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Lunch with Oligarchs to Working with Debarred Suppliers, AppZen’s State of AI in Spend Auditing Report Sheds Light

Enterprises That Use AI to Audit Expenses, Contracts, and Invoices Find Errors, Fraud, and Compliance Snafus

AppZen, the world’s leading AI platform for modern finance teams, has released its August 2019 “The State of AI in Business Spend” report, which uncovers trends and insights on enterprise spend auditing. The report details are based on expense reports, invoices, and contracts from billions of transactions across hundreds of direct enterprise customers.

What are the craziest things AI has uncovered in expenses and invoices? Download the “State of AI in Business Spend” report here:

Key findings:

Spend audit overview: On average, 96.3 percent of an enterprise’s non-payroll business spend is accounts payable-based and 3.7 percent is T&E-based. Most enterprises that don’t use AI only audit up to 10 percent of spend, while companies that use AI are able to audit 100% of invoices, contracts, and expenses. AI flags 8.7 percent of expenses as high risk, commonly due to unauthorized expenses, errors in keyed-in amounts, and duplicate spend. AI also flags four percent of invoices as high risk commonly due to price, discount, or terms that don’t match the contract, inflated prices compared to market data, and duplicate spend (across invoices or with T&E).

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Regulatory non-compliance: A payment to a foreign official, foreign-owned government entity, politically-exposed person, sanctioned or debarred entity, entity on an export control list, or even to a healthcare provider can constitute a regulatory violation. Based on AI discovery, for every 10,000 expenses, two contain a regulatory violation, and for every 10,000 invoices, one contains a regulatory violation. To put this in context, on average, enterprises process 8,876 expense reports per month and 60,354 invoices per month. The average monetary corporate sanction imposed for a Foreign Corrupt Practices Act violation is $233 million in 2019, according to Stanford Law School.

Non-compliant or wasteful spend: The most (ahem!) “creative” expenses employees submitted for reimbursement last quarter include lunch with an oligarch, “Airbnb” on a friend’s couch, cufflinks, strip club “services,” private helicopter rides, and an “extramarital” travel companion. The most creative accounts payable transactions include an invoice for IT equipment that is five times the market price, a partner contract that expired a year ago, an invoice from a debarred supplier (a supplier that the government will not work with), an auto-renewing contract for a no-longer-used service, and a supplier invoice with the same remit details as an internal employee.

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Spend thresholds: On average, auditors approve 79 percent of above-limit expenses, an indicator that it may be time for companies to revisit their expense thresholds. For example, the average limit for alcohol spend is $266, yet 86 percent of alcohol purchases over the threshold are approved, with an average above-limit approved amount of $1,044. Another example of over-the-limit spending is gifts. The average limit for gifts is $88, yet 78 percent of above-limit gift purchases are approved, with an average above-limit approved amount of $509.

“There’s a lot that can go wrong in the enterprise spend audit process. Manually reviewing vendor invoices and employee expense reports is time-consuming, error-prone and simply ineffective. Most companies resign themselves to conducting partial audits well after the transactions have occurred, which leaves companies at risk for errors, waste, and fraud,” said Anant Kale, CEO, and co-founder of AppZen. “AI can improve the audit process by auditing 100 percent of spend in real-time and before payment to uncover expense misuse, double-check invoices, find regulatory violations, discover fraud and duplicate payments, and most importantly, audit before you pay.”

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