Artificial intelligence can improve audit processes providing businesses a way to reduce errors, waste, and fraud.
There’s a lot that can go wrong in the typical organization’s spend audit process. Manually auditing vendor invoices and employee expense reports can be time-consuming and frustrating.
Most companies resign themselves to conducting partial audits, which might catch a few discrepancies, but leaves your company at risk for errors, waste, and fraud. More is needed.
Luckily, there’s a solution: Artificial intelligence (AI). AI can improve audit processes. Below are six ways AI can help reduce business spend.
See also: The Bank of 2020: Beacon of Real-Time Services
1. Audit 100% of spend
At most organizations, the idea of humans manually reviewing every invoice and expense report is laughable. There are too many reports, too few people, and too many other responsibilities pulling at auditors’ time. Luckily, one of AI’s many superpowers is its ability to comb through documents and evaluate risk factors near-instantly. When an invoice comes in, AI systems can immediately check if its terms match those in the contract. Similarly, when an expense report is submitted, AI can look to see if it contains violations (e.g., duplicate receipts or out-of-policy spending); it’ll flag the reports with a problem for further investigation by your team and initiate an (immediate!) reimbursement for low-risk reports. Ultimately, a comprehensive audit process means a significant reduction in leakage, plus a faster process.
2. Sniff out T&E misuse
In most companies, travel and entertainment (T&E) is the second-largest controllable business expense after salaries and benefits. It’s also particularly hard to manage, given that there are so many small expenses continuously rolling in from many different sources. In our data, we’ve found that a whopping 10% of T&E expenses are either fraudulent or a mistake. We’ve heard of employees expensing everything from tattoos, to dog kennels, to strip clubs, to jewelry, and more. Other common violations include claiming personal trips as business-related, upgrading tickets to first-class, expensing weekend meals with friends, and more. AI can help you track down these problems, ensure the incorrect expenses aren’t paid out and give you the information you need to address any large-scale issues.
3. Double-check that invoices match the contract terms
Many organizations have procurement teams whose whole job it is to negotiate favorable contract terms with vendors. But too often, that effort is squandered once the contract is signed, as AP teams may not have the bandwidth to check that the invoice matches the agreed-upon terms. AI can do this automatically with every invoice received, instantly checking to make sure early payment, loyalty, and/or quantity discounts are applied.
4. Don’t let fraud slide
Unfortunately, invoice and expense report fraud is common and can have a not-so-small impact on your company’s bottom line. Shell companies might bill for services that were never provided, or send fraudulent invoices that are part of a larger phishing scam. Employees might submit the same dinner receipt as a colleague, knowing that they’ll likely both be reimbursed, causing you to be foot the bill for their dinner twice. With AI, you can check every invoice for risk factors and flag anything fishy for auditor review.
5. Catch double payments
Invoices often get held up — maybe an approver is out of the office, or the invoice failed a three-way match. In the meantime, the vendor follows up, and someone else intervenes to pay the invoice out manually without noting it in the system. Afterward, the system clears the hold, and the invoice is paid yet again. This double payment happens more than you might expect, and often no one catches it (after all, who is going to complain about receiving extra money?). AI helps prevent this problem by keeping track of all spend and always checking for duplicates.
6. Audit before you pay
Once a payment is out in the world, it can be difficult, if not impossible, to get it back — even if you later prove that the charge was erroneous or fraudulent. Even if you are able to recover it, doing so takes up valuable time, and there’s a significant disadvantage to not having the cash on hand for your business. AI makes it possible to audit all spend before you pay, rendering this problem moot.
