Right now, I spend a big chunk of my time researching best-in-class Business Spend Management techniques, specifically in relation to a company’s Travel & Expense policy.
Though less glamourous than emerging hot topics like AI, ERM and IT governance, travel and expenses incurred by employees of an organization produce a high volume of transactions. With the complexity of computer systems and the participation of employees at all levels, this function remains a primary risk area for potential error, and it tends to experience it’s share of fraudulent and other inappropriate activity. More critically, problems found within T&E may suggest much larger or complex organizational concerns.
For many organizations, travel & entertainment (T&E) expenses represent a major source of discretionary spending. The sheer number of transactions and diverse sources of data and applications make T&E vulnerable to error, abuse and fraud. Companies aggregate purchases to negotiate volume discounts (I work closely with my company’s Travel Manager and hear about the struggle of hotel offerings allllll the time) and better deals that benefit when employees comply with T&E policies. Recouping a small percentage of excessive or improper T&E expenses can have a substantial impact on the bottom line.
More importantly, adherence with expense reporting policies may be reflective of the ethical climate and the tone at the organization. Research consistently suggests that most people are the product of the environment they find themselves in. They look around and do what others around them do or expect them to do (I hear this all the time: “oh, yeah, so-and-so said he was using his corporate card for his gym membership and post-workout smoothie so I figured it was okay”). What this means is that the most unethical behavior in a business is supported by the context in which it occurs. In other words, abuse of T&E expenses is a gateway drug to bigger fraud problems you don’t want to have.
So why do you, the employee care? The primary purpose of a company’s T&E policy (which I am working to update for my company in another tab) is for the employee not to incur a financial loss or to realize financial gain while conducting company business.
Typically the T&E audit involves a review of a sample of employee expense reports for compliance with company policies and directives. It may be appropriate to focus a T&E review on departments or employees with the highest volume and dollar amounts of travel and expense-related expenditures. Common “exceptions” or areas of improvement often involve the following:
- Expense reports not always filed promptly and properly, including the lack of detailed receipts to support the expenditure
- Failure to specify a business purpose, and to identify participants on expenditures for meals, lodging and flights
- The per diem meal allowance not being followed
- Employee who, with the approval of their department manager, bypass the corporate travel department and book their own travel arrangements
In the grand scheme of things, these issues may seem small or even petty. But consider some of the implications: Why would employees not follow the company T&E policy?
The ultimate question here – and in any audit – is why the exception happened in the first place. Why do employees go outside the prescribed procedures for T&E expense? Why do their managers agree and approve? WHY!? And why hasn’t corporate travel seen this and responded to the needs of its employees (who, in my organization are kicking and screaming about our T&E platform).
And that’s where analytics and policy-rewriting come into play. Enter me!