What’s Hidden in Employee Expense Reports?

Employees have been known to bill unusual (and sometimes questionable) items to their expense reports. Here’s a look at common problems and abuses that AppZen uncovered in their research of expense reports from over one thousand companies. 

You may have heard about employees who bill some strange or rather questionable expenses to their companies. But how often does that happen, and how crazy or extraordinary do the expenses get? If you’re an employee, what kind of expenses will be routinely approved, and which may raise eyebrows? If you’re in charge of approving employee expenses, how do the items your employees want to charge and what you approve stack up against policies at other corporations? And how can you make better and faster reimbursement decisions?

AppZen, a product that uses artificial intelligence to automate expense and invoice audits, has just released a report that can answer your questions. The report uncovers trends and insights on enterprise business spend with details based on expense reports from nearly one thousand enterprises across a variety of industries. Here are some of the findings.

Which Expenses Get Approved – Which May Not

The AppZenn report shows most companies have pretty straightforward policies when it comes to paying for hotel stays and airfare. But other types of expenses are not routinely approved in many companies. For example, 46 percent of companies reimburse for gifts and 39 percent do so for golf. Yet, only 16 percent of businesses reimburse employees for room service and 15 percent for the mini bar. Forty-one percent of companies provide reimbursement for cell phone expenses, 24 percent do so for car washes, and 19 percent for clothing.

Spend Visibility: Last quarter, the average enterprise processed 4,374 expense reports. Each report contained an average of 11 expenses. Companies that use AI to make spend audit approval decisions and automate processing achieve 100 percent visibility, versus just 2-10 percent for companies that don’t.

Non-Compliant or Wasteful Spend Statistics: The most “creative” expenses employees submitted for reimbursement last quarter include strip clubs, dog kennels, jewelry, cigarettes, and gambling losses. AI unveils “brown paper wrapper” vendor names on receipts based on intelligence gained from online sources to learn which organization names fall into categories that may be deemed inappropriate or out-of-policy. 

Identifying Wasteful Expenses is Critical: The report found that while only 10 percent of enterprises’ total expenses were flagged as high risk in the fourth quarter of 2018, that 10 percent represented one-third of the total dollar value across all expenses, making them critical to find and review.

Fixing the Problem

Anant Kale, AppZen Co-founder and CEO, notes that there are two important steps companies can take to prevent wasteful spending: establishing policies and auditing expense reports. “A well-defined spend policy clearly conveys a company’s expectations for what business activities can be reimbursed,” he says. “Auditing spend using AI helps ensure compliance to such a policy, while reducing spend and achieving more predictable financial results.”

Companies that don’t use AI to audit 100 percent of spend, and instead rely on manual sampling, virtually guarantee that they will not audit all the high-risk items.

Streamlining Expense Audits

AppZen has found that companies that aren’t using AI to audit spend take about two weeks to reimburse employee expenses. That time can be reduced – and employees can be reimbursed sooner – by using AI to audit expense reports.  According to the report, Enterprises that use AI recorded a significant improvement in employee reimbursement time. Half completed the expense report approval process within four hours, while 90 percent did so within three days.

For additional information, you can download the full report from the AppZen website.