AppZen is Solution to Fraudulent Expense Reports

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Years ago, I ran an internal audit team for a major corporation. One of the few fun things about that job was doing expense report auditing.

People were incredibly creative when it came to taking advantage of the company. You’d likely be amazed at how ingeniously some executives and many (if not most) salespeople were taking advantage of the company. We had executives who literally believed the firm owed them a free lunch and took one of their employees out every day. We had folks who would book the same trip twice and expense the costlier ticket but actually fly on the cheap one (getting a refund on the expensive trip they didn’t take).

We had folks who got their subordinates to take them out. There were folks who thought the firm should pay for them to go to “men’s clubs.” We even had folks who regularly went out to eat with fictional or dead people to get underneath policies specifying maximum amounts per person. The level of effort some employees go through to scam their firms is amazing, including photoshopping receipts and treating their company credit card like they won the lottery.

Today the risks of this type of behavior are much higher as laws that prevent it or require notification if you take out doctors (if you are a pharma company), take out foreign or domestic politicians (or relatives of them) or do anything that remotely looks like it might be a bribe.

With organizations implementing artificial intelligence (AI) systems and gaining unprecedented access to transactional data, it was only a matter of time before some company used AI as a solution to handle expense reports.

I spoke to that company recently. It is called AppZen, and it has a solution that takes the fun out of internal audit (well, some of it anyway). That solution should also help assure that organizations aren’t charged for violating laws related to expenses. It effectively allows users to audit 100 percent of their expense reports, potentially saving thousands on fake, erroneous or fraudulent expense reports.

The Problem with Expense Reports

The two biggest problems with expense reports are that employees do like to cheat on them and managers don’t like to spend the time to look at the things. I’d like to say it is about misplaced trust, but when I’ve done reviews, it often has more to do with managers just not taking the time. I’ve seen folks who were trying to joke get caught with expenses for everything from Hibachi stoves (complaining that it was too cold in the building) to talent fees for their cats (that was my wife) that got approved by managers who didn’t realize they were being pranked and didn’t read the expense reports.

Areas where people aren’t willing to do the work are ideal areas for an AI solution and that is what AppZen apparently rolled out.

Apologies to my internal audit friends, because AppZen pretty much removes the need for internal audit to do expense report reviews (and this truly is one of the few fun things about that job). Still with audit generally underfunded and understaffed these days, any reduction in load is likely a good thing.

AppZen

AppZen looks at the information that surrounds the expense report and uses mostly web resources to make sure the costs charged and the businesses referenced are legitimate. The application looks for patterns and then ranks every employee reviewed with a rolling score that showcases just how often they are violating policy. Rather than forcing managers to review every expense report, the application just flags those that have problems and gives the manager and finance reports that identify by rank the worst violators of expense policy.

Were it me, I’d tie the results to year-end bonuses. If the score were too high, high being bad, I’d dock or not distribute the bonus. That way, you train employees not to cheat on their expense reports, or if they are doing it flagrantly, manage them out of the firm.

The application can flag patterns (excessive travel expenses) and locations that aren’t what they seem (Momma’s Diner could be a gentlemen’s club), and identify for further review employees who are running up expenses more than average. Unlike human auditors, who typically have the bandwidth to look at a small percentage of expense reports, AppZen can take a 100 percent sample, making it far riskier to cheat in the first place.

Finally, like all good AI-based engines, this one learns as it operates and will get smarter over time.

Broader Implications

Expenses are a huge problem, largely because both the employees tend to cheat on them and managers don’t want to be bothered reading them. This can result in a culture where employees take advantage of the company and increasingly believe rules don’t apply to them, resulting in far broader behavioral issues, including harassment. By using an AI based expense report analysis engine, you should be able to not only eliminate much of the financial impact of false expense reports but create a stronger preventative measure to employees acting out more broadly and reducing dramatically the number of executives who believe company rules don’t apply to them.

So while something like AppZen can make an internal auditor’s job less fun, it should also improve company culture and help assure most of your employees don’t start down a path of abusing policy. The collateral benefits are potentially significant.

Photo courtesy of Shutterstock.