finance and travel leaders, and business travelers around the world. More than 20,000 organisations in 120 countries, from Global 2000 corporations and small-medium businesses to public sector agencies and nonprofits, count on us to manage business travel and employee expenses with ease.
Our highly automated, mobile-first solutions streamline business travel planning, booking, and management, and eliminate manual, time-consuming expense submissions, approval, and reconciliation. We deliver efficiency and time savings, increase financial visibility, enhance spend control and compliance, and improve the entire business travel experience. This empowers our customers and their teams to deliver meaningful value for their organisations.
For more information visit emburse.com/uk, or follow our social channels at @emburse.
About AppZen
AppZen, a pioneer in autonomous spend management, revolutionises back-office finance operations with enterprise finance AI technology. Tailored for finance and trained on millions of transactions, our solutions offer unmatched accuracy and efficiency in automating expense, invoice, and card processing. Our AI integrates seamlessly into existing workflows and learns your unique spend profile to make real-time decisions, reducing fraud and unnecessary expenses. Trusted by global enterprises, including a third of the Fortune 500, AppZen accelerates business agility and risk mitigation and delivers more time for strategic, meaningful work.