There’s a smorgasbord of sexy artificial intelligence products on the market these days. AI-based spend auditing is not one of them. But, by God, it’s a big need.
If you’re a CFO, you and your team are the fiduciaries of your organization’s resources and money. You’re on the hook for acting in the best interests of shareholders, making smart resource allocation decisions, and holding your organization accountable to its financial goals.
If you rank your concerns, chances are visibility into your business is at or near the top of your list. You’re paid to be naturally paranoid, see around-the-corner threats that can derail your business, and act as a foil against your CEO’s roses-and-glory stance.
One chronic problem CFOs face is within the finance department itself: overseeing spend. Getting your arms around spend is crucial for two reasons. The more obvious is it can make or break your bottom line at earnings time. The less obvious is that it offers unique insight into risk. Deep Throat said “follow the money,” and nobody knows more than you that understanding spend at a deeper, more comprehensive level helps you suss out fraud, bribery, and other criminal or unethical behavior — the things that can land you on the front page of the Wall Street Journal… and not in a good way.
If spending is so important, why doesn’t your finance team review it more thoroughly? Because it can’t. Even with a robust audit staff and workflow tools that help them be more efficient, your finance department audits only a fraction of your organization’s spend. Anything more than that becomes a bottleneck to your business. It’s a catch-22.
Take Travel and Entertainment. It may not be your biggest bucket of spend, but as the most fragmented it’s one of the best hiding places for bad behavior in your organization. On average, companies’ auditors look at only 2-10 percent of expense reports. According to our aggregated, anonymized data here at AppZen, about one in ten expenses is high-risk. This means that even in the best case, your team’s probability of finding all of your high-risk expenses is an ulcer-worthy tiny fraction of a percent.
Now let’s look at what AI-based spend auditing does, and how it completely upends this paradox. When you use AI to audit spend, you’re running 100 percent of your spend through a machine that has been trained using your data, data from thousands of other companies, and data from external sources to verify whether the item – an expense report, a receipt, or an invoice – is accurate, complies with your policy, and is not wasteful or fraudulent. The 90 percent that meet those criteria pass through automatically, leaving your audit team to review only the 10 percent that are high risk. Perhaps most importantly, you’re doing all of this before you pay the bill or reimburse the employee, versus catching violations after the fact. Rather than knowing there are needles in your haystack and simply hoping you’ll find the big ones, you’re addressing all of the needles, and spending auditors’ valuable time only on the real ones.
As the CFO, you have a fiduciary duty of care, which means that if you know that you can employ an innovation to improve financial outcomes and reduce risk, you have an obligation to do so. AI-based spend auditing is just that innovation; it takes your fractional percent probability of finding wasteful, fraudulent, or non-compliant spend to nearly 100 percent. It may not be the sexiest thing you do all year, but it could be the most effective.