Expense report auditing remains a highly manual, difficult process for many organizations. So much so that many just skip it. Aberdeen reports that less than two-thirds of organizations regularly conduct audits of expense reports. That’s a scary notion considering T&E is the second-largest corporate expense behind payroll.
Below are the top five things that make auditing expense reports painful, and how you can overcome these challenges. Expense report audit does not have to be besieged with difficulty.
- Manual matching receipts to expense reports. Organizations have so many expense reports, receipts and other information that needs to be reviewed, that auditors often limit their verifications to matching receipts to expenses claimed. Most audit time is spent just verifying receipt amounts. It’s even worse if you handle paper receipts that are hard to read or provide an incomplete record of costs. Manually sifting through expense reports and receipts to catch errors takes a lot of time. This process is so time consuming that organizations resort to random sampling or thresholds to identify which T&E reports should be audited.
What to do about it? Streamline how employees enter expenses so auditors don’t have to see another paper receipt. Ditch the spreadsheets and get an expense management solution like Concur or Certify to automate your expense report entry. Then use an Artificial Intelligence (AI) solution to automatically analyze 100% of transactions in a comprehensive risk-based audit.
- Expense policies that read like a Shakespeare sonnet. Too many expense policies cause confusion. Some organizations don’t have defined rules. Others have overly-strict policies that inadvertently encourage travelers to go rogue. When employees do not understand what is compliant with company policy, the same errors will show up again and again. Repeated mistakes result not only in wasted money but also wasted auditors time.
What to do about it? Open lines of communication with stakeholders in other departments about your T&E policies. Talk to finance, operations, and HR. Most importantly, talk to your employees who travel often to uncover their pain points and preferences. Engaging the right people will let you know where to focus and get them to buy into your policy.
- Back and forth with employees over errors. In a manual audit process, when auditors spot expense reports that need correction, the ensuing follow-up with employees can be a mess. The auditor must personally reach out to the person who filed the report, and their manager, to communicate what is wrong and how to fix it. This often is handled via email and manual tracking of the resolution.
What to do about it? The best AI tools won’t just find the transaction exceptions in expense reports, they’ll find patterns of behavior that need to be corrected and the root cause of the problem. When the system detects a high-risk activity, it automatically assigns it to the audit team for remediation in a case management system that prioritizes cases, provides a case research workflow and documents steps taken to resolve cases. This enables better communication with employees and better documentation for demonstrating compliance.
- End-of-month expense report madness. At the end of every month, employees and auditors alike want to run for the hills because expense reports are due. Employees busily hunt down receipts from business trips, cab rides, team lunches, and spend hours organizing them and filling the data into spreadsheets. Auditors then receive an avalanche of expense reports to verify and become buried in the process comparing receipts to reports. Other work piles up. It’s a vicious cycle. Some companies opt to outsource the process to an audit firm, but these still take a lot of time and are prone to error.
What to do about it? Take the burden out of the expense report process by automating end-to-end. Use expense management software to create expense reports and an automated expense report audit solution to detect fraud and misuse. Many companies find that automating more of the process makes employees happier too because they can process and reimburse expenses faster. Many companies can move to weekly reimbursements because they are not held hostage to end of month madness.
- Scaling is impossible. A manual expense report audit process can be difficult to scale as your business grows. When you jump from processing 500 expense reports to 1,000 expense reports, you need to add headcount for audit. This can’t be done rapidly.
What to do about it? Again, automation saves the day. As your workforce grows and the number of expense reports grows, automated expense report auditing scales without adding headcount. Auditors are free to focus on correcting problems such as repeat offenders and fraud instead of just verifying receipts in a random sample.
Many of the things that make auditing expense reports so awful can be easily overcome with automation. If you feel the pain of expense report audits, we should talk.
Schedule a demo of Oversight’s automated expense report audit solution.