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Business travel expense management is one of the most challenging expense categories for an organization. To add to the problem, a whopping $7 billion is lost annually to workplace fraud, and 30% of the fraud is expense reimbursement related.
Furthermore, filing expenses manually increases the chances of errors. One in five (19%) expense reports contains errors or missing information.
So, what can you do to optimize your travel and expense management? The answer is regular travel and expense audits.
Let’s understand what a travel and expense audit means, how it can help you combat expense fraud and how your organization can conduct it seamlessly.
When employees take a business trip, they incur travel expenses like commute, food, vehicle parking, etc. After that, they submit all the receipts for approval and reimbursement. The process of checking the validity of those business travel expense claims submitted by employees is known as Travel and Expense Audit.
The finance department is responsible for undertaking regular travel and expense audits. It helps them get insights into travel expense data, control travel costs, and ensure travel policy compliance.
You need to examine whether all the expense claims are materially sound by matching records with receipts and determine what kind of expense claims have been filed and approved.
After analyzing the travel expense reports, you may find some dubious claims. For example, an employee visits multiple unknown local sites during international travel. You can then inquire how these visits are business-related and identify whether the employee is committing expense fraud.
With frequent travel and expense audits, you can analyze how strictly your company’s travel policy is being implemented by looking at the number of violations. If there are multiple violations, you should check whether the company policy is practical and whether the employees can understand it clearly.
Conducting a regular travel and expense audit can help you discover the bottlenecks in your travel and expense management process. For instance, you might find out that employees can authorize their expenses due to a vague policy clause causing overspending. After discovering such loopholes, you can take the necessary steps to mend your travel and expense management process.
When thoroughly analyzing various expense reports while conducting a travel and expense audit, you can get data-based insights into employees’ spending habits. With this information, you can detect the non-essential expenses and take action to prevent employees from incurring them in the future. Moreover, you can track department-wise travel expenditure and segregate the cost-heavy and saving-heavy departments.
Getting insights into your employees’ spending habits can help you curb unnecessary travel expenditures and maintain your company’s bottom-line results.
If your company has multiple employees and you require physical copies of expense receipts as proof, you will end up with an overwhelming amount of receipts.
Moreover, using spreadsheets to manage travel expense data manually can cause data irregularities. Irregular data can lead to disorganized audits because the auditors will have to spend significant time double-checking the claims.
Automate your expense management process to make the travel and expense audit process fast and smooth-sailing.
If your travel policies are complex, employees are reluctant to go through them thoroughly. Hence, they may skim through the policy document and miss crucial points. Therefore, accidental instances of non-compliance can increase. Conducting travel and expense audits with many cases of non-compliance will increase the claim rejection rate and make the process difficult.
Draft more comprehensive and straightforward travel policies to reduce non-compliance cases and simplify travel and expense audits.
When the expense receipts submitted by employees don’t reconcile with the travel policy, the finance team has to reach out to employees personally and engage in a lengthy back-and-forth to justify the claims. The process can get complicated and frustrating and hinder the travel and expense audit.
Ease the reconciliation process with the help of business travel and expense management software to speed up the travel and expense audits.
A thorough evaluation of your travel and expense management process will help you determine the policy-related flaws and fix them. The assessment should include checking bookings, pre-trip approvals, and final authorization.
Look for policy loopholes and workflow overlaps- no employee should be allowed to approve their expense claim. A clear workflow ensures that no suspicious expenses are approved, making audits easier.
If you draft a clear travel and expense management policy, it will help reduce cases of non-compliance. Conducting travel and expense audits with lower non-compliance will be easier.
So, while making a travel policy, you should clearly define the roles of various stakeholders and set up a practical budget limit. Your policy should be understandable to the employees to comply with. Additionally, If your employees can view the policy in real-time while booking, they will be able to keep away from going over budget.
If your finance team audits the expenses manually, and all your employees file expenses close to the reconciliation time, it burdens the auditor. Therefore, they will not be able to go through all the expenses to verify their validity.
Conducting travel and expense audits becomes futile if the auditors cannot adequately examine expense reports. Hence, it is essential to impose a submission deadline on employees if you plan to conduct a manual audit so that the auditors have the required time to validate the expense reports and gain insights.
If the auditors scrutinize each expense report for historical data, the travel and expense audit will become time-consuming and strenuous.
Therefore, when choosing audit reports, they should pick their battles and select a few pieces for detailed examination. Reports from travel-heavy departments like sales will be more extensive and give a better overview of the nature of expenses.
If you conduct a travel and expense audit before reimbursing the expenses, you will save time and energy. Your finance team will not have to extract the funds issued to non-compliant claims. However, if you audit before reimbursement, it can cause more delays in the process.
Opting for automated business travel and expense management software to help employees file expense claims in real-time and send the expense reports for approval promptly will speed up the process.
The final step in conducting a seamless travel and expense audit is the verification of all the financial records until all the errors are resolved. To verify financial records, your finance team has to re-calculate all the expense reports and investigate any leftover suspicious claims. They must carry out this process until they can explain all the discrepancies and suggest corrective actions.
An automated travel and expense management software solution can make audits easier by automating your company’s travel and expense management process.
Let’s look at how automating the T&E management process will help make the audits easier.
Travel and expense management software offers digital receipt management through which your employees can submit their expense receipts as and when incurred. They can also create an expense report and send it for approval to their managers promptly. As a result, there are no data irregularities, making travel and expense audits error-free.
A unified travel and expense management software allows you to set a budget limit according to employee level, departments, etc., and only offers policy-compliant booking options. As a result, there are no over-budget bookings and policy violations, making the travel and expense audit faster.
Travel and expense management software creates a detailed workflow in your organization by defining who will be responsible for which approval. Therefore, it significantly reduces the chances of the finance team approving a suspicious claim because each claim has to go through multiple checks.
Conducting regular travel and expense audits can help you control travel costs, increase travel policy compliance, and gain insights into your organization’s travel expense data.
You can enhance the efficiency of your travel and expense audit by automating your expense management process with the help of ITILITE travel and expense management software. ITILITE offers you an automated audit and fraud detection feature that automatically identifies duplicate claims and validates the expenses.
We offer a free demo of ITILITE with all the features so that you can experience improved expense management yourself.