Travel & Expense Purchase Card

Unintended Consequences

on April 10, 2014

Today's cloud-based travel and expense systems have significantly advanced since the days of manual report processing. These modern systems promise to provide an automated paperless experience, which in turn speeds up report submission, approval and reimbursement.

Previously, using a legacy system meant manually filling out an expense form, attaching receipts and passing it along to a manager for review and approval. Now individuals submit expense reports via state-of-the-art online systems accessed through a web browser or smart phone app. With the new systems individuals enter their information and submit reports electronically, while scanning or photographing the receipts and electronically attaching them to the report. Once submitted, a manager receives an email notification, and they can quickly process the report with the single click of the “Approve” button. 

While this approach has been successful in simplifying the expense process, a potential unintended consequence is that most of these systems do not force the approver to view each report’s details before approving. In a hectic and time constrained business environment it is often easier to take the path of least resistance and click approve, rather than take the time to look at the details of a report. This path of least resistance did not occur with legacy systems as an approver had no choice but to look at the report lines before they physically signed an approval.

What are the impacts of this tradeoff? Do we gain expense process efficiency while potentially losing oversight? Unfortunately, the burden of providing this oversight has shifted to the travel and expense department and internal auditors, and it is probably safe to say that both of these groups have not been given increased headcount to pick up this responsibility. To deal with this increased responsibility these departments have become accustomed to reviewing a sampling of expense reports versus a comprehensive, 100% examination.

The bottom line is that in many organizations implementing a more efficient expense system may actually have a less effective operation. This can result in an increase of expense report errors, misuse and fraud and less of enforcement of travel and expense policy. It would seem that the same technological advancements that have made expense reporting more efficient could also be used to improve expense report quality and accuracy. What would a system that could do this look like?

  • First, 100% of an organization’s expense reports should be reviewed using a number of analytical criteria.
  • The analytics should be able to determine potential fraud and misuse based on an organization’s specific policies. These analytics should also be capable of identifying duplicate report submissions, suspicious out of pocket expenses, expense outliers and split purchase card transactions.
  • The results of the analysis should be presented to the examiner in an easy to use browser-based interface.
  • Ideally, the individual conducting the examination would have access to all data related to individual employees, individual expense reports and merchants without having to log into the source systems.
  • Reviewers should be able to easily email the employee or their manager to obtain clarification or to let them know of a policy violation. Emails sent and the responses should be stored as part of the audit record. All completed research should be stored and easily accessible for additional analysis.

In addition to the tactical benefits of an analytical system as described above, there should be some strategic value as well. It would seem logical that if all expense report data is being analyzed and then stored, some higher level insights could be drawn from examining the data at a macro level. For example, being able to understand what aspects of the existing travel and expense policy are working and which are not. This information could be useful in the creation or modification of policy, and could be used to benchmark the organization to others in their industry, and see internal benchmarking data as well.

As is often the case with technological advancements, we seem to take two steps forward and one step back. This, unfortunately, may be the situation for organizations implementing state-of-the art travel and expense systems based on the unintended consequences presented in this article. These unintended consequences open up the opportunity for a solution (See how Oversight can provide analysis to drive better business decisions) that also takes advantage of technology and provides automated 100% audit-level review of all reports, thereby changing the ratio to three steps forward and zero steps back.

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