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Think twice before submitting unauthorized expenses. Seniority and performance may not save you from being fired.

by Gary Malhotra March 31, 2022

Our ongoing “Did you know?” series highlights the capabilities and benefits of AppZen and how you can take advantage of our solutions’ capabilities. In this post, we examine travel compliance and unauthorized upgrades.

Unauthorized expenses and business travel on the rise

With employee travel bouncing back, there is a rising incidence of unauthorized expenses. Employees are stretching travel policies for personal benefit, including strip clubs, adult entertainment, massages, travel upgrades, companion travel, and pet care. 

This is reflected in the use of out-of-policy services from approved merchants and the use of unapproved merchants. Some employees exploit dual-use merchants, such as hotels and restaurants that provide approved services like meals. Some take chances on those that are unapproved, like adult entertainment, massages, alcohol, and spas. They cleverly use misleading terms on receipts to disguise, bundle, and misrepresent the services consumed. 

At the same time, tech-savvy finance teams have become smarter about detecting such policy violations using AI-powered expense auditing and less tolerant about excusing errant employees. A recent news article highlighted a global enterprise that fired top-level executives for taking clients and colleagues to a strip club and submitting the expenses for reimbursement. Such visits are a clear a policy violation within the organization. 

AI can prevent unauthorized expenses

Finance auditors have realized that simply taking employees’ and merchants’ receipts at face value is not enough. Auditors can use AI-powered auditing technology, in conjunction with social databases and public directories, to verify whether the merchant on the receipt is indeed a legitimate business or a dual-use merchant offering unauthorized services under the guise of a hotel or restaurant.

Adult entertainment in a strip club can get you fired but other violations can also get you into trouble. One of AppZen’s customers found an employee was using a pet facility to take care of his dog and billing the expense as a hotel stay — the receipt looked exactly like it came from a hotel. When discovered, the HR team and the VP of that employee’s business unit put this incident in the employee’s HR file, indicating lower-than-satisfactory behavior and performance.

Finding non-compliant transactions, however, is easier said than done. For example, employees may upgrade to business or first class at the airline gate. The fees can often be buried in a line item under the regular receipt, or be found in Level 3 P-Card/credit card data, which often goes undetected. Similarly, detecting upgrades to rental cars, railway cabin types, and hotel room suites requires the ability to read “unstructured” data on merchant receipts — data that does not conform to a predefined data model, like text or images, and cannot be easily read by a computer program.

Traditional audit tools can’t catch disguised expenses – only AI can

When unstructured line-item data, such as the service description, is present on merchant receipts, it is hard to extract and read using basic audit and OCR tools. Even when it can be extracted, simply reading unstructured receipt data is not enough. An understanding of the content and context of the receipt is required to truly predict whether it's a policy violation. This requires augmenting the unstructured receipt data with an understanding of branded terms, commonly used expressions, online public and social data about the merchant’s services, and your corporate expense policy. Expense auditors must have an understanding of commonly used expressions and branded terms around the service to understand what was bought and if it is out of policy. Only artificial intelligence can do what an experienced auditor can do.

4 ways only AppZen’s AI can prevent unauthorized expenses

AppZen’s patented finance AI addresses all of these challenges: 

  1. Constantly monitors, extracts, and audits every line-level item in every transaction in all kinds of receipts, from gift cards to P-Cards and merchant receipts
  2. Remembers everything so it can spot anomalies and duplicates quickly
  3. Looks at not only the content of each transaction but also understands its context
  4. Detects fraud and other risks 10x better than any other solutions without manual work 

AppZen’s finance AI reads unstructured data on receipt line items, Levels 1 through 3 P-Card/credit card data, itineraries, and hotel folios. It then looks for clues based on an understanding of the terms on the receipt, their relationship to each other, their relationship to branded terms and common expressions, social and online data about the merchant and their services, and representation in your travel policy.

It can verify hotel identities in real-time to flag expenses misclassified as lodging, like the pet boarding charges expensed as a “hotel,” in the earlier example. It can identify out-of-policy upgrades and add-on services on a receipt, such as a mini-bar or in-flight alcohol. It also checks for bookings made outside of travel management companies or preferred travel agents and identifies spousal travel bookings in travel itineraries. 

To ensure that employee upgrades and out-of-policy spend don’t end up downgrading the bottom line, companies must continue to monitor current travel policies for compliance.

To learn more about how you can ensure travel compliance and audit 100% of expenses prior to reimbursement, request a demo today.

Gary Malhotra

VP - Product Marketing, AppZen Inc.