Analyzing data from 1,000 companies: 3 key ways to reduce spend

Enterprises spend millions – even billions – on business activities, yet their spend processes are outdated and inefficient. A huge source of leakage is travel and expense (T&E), which after salaries and benefits, is the second-largest controllable business expense. It’s also one of the most complex and difficult to control. Over a third of T&E spend is wasted on out-of-policy expenses, mistakes, and even outright employee fraud, according to proprietary data published in AppZen’s latest report, The State of AI in Business Spend.

Below are three things you can do based on real-world insights from our aggregated, anonymized enterprise data.

1. Clearly define your travel and expense policy

Setting clear expectations and guidelines around travel and expense is crucial. A well-defined policy clearly communicates what your employees can and cannot reimburse, which will ultimately help your company save money and achieve more predictable financial results. Policies related to business travel such as meals, airfare, and hotel stays are usually pretty straightforward, but what about some of the less-obvious items such as alcohol?

We dug into our data to understand reimbursement trends for those less-common spending areas. Expenses that increase connectivity and collaboration are very likely to be reimbursed: 41% of companies reimburse cell phone services and 37% reimburse internet services. Additionally, the majority of business travel expenses are reimbursed – for example, 28% reimburse travel upgrades. However, less essential travel perks like room service (16% reimburse) and mini bars (15% reimburse) are still scrutinized. Non-essential items such as clothing (19% reimburse) and coffee card reloads (9% reimburse) are also less likely to be approved. We recommend companies keep these spend averages in mind as benchmarks for their policies.

2. Use AI to gain visibility into your expenses

On average, accounting departments at large enterprises process 4,374 expense reports per quarter. Companies just don’t have the time or resources to manually research the legitimacy of each expense report, and finding an out-of-policy through random sampling is like finding a needle in a haystack. Artificial intelligence (AI) tools can help your auditing team gain visibility into business spend to find duplicate receipts, spending that is out of line with company policy or common sense use of company funds, or meals or gifts to politically-exposed individuals. We recommend companies implement AI into their spend audit process, which over time will help identify spend trends, stop leakage, and influence policy changes as needed.

3. Identify non-compliant or wasteful spend

Some employees can get pretty creative in what they claim as business spend. We’ve seen it all — strip clubs, dog kennels, jewelry, cigarettes, and gambling losses being among most the most notable. Although these charges may seem like obvious violations, they often fly under the radar with generic names on their receipts, such as “K-Kel, Inc” (which is actually a strip club). AI systems that cross-reference online systems and over time learn which organizations fall into which categories, flagging fraudulent spend that human auditors would have likely missed.

With a clearly-defined policy, visibility into expenses, and a method for identifying fraud, your company will be well-equipped to innovate its back office processes and reduce spend. For more trends and insight, download our latest research report. The findings focus on spend visibility, value at risk in expense reports, insights on streamlining the spend audit process, recommendations for finance teams, and more.