Last month, DataServ conducted a client survey to measure the frequency with which companies are auditing employee expense reports.
10% or Less Audited
We’re thankful for the honesty of the 29% of survey participants who admitted that their company audits less than 10% of all travel and expense reports submitted, and we’re guessing that they, along with the 14% who audit only 10-25% of expense reports, wish they had the time or the resources to do more. But, like so many “important but not urgent” tasks in today’s busier-than-ever world, for these companies travel expense auditing falls by the wayside in favor of seemingly more mission-critical activities.
But expense report auditing is a lot more than catching the big offenders, the traveler who spends too much on wine at dinner, turns in expenses without documentation, or worse, cheats the company in any number of ways (more on that in a future blog post). Auditing T&E expense reports has numerous benefits that do, ultimately, affect the bottom line in very meaningful ways, including:
- Increasing compliance with published company travel policies (left unchecked, non-compliance can quickly become a slippery slope that could cost your company thousands in unnecessary expenses).
- Ensuring that corporate travel partners (airlines, hotels, rental car companies, etc.) are in fact charging employees the proper amount. Frequent audits can also identify opportunities for negotiating with suppliers if, for example, you notice more and more of your employees are using a specific type of service or a particular vendor. So you see, sometimes it’s not your employees you’re auditing, it’s actually your travel vendors!
- Identifying trends in spending, which can lead to tightening of policies or creation of new programs or guidelines, either of which could result in significant savings for the company over time.
- Justifying the need for automated T&E systems. Audits can be used to examine the return on a company’s investment in an automated tool like DataServ’s SaaS Solution for T&E reporting. Travel expense software can allow for better policy compliance, less paper, Accounts Payable integration, and increased employee productivity, all of which ultimately free up valuable company resources.
According to our data, as many companies audit 100% of all employee expense reports as those who audit 10% or less. While our hats are off to the 29% of companies surveyed who are conducting audits at the 100% level, believe it or not, this practice does have potential drawbacks. First, while auditing every expense report thoroughly may be practical for small or even medium-size companies, or those whose employees travel very little, it quickly becomes an enormous resource burden to larger companies or even mid-size companies who have a lot of sales people and executives on the road.
When it comes to expense report auditing, it appears that the 80/20 rule applies. Business Travel News, who reviews trends in travel expenses annually, perhaps says it best when they say: “Typically, 80 percent of audit risk is coming from 20 percent of expense reports.” Their study goes on to say that the intensive (and often manual) practice of auditing every expense report “often costs more than the potential savings from violations.”
Travel Expenses Auditing Best Practices
The Business Travel News study’s recommendations are strongly aligned with what 42% of DataServ’s survey participants are currently doing in expense report auditing, which is to audit more than 10% but less than 100% of all reports.
Their recommendations include auditing:
- Specific high-infraction areas (they identify miscellaneous expenses, business meals, and mileage reimbursement for 2012)
- High-risk individuals, past offenders or “cowboys” (almost every company has at least one, right?)
- High-dollar or seemingly excessive expense reports (for example, every report over $5,000)
On top of a 100% audit of those areas listed above, BTN recommends companies conduct periodic random audits at the 20-25% level from the remainder of employee expense reports to communicate to employees that expenses are being monitored for fraud and infractions. You can read the entire article and study on businesstravelnews.com.
Virtually every expert in the field of expense report auditing recommends that companies at least investigate the feasibility, cost, and potential savings associated with automating their travel and expense reporting systems. DataServ’s T&E solution offers built-in safeguards against over-spending in areas from airline tickets to meals and entertainment to hotel night stays, via expense maximums and red flags, and also allows the company to establish auditing procedures within the system to track and control expenses and detect fraud.