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Manual Expense Review: Necessary Precaution or Overkill?

Most businesses implement automated expense management systems to cut back on processing costs and to streamline the reporting process. The features of these programs can take significant responsibility off the plates of accounting departments and allow them to focus on other important aspects of their jobs. But if management software is so helpful, why are so many financial professionals still manually reviewing each employee’s expenses?

A recent survey from Certify showed that of 434 financial professionals and CFOs, 64 percent use a web-based or ERP management program to track employee expenses. This is unsurprising, as past research has shown that automated expense management can reduce processing costs by up to 60 percent and improve compliance with corporate policies by 40 percent. However, the Certify survey also revealed that 27 percent of respondents using automated systems still review each submitted expense and match it to corporate policy.

With almost one-third of companies taking this extra step, it begs the question of whether manual expense review is necessary or if these professionals are being overly cautious.

Companies often switch to automated expense reporting to gain better analytical insight. Companies often switch to automated expense reporting to gain better analytical insight.

Driving Factors Behind the Switch
The most frequently noted benefits of automated expense reporting are that it cuts back on the administrative tasks performed by finance departments, allows employees to be reimbursed more quickly, increases policy compliance and allows for easier analysis of expense trends. The 2013 Annual Travel & Expense Management Benchmark report from the Aberdeen Group showed that 76 percent of companies who were planning to switch to cloud-based expense management were doing so to simplify expense reporting processes. Small businesses noted that they needed to reduce expense processing costs, while enterprise organizations were more interested in increasing visibility into travel and expense spending.

These statistics show that the majority of companies switch to automated travel expense management to make reporting easier for travelers while reducing the in-house work that must be done to create analytical expense reports. With this in mind, it seems counterintuitive that managers are manually reviewing expenses, essentially adding unnecessary tasks to their reduced workforce.

“Almost 30 percent of executives and managers have committed expense fraud.”

Rationalization of Manual Reviews
These professionals aren’t without reason, however. Many irresponsible business travelers commit expense fraud in hopes of getting a little – or sometimes a lot of – extra money. In fact, a 2014 study from the Association of Certified Fraud Examiners showed that almost 30 percent of corporate executives and upper-level managers have fabricated expenses.

“[Clever employees] are getting the cab drivers to give them blank receipts, asking for double receipts at hotels and restaurants, masking one transaction as another, using cash to buy something and getting a blank receipt and putting in for more than the transaction it was,” Allan Bachman, educational manager at the Association of Certified Fraud Examiners, explained to CNN. Bachman noted that many workers can figure out how to dupe automated expense software, which is why managers often review expense submissions.

Without frequent manual review, it takes an average of 24 months for expense fraud to be detected. This often means that dishonest employees rack up significant fraudulent charges on the company’s account. This may be the reason why 30 percent of financial professionals would rather shoulder the burden of manually reviewing expenses – if they don’t, their business could be swindled out of hundreds of thousands of dollars.

Finding a Middle Ground
Until automated reporting programs are able to detect expense fraud or travelers are no longer responsible for handling paper receipts or paying for items using cash, it may be necessary for managers to manually review at least some of their employees’ charges. One option to reduce the workload that befalls finance departments is to only review expense reports that total over a certain amount. Another might be to randomly spot-check employee submissions. Companies should also ensure that their management systems are optimized to spot as many out-of-policy expenses as possible.

Another way to help eliminate the necessity for managers to manually review employees’ charges is by developing travel policies where vendors automatically provide e-receipts for their services. One specific area to standardize should be a company’s corporate car service provider.

“Companies may want to establish a relationship with a car service provider that only uses e-receipts instead of paper receipts or vouchers,” noted GroundLink CEO Dean Sivley. “This eliminates the ability for employees to submit fabricated car service expenses.”

By implementing these procedures, businesses may be able to reclaim some of the time and resources spent manually reviewing travel bills and drive down the cost of expense processing.

 

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