The recovery audit process is designed to recover spend leakage, ranging from errors, waste, fraud, and non-compliance. While accounts payable recovery audits can identify and recoup lost profits, wouldn’t you prefer that money never leave the business in the first place?
Today’s enterprises are used to making constant tradeoffs between finding spend leakage and non-compliance and maintaining an efficient process.There’s just no way an audit team can review every invoice, p-card transaction, and expense before they’re paid out. Even if they worked 24/7, there’s not enough time in the day.
AppZen’s AI-powered spend auditing solution gives your teams the superhuman boost they need. Our platform automatically reviews and assesses the relative risk of every invoice and expense. We flag high-risk invoices and expense reports for manual review, while low-risk spend automatically proceeds to payment.
With AppZen, the impossible becomes possible. You can increase your audit coverage from a fraction (maybe 10 percent in a good month?) to a can’t-beat-it 100 percent (yes, really!) of expenses and invoices. There’s no more need to pay contractors for a cost recovery audit or spend your team’s limited time performing one yourself.
of expenses are high risk
of invoices are high risk
With AI, you can review or audit all expenses and payables before you pay a cent, meaning there’s no need for a recovery audit. Review all spend for duplicate payments, fraud, and other errors in advance and pay suppliers and employees on time.
Extract and understand key information like dates, amounts, and spend categories from unstructured documents such as contracts, invoices, and receipts. These data points can serve as powerful clues to identify high-risk invoices and expense reports ahead of payment and avoid costly after-the-fact audits.
Enrich spend information with intelligence from business systems and external sources. Unlike traditional payment systems, AI enables you to proactively detect errors, fraud, duplicates, and other problems.
Use AI to assess risk consistently, before you pay. Refine the way you evaluate risk based on new data and user feedback over time. This lets you take automated action on duplicate payments and other types of errors, waste, and fraud.
Automate workflows, remove extraneous steps, and arm reviewers with the information they need to make smart decisions. Streamlining your review process lets you review all spend in real time, at scale.
Error and fraud are unavoidable in the spend audit process, and most (if not all) businesses already have processes in place to try to cut back on any losses.
In accounts payable, the three-way match attempts to validate invoices against purchase orders and receipts, coupled with business user approvals, to ensure invoice accuracy prior to payment. This is a good start, but even with this approach, up to 30 percent of invoices fail the first match, according to the Institute of Finance and Management. Plus, the typical three-way match doesn’t address spend leakage from other sources, such as duplicate spend, manual errors, fraudulent invoices or suppliers, inflated or incorrect pricing, and missing discounts, not to mention duplicate “crossover” spend with secondary invoice systems or T&E systems, where users are reimbursed for out-of-pocket, corporate card, and p-card purchases.
On the expense side, you may also have an automated process, like built-in approval workflows, policy checks, or an in-house or outsourced audit team that reviews expense samples for erroneous or risky purchases. But how do you know they’re finding the inevitable keying errors, duplicate receipts, mis-reported merchants, over-the-limit meals, weekend expenses, and regulatory violations that show up in every company’s expenses? Research varies, but sources agree that about 2-3 percent of all travel and entertainment expenses contain errors, waste, fraud, and non-compliance. That number may sound small, but it can amount to hundreds of thousands – or even millions – of dollars per year for large enterprises.
AI-powered spend auditing helps you proactively identify these problems before invoices and expense reports are paid out, making better use of your auditors’ time, preventing headaches down the line, and saving money.
of invoices fail the first match, according to IOFM
Audit and recovery firms market their services to businesses as essential components of a healthy, comprehensive spend audit process. Because no audit is 100% error- or fraud-free, the pitch goes, the recovery audit is the only way to ensure that your company claws back otherwise unavoidable spend leakage.
But today, advances in technology enable companies that use AI-powered spend auditing to perform the equivalent of a cost recovery audit in the time before payment is issued, meaning that misallocated cash never leaves your balance sheet, and saving your team the time and headaches that come from trying to regain lost funds.
Still, if your business is used to performing regular recovery audits, you may see no point in changing up the process. But imagine the time and money your business could save by shifting from a recovery-based mindset to a discovery-based approach. The typical recovery audit, often performed by contractors, requires the accounts payable team to be available for questions and troubleshooting, taking time away from other responsibilities. Depending on how frequently you perform audits, the recovery audit process can take up to six months, and requires regular communication with the on-site AP team throughout. With some companies performing recovery audits quarterly, this time and cost add up quickly.
In addition, AI-powered solutions have other key benefits when compared to manual cost recovery audits. Critical information that can help you validate spend is often spread out across a company’s internal business systems and external online sources, the totality of which can be hard to compile in one place. AI can enrich your transaction data by validating it against intelligence from these internal and external sources that offer information about merchants, prices, environmental data, and regulations. For example, an AI-powered system can check invoices and expense reports against multiple lists of foreign officials, governments, or departments who may put your company in non-compliance with anti-bribery or anti-corruption legislation, a task which is extremely hard to do manually. Such capabilities allow you to assess risk in a more informed and confident manner than if you only had data from your spend system and documents. This ability to constantly learn from new inputs and user feedback is part of what makes an AI-powered spend audit system so powerful compared to a backwards-looking recovery audit model. With AI, you can streamline your processes and ensure your company isn’t stunted by constant backwards-looking analysis. It may seem hard to believe, but with AI, it’s finally possible both to find the errors, waste, fraud, and non-compliance in your spend before you pay it out and pay your people and suppliers on time!
We found a $66,000 invoice for spend that had previously been reimbursed over several expense reports.DIRECTOR OF FINANCE,
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This report shares findings based on aggregated, anonymized data from AppZen direct enterprise customers.
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